Standard Operating Procedure (SOP) for Purchase Committee

1. Purpose
 To ensure that all procurement activities are conducted in a systematic, fair, and
transparent manner, aligning with organizational goals and policies.

2. Scope
 Applicable to all departments and personnel involved in the procurement of goods
and services within the organization.

3. Definitions
 Purchase Committee: The group responsible for evaluating and approving
procurement requests.
 Procurement: The process of sourcing and acquiring goods and services.
 Vendor: The supplier or service provider from whom goods or services are
purchased.

4. Responsibilities
 Committee Chair: Organizes meetings, ensures procedures are followed, and
communicates decisions.
 Committee Members: Review requests, evaluate proposals, and cast votes.
 Procurement Manager: Facilitates the procurement process, supports the
committee, and manages vendor relationships.

5. Committee Composition
 Chairperson: [Name/Title] – Oversees the committee and ensures the process runs
smoothly.
 Members: [Names/Titles] – Participate in discussions, evaluations, and decision-
making.
 Secretary: [Name/Title] – (Optional) Manages documentation and minutes.

6. Procedure

6.1. Purchase Request Submission

 Initiation: Department heads or project managers submit purchase requests using
a standardized form. The form should include:
o Description of the item or service.
o Justification for the purchase.
o Estimated cost and budget code.
o Any required specifications or quality standards.
 Documentation: Attach quotations from vendors, detailed proposals, and any
supporting documents such as project plans or cost-benefit analyses.

6.2. Preliminary Review

Procurement Manager:
 Review for Completeness: Verify that all required fields are completed and
documents are attached.
 Compliance Check: Ensure the request adheres to budgetary constraints and
organizational policies.
 Initial Assessment: Evaluate if the request aligns with the organization’s strategic
goals.
 Initial Screening: Perform a preliminary assessment to filter out incomplete or
non-compliant requests before they reach the committee.

6.3. Committee Meeting

 Scheduling: The committee chair schedules meetings based on the urgency and
number of requests. Provide advance notice to all members.

 Agenda Preparation: Prepare an agenda that includes:

o List of purchase requests.
o Supporting documentation for each request.
o Relevant details such as vendor proposals and cost analyses.

Discussion:
 Request Review: Each purchase request is discussed in detail, including the
rationale, costs, and vendor options.
 Evaluation Criteria: Consider factors such as cost, quality, vendor reputation, and
alignment with organizational needs.
Voting:
 Decision Making: Members vote on each request. Voting can be done by a show of
hands, electronic voting, or written ballots.
 Majority Approval: Typically, approval requires a majority vote (e.g., more than
50% of members present).

6.4. Decision and Approval

 Approval Communication: The chairperson or procurement manager
communicates the decision to the requesting department and the selected
vendor.
 Rejection Communication: Provide constructive feedback on rejected requests to
the requesting department for possible resubmission or revision.

6.5. Purchase Order Creation

 Order Placement: Once approved, the procurement manager issues a purchase
order to the selected vendor, specifying:
o Quantity and description of goods or services.
o Delivery terms and schedule.
o Payment terms and conditions.
 Documentation: Ensure purchase orders are properly documented and tracked for
future reference and auditing.

6.6. Receipt and Inspection

 Delivery Monitoring: Track deliveries to ensure they arrive on time and in
accordance with the purchase order.
 Inspection:
 Verification: Check that the delivered goods or services match the order
specifications and quality standards.
 Acceptance: Approve the receipt and inspect for any damages or discrepancies.
Document any issues and notify the vendor if necessary.

6.7. Payment Processing

 Invoice Review: Cross-check invoices with purchase orders and delivery receipts to
ensure accuracy.
 Payment Approval: Forward approved invoices to the finance department for
payment processing according to organizational policies.

6.8. Record Keeping

 Documentation: Maintain records of:
o Purchase requests and approvals.
o Meeting minutes and decisions.
o Invoices and payment records.
 Archiving: Store records in a secure location for future reference, compliance
audits, and historical analysis.

6.9. Review and Evaluation

 Performance Monitoring: Regularly review the performance of vendors and the
efficiency of the procurement process.
 Feedback Collection: Gather feedback from departments and vendors to identify
areas for improvement and adjust procedures as needed.

7. Compliance and Standards

 Adherence: Ensure all procurement activities comply with legal requirements,
organizational policies, and ethical standards.
 Ethics: Avoid conflicts of interest, ensure transparency, and promote fair
competition in procurement practices.

8. Review and Revisions

 Annual Review: Conduct an annual review of the SOP to ensure it remains
effective and relevant.
 Updates: Make necessary revisions based on changes in organizational policies,
legal requirements, or feedback from the committee.

9. Contact Information
 Procurement Manager: [Name/Contact Information] – For questions or
clarifications related to procurement.
 Committee Chairperson: [Name/Contact Information] – For issues related to
committee procedures and decisions.

1. General Recommendation
Minimum Number: Three vendors are typically considered the minimum number for
most procurement processes. This allows for comparison of prices, quality, and
terms, helping to ensure that the organization gets the best value.

2. Rationale
Competitive Pricing: Having at least three vendors enables a competitive bidding
process, which can lead to better pricing and terms.
Quality Comparison: It allows for comparison of quality and services, ensuring that
the selected vendor meets the organization’s standards.
Risk Management: Reduces the risk of dependency on a single vendor and helps
identify potential issues with service reliability or product quality.

3. When More Vendors Might Be Needed

High-Value or Complex Purchases: For high-value items or complex services, having
more than three vendors can provide a more comprehensive view of the market and
options available.
New Markets or Products: When entering new markets or procuring new types of
products or services, it may be beneficial to evaluate a larger number of vendors to
understand market conditions and options.

4. Exceptions
Specialized Items: In cases where the item or service is highly specialized, there
might be fewer vendors available. In such cases, seeking out all available vendors is
important, even if the number is less than three.
Pre-Approved Vendors: If the organization has a pre-approved list of vendors or long-
term contracts, the number of vendors considered may be limited to those on the
list.

5. Process
Vendor Selection: Ensure the vendors considered are reputable and capable of
meeting the organization’s needs. Conduct due diligence, such as checking
references and reviewing past performance.
Request for Proposal (RFP)/Quotation (RFQ): Issue an RFP or RFQ to the selected
vendors to gather detailed proposals and pricing.
Evaluation: Evaluate the proposals based on criteria such as cost, quality, delivery
times, and vendor reputation.

6. Documentation
Record Keeping: Document the selection process, including the vendors considered,
reasons for selection or rejection, and the final decision. This documentation supports
transparency and accountability in the procurement process.

Major Projects: For major construction projects or large-scale equipment purchases, it

may be beneficial to evaluate more vendors to ensure competitive bidding and
comprehensive market analysis.

1. Initiation
1.1. Identification of Need
Requestor: Department or individual identifies a need for goods or services. This
could be for operational requirements, project needs, or inventory replenishment.
Requirement Specification: Clearly define the specifications, quantity, and quality of
the items or services required.

1.2. Requisition Form

Form Completion: The requestor fills out a purchase requisition form, which typically
includes:
Description of the item or service.
Quantity needed.
Estimated cost.
Justification for the purchase.
Preferred suppliers (if applicable).
Desired delivery date.
Supporting Documents: Attach any supporting documents, such as quotations,
proposals, or technical specifications.

2. Review
2.1. Initial Review
Department Head/Manager: Reviews the requisition form for completeness and
validity. Checks if the request aligns with departmental needs and budget
constraints.

2.2. Budget Approval

Financial Review: The requisition is sent to the finance department or budget
controller to verify that funds are available and the expenditure is within the budget.

3. Approval
3.1. Approval Workflow
Approval Levels: The requisition may need approval from multiple levels of
management based on the organization’s policies, such as:
Immediate Supervisor.
Department Head.
Senior Management or Finance (for high-value or critical purchases).

3.2. Documentation of Approval

Signatures: Obtain necessary signatures or electronic approvals on the requisition
form.
System Entry: Enter the approved requisition into the organization’s procurement or
ERP system, if applicable.

4. Conversion to Purchase Order

4.1. Purchase Order Creation
Purchase Order (PO): Once the requisition is approved, the procurement department
creates a purchase order, which includes:
Detailed description of the goods or services.
Quantity and price.
Delivery terms and conditions.
Payment terms.
Vendor Selection: Choose the vendor based on existing contracts, quotations, or a
competitive bidding process.

4.2. PO Approval
Review: The purchase order is reviewed and approved by authorized personnel
before being sent to the vendor.

5. Order Placement
5.1. Sending the PO
Vendor Communication: Send the approved purchase order to the selected vendor
via email, mail, or an electronic procurement system.
Confirmation: Request an order confirmation from the vendor to ensure they have
received and accepted the purchase order.

6. Receiving and Inspection

6.1. Delivery
Receiving: Track the delivery of goods or services.
Inspection: Upon receipt, inspect the goods or services to ensure they meet the
specifications and quality standards outlined in the purchase order.

6.2. Discrepancy Handling

Report Issues: Report any discrepancies or issues to the vendor and the procurement
department.
Resolution: Work with the vendor to resolve any problems, such as damaged goods or
incorrect items.

7. Invoice and Payment

7.1. Invoice Receipt
Verification: Review and verify the vendor’s invoice against the purchase order and
receiving documents.
Approval for Payment: Ensure that the invoice is approved by the appropriate parties
before processing payment.

7.2. Payment Processing

Finance Department: The finance department processes the payment according to
the agreed terms and conditions.

8. Record Keeping and Documentation

8.1. Documentation
Maintain Records: Keep records of the purchase requisition, purchase order, delivery
receipts, and invoices.
Archiving: Store these documents securely for future reference, audits, and
compliance.

8.2. Analysis
Review and Feedback: Periodically review the procurement process and gather
feedback from stakeholders to identify areas for improvement.
Example Flow of the Purchase Requisition Process
Need Identification: Department A identifies a need for new office furniture.
Requisition Form Submission: Department A fills out a requisition form with details
and justification.
Initial Review: Department Head reviews and approves the requisition.
Budget Approval: Finance verifies budget availability.
Approval Workflow: Higher management approves the requisition.
PO Creation: Procurement creates a purchase order based on approved requisition.
Order Placement: PO is sent to the selected vendor.
Receiving and Inspection: Furniture is delivered and inspected.
Invoice Verification: Invoice is verified and payment is processed.
Record Keeping: All documents are filed and archived.
Key Considerations
Compliance: Ensure all steps adhere to organizational policies and procedures.
Efficiency: Streamline the process to minimize delays and administrative burden.
Transparency: Maintain clear documentation and communication throughout the
process.