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How to Perform a Procurement Assessment?

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Mikey Pasciuto
November 22, 2024
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4 minutes
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This blog article has been created to help you better understand the ins and outs of a procurement assessment. In previous articles, we have covered what circular procurement is. Now we want to provide tangible steps on how to administer your own assessment in the future.

What is a Procurement Assessment?

Definition 📖

A procurement assessment systematically evaluates an organization's procurement processes, policies, and practices. It involves analyzing various aspects of procurement activities to identify strengths, weaknesses, risks, and opportunities for improvement.

Purchasing and Procurement are not the same. The purpose of purchasing is to reduce the cost of the order, while procurement has other objectives such as risk reduction, contract compliance, cost savings, and maintaining supplier relationships.

Goal ⭐️

A procurement assessment aims to ensure that procurement functions are efficient, cost-effective, compliant with regulations, and aligned with the organization's strategic objectives.

The Benefits of Procurement Assessments

Procurement assessments help organizations to:

⭐️ Evaluate Procurement Performance:

  • Assess the effectiveness of procurement processes, such as sourcing, supplier management, contract negotiation, and order fulfillment.

⭐️ Identify Risks and Mitigation Strategies:

  • Identify potential risks in the procurement process, including supply chain disruptions, supplier dependency, compliance issues, and financial risks.
  • Develop strategies to mitigate identified risks.

⭐️ Ensure Compliance with Regulations and Standards:

  • Review procurement practices to ensure compliance with relevant laws, regulations, and industry standards.

⭐️ Enhance Supplier Relationships and Performance:

  • Evaluate supplier relationships and explore opportunities for collaboration and improvement.

⭐️ Optimize Cost and Efficiency:

  • Analyze procurement costs and identify areas where cost savings can be achieved.

⭐️ Align Procurement with Organizational Strategy & Goals:

  • Ensure that procurement activities support the organization's overall strategic goals and objectives.

The Procurement Assessment Process

Completing a procurement assessment involves a systematic evaluation of an organization's procurement processes, practices, and outcomes to identify areas of strength, weaknesses, and opportunities for improvement.✨

Here's a step-by-step guide on how to conduct a procurement assessment :

1. Define the Scope and Objectives

  • Set specific goals for the assessment and determine the boundaries.

The United National Development Programme (UNDP) Public Procurement Capacity Development Guide recommends you consider these points below:

  • Clarify the objectives and expectations from the assessment exercise.
  • Identify, engage, and, where appropriate, clarify objectives of and expectations from the assessment exercise with other key stakeholders.
  • Familiarize yourself with relevant key stakeholders with the Assessment Methodology.
  • Work to identify the point of entry, core issues, and procurement capacities to be included in the assessment.
  • Develop assessment worksheets, interview guides, or other supporting tools
  • Discuss how the capacity assessment will be conducted (where, when, with whom?).
  • Develop a work plan that details what needs to be done, by whom, when, and the resources needed.

2. Gather Relevant Data

  • Gather quantitative and qualitative data on procurement activities and stakeholder engagement.  
  • Sources include:
    • Review of documents such as laws, regulations, procedures manuals, organization charts, monitoring reports etc.
    • Interviews
    • Focus groups
    • Questionnaires
    • Client satisfaction surveys and scorecards
    • Workshops Self-assessment instruments
    • Review of case files and records
Screen Shot 2024-08-16 at 10.45.44 AM.png

Sample data collection worksheet

Image Credit: UNDP Public Procurement Capacity Development Guide

3. Evaluate Procurement Processes

  • Create a detailed map of the procurement process from start to finish, identifying all key steps and decision points.
  • Compare the current procurement process with best practices or industry standards to identify gaps and areas for improvement.
  • Ensure that the procurement processes comply with all legal, regulatory, and organizational requirements.
Screen Shot 2024-08-16 at 10.49.24 AM.png

Gap identification worksheet

Image Credit: UNDP Public Procurement Capacity Development Guide

4. Assess Supplier Performance

  • Use established criteria (e.g., cost, quality, delivery, reliability) to evaluate the performance of key suppliers.
  • Identify any risks associated with suppliers, such as financial instability, supply chain disruptions, or non-compliance.
Screen Shot 2024-08-16 at 10.57.19 AM.png

Assessment Framework

Image Credit: UNDP Public Procurement Capacity Development Guide

5. Analyze Costs and Efficiency

  • Conduct a total cost of ownership (TCO) analysis to evaluate the full cost associated with acquiring and using goods or services from suppliers.
  • Analyze key performance indicators (KPIs) such as procurement cycle time, order accuracy, and cost savings.
  • Look for areas where processes can be streamlined or costs reduced without compromising quality or compliance.

6. Evaluate Technology and Tools

  • Review technology used to assess the effectiveness of current procurement technologies.

7. Compliance and Risk Management

  • Verify that procurement activities comply with relevant laws, regulations, and ethical standards.
  • Identify and assess risks within the procurement process, and evaluate the effectiveness of existing risk management strategies.

Procurement Assessment Findings

Once you have assessed your organization's procurement process and the factors involved, it is important that these findings are used to create change. 🗣

Here are a few recommendations for actions to take:

Report Findings

  • Create a comprehensive report which compiles all findings, analyses, and recommendations.
  • Present the assessment results to leadership/ management. Highlighting the key areas of improvement and proposed actions.

The UNDP Public Procurement Capacity Development Guide recommends the report include the following :

  • Mobilize and Design
    • Description of the context in which the assessment was conducted
    • Description of the primary clients of the assessment
    • Definition of the objective of the assessment and its scope
    • How the UNDP Procurement Capacity Assessment Framework was adapted
  • Conduct the Procurement Assessment
    • Overview of the methodology (data sources)
    • The tools used (assessment worksheets, questionnaires)
  • Summarize and Interpret Results
    • Presentation of the current procurement and desired procurement
    • Summary analysis of the assessment findings, both for desired and for existing capacities
  • Annexes
    • Terms of Reference
    • Procurement assessment workplan
    • Overview of the different stakeholders consulted
    • Detailed questionnaires or interview guides
    • Detailed analysis of the assessment findings

Develop Recommendations

  • Based on the assessment, develop actionable recommendations for enhancing procurement processes, reducing costs, and mitigating risks.
  • Prioritize actions by ranking the recommendations based on their potential impact and the resources required for implementation.

UNDP identifies 3 levels of procurement measures, the recommendation should reflect these 3 things:

  1. Impact: Change in people’s well-being
  2. Outcome: Change in institutional performance, stability, and adaptability
  3. Output: Product produced or service provided.

Implement and Monitor

  • Develop an action plan for implementing the recommended procurement changes. In the plan be sure to assign responsibilities and set timelines.
  • Establish mechanisms for continuous monitoring and evaluation to ensure that the implemented changes lead to the desired outcomes.

According to the UNDP Public Procurement Capacity Development Guide, monitoring and evaluation plans should include the following

  • How the data is to be collected
  • The frequency of the measurement
  • Who is responsible for collecting the data/reporting
  • Resources required for the monitoring
  • Risks and assumptions for carrying out the monitoring

Follow-Up and Review

  • Periodically review the progress of the implemented changes to ensure they are achieving the expected benefits.
  • Make any necessary adjustments to the procurement process based on feedback and results.

Key Terms

Compliance: adherence to laws, regulations, and internal policies governing procurement activities, including ethical standards and sustainability requirements.

Contract Management: the process of managing contract creation, execution, and analysis to maximize operational and financial performance while minimizing risk.

Key Performance Indicators (KPIs): metrics used to measure the effectiveness and efficiency of procurement processes.

Procurement: the process by which an organization acquires goods, services, or works from external suppliers to meet its operational needs.

  • Direct procurement: any expense related to the cost of production and goods sold. This included all items required for finishing the product. If it is service-based, direct procurement generally refers to labor costs.
  • Indirect procurement: the act of purchasing supplied and services for the day-to-day operations of the business, including repairs, office supplies, and services acquired. Indirect procurement never adds to the bottom line.

Procurement Process: the series of steps an organization follows to acquire goods and services, including planning, sourcing, negotiating, and managing suppliers.

Procurement Strategy: this plan defines the approach an organization takes to manage its procurement activities, including sourcing, supplier management, and risk mitigation, in alignment with overall business goals.

Risk Assessment: the identification and evaluation of potential risks in the procurement process.

Sourcing: the process of identifying, evaluating, and selecting suppliers to provide goods or services required by the organization.

Spend Analysis: the process of collecting, categorizing, and analyzing expenditure data to understand spending patterns and identify opportunities for cost savings and efficiency improvements.

Supplier Evaluation: the assessment of a supplier’s performance based on criteria such as quality, cost, delivery, reliability, and compliance with contractual obligations.

Total Cost of Ownership (TCO): a financial estimate intended to help buyers and owners determine the direct and indirect costs of a product or system.

How can Scrapp help?

Automate your entire procurement assessment tasks using Scrapp's waste tracking software. Carry out assessments on a daily or weekly basis to gain quicer insights and take even quicker action. Book in a time with the team to learn more. If you liked this blog article, you can find more educational resources through Scrapp's zero-waste champions program.

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Article by
Mikey Pasciuto
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