6 Key Considerations
Drafting an effective procurement policy is critical for Non-Profit Organisations (NPOs) to
ensure transparency, accountability, and efficiency in the utilisation of resources. A well-
designed policy not only provides a framework for decision-making but also ensures
compliance with regulatory and donor requirements. Here are six essential points to keep in
mind:
Have a Policy that matches the size of your organisation
A procurement policy should be tailored to the size and complexity of operations of your organisation. For smaller or less complex operations, avoid overly detailed or lengthy policies that may be difficult to implement. Instead, focus on creating a practical, simple, and actionable policy that aligns with your organisation's specific needs.
Implementation is Key
Drafting a policy is only the first step—successful implementation is what makes it effective. Clearly assign responsibilities and accountability at different levels within the organisation. This ensures that the policy transitions from being a document on paper to a fully functioning system integrated into daily operations.
Focus on Documentation and Compliance
Proper documentation is the foundation of an effective procurement process. Clearly outline how procurement records—such as quotations, approvals, contracts, and invoices—will be maintained and retained. Robust documentation ensures smooth audits, enhances transparency, and demonstrates compliance with regulatory and donor requirements.
Address Donor-Specific Requirements
For Organisations working with multiple donors, particularly those with CSR or foreign funding, specify that donor-specific procurement guidelines will take precedence over the general policy when necessary. This ensures compliance with donor agreements while maintaining transparency in fund utilization.
Capacity Building and Monitoring
Regular training of employees is crucial to ensure proper understanding and consistent application of the procurement policy. Conduct periodic training sessions and provide updates whenever the policy changes. Additionally, establish a framework for monitoring and evaluation, such as periodic internal audits, to identify gaps, address inefficiencies, and ensure continuous improvement.
Promote Ethical and Transparent Procurement Practices
Incorporate guidelines to ensure ethical procurement practices, including conflict-of-interest disclosures, transparent vendor selection through quotations, and anti-corruption measures. This reinforces trust among donors, beneficiaries, and stakeholders. Additionally, ensure vendors comply with the NPO's POSH as well as Child Protection Policies to safeguard organisational values and commitments.
Key Areas to Include in a Procurement Policy
In addition to the considerations for developing an effective procurement policy, the
following are the key areas recommended to be included in the procurement policy of a
Non-Profit:
Objectives and Principles
Clearly define the goals of the procurement policy, such as ensuring fairness, cost-effectiveness, and compliance with regulations.
Highlight core principles like transparency, ethical practices, and accountability to establish a strong foundation.
Clearly assign responsibility for maintaining, updating, and distributing the procurement manual to ensure accessibility and control.
Scope of the Policy
Clearly outline inclusions (e.g., procurement of goods, services, booking venues, software etc.) and exclusions (e.g., utilities, niche vendor requirements, or specific waivers where justified).
For NPOs, define emergency procurement guidelines, including fast-track approval processes, required documentation, and authorisation thresholds to address urgent needs (e.g., disaster relief scenarios) efficiently. Remember these should be small exceptions to the policy, they should not end up forming majority of your procurement.
Procurement Process
Develop an authorization matrix that specifies approval thresholds based on procurement value and ensures clarity in decision-making at all levels.
Provide a step-by-step overview of the procurement process:
Requisition and budget approval
Vendor identification and selection
Contract negotiation and management
Payment and closure of procurement activities
Introduce guidelines for vendor selection, including minimum requirements like obtaining multiple quotations, using formal tenders for large-value procurements, and documenting justification for vendor choices.
Include a Code of Conduct for employees involved in procurement to prevent conflicts of interest, favouritism, and collusion. Outline specific actions to be taken in case of violations.
For large organisations, include detailed guidelines for: The formation of a Procurement Committee, including its composition, roles, decision-making processes, and responsibilities.
Vendor Managementt
Establish a vendor empanelment process, ensuring the collection of critical compliance details, such as PAN and GST registration, MSME status (if applicable), Bank details, Confirmation of filing income tax returns for the last two years etc.
Maintain a vendor database with performance ratings based on quality, reliability, and previous engagement history. Include provisions for regular vendor reviews and feedback to improve efficiency and build long-term partnerships.
Implement a tracking system to monitor the validity of Service Level Agreements (SLAs), Purchase Orders (POs), and Work Orders (WOs) to ensure timely renewals and avoid disruptions in service.
Review and Updates
Clearly state how often the policy will be reviewed and updated. Regular updates ensure that the policy remains aligned with the organisation’s needs, donor requirements, and regulatory changes.
Conclusion
An effective procurement policy is a strategic tool for NPOs to ensure accountability, transparency, and efficiency in resource utilization. By aligning the policy with the Organisation’s size and needs, ensuring robust documentation, and addressing donor-specific requirements, NPOs can establish a reliable framework to support their mission. Regular reviews, capacity-building through training, and continuous monitoring will ensure the policy remains relevant, functional, and impactful over time.
Interested in learning more? Sign up for our webinar on developing a robust Procurement Policy for your Organisation. Contact Aria for Expert FCRA Consultancy:
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