Contracts Management

Procurement refers to acquiring goods, commodities or services by any company, industry, organization, or individual using legal means. Procurement must be in the right quantity, quality, price, place, and time for the benefit of individuals, governments and corporations. That is why a procurement contract is important. It stipulates the performance requirements.

For organizations where the main objective is to acquire goods and services for consumption or usage a procurement contract is standard practice. Parties that are bound by procurement contracts either pay to acquire or are required to supply the goods and services as directed by the terms and conditions of the procurement contract.

Governments are one such party that frequently use procurement contracts. A procurement agreement is beneficial for the government because it acts as an instrument where the government can acquire goods or services for use in the U.S. Governments are sometimes subject to rules and regulations regarding the business dealings of procurement contracts. Title 41 and Title 10 (Chapter 137) of the U.S. Code state the laws of the procurement contracts. In the same manner, operational guidelines are mentioned in Title 48 of the Code of Federal Regulations.

Here are some ways by which a procurement initiation, negotiation and inspection can take place:

Suppliers Information: While doing a business, manufactures have to deal with many suppliers. In order to identify one or more suppliers, Request for Quotation (RFQ), Request for Proposal (RFP), and Request for Information (RFI) are required. Alternatively, direct contact may be required for gathering information.

Collecting information: In a situation where the potential customer doesn't maintain any relationship with sales/marketing departments of suppliers, then contact is made with potential companies to prospect for desired suppliers to fulfill their requirements. This can involve the submission of quotations or sample products for consideration.

Negotiation: Prices, quantity, delivery date, etc are sometimes pre-negotiated. As per the negotiated price, date, and quantity, the business transaction takes place or continues on an ongoing basis at an agreed to price.

Investigation: After reaching a mutual agreement between the buyer and the seller, the goods are checked for quality before delivery. This is standard practice if the goods are of a perishable nature.

Procurement activities are broadly segregated into two categories: direct production-related procurement and indirect, non-production-related procurement. In direct production-related procurement, the finished goods are raw material based for use in additional stages of production. Indirect, non-production-related procurement consists of operating resources that every company requires in order to perform its operational activities.

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