What is the procurement process, step by step?

What are the steps of the procurement process?

The procurement process has seven steps: identify and approve the need, plan the purchase, select the supplier, award the contract, order, receive and pay, then manage performance and close. The first four decide what to buy, from whom and on what terms; the last three carry the purchase out and check it.

1. Identify and approve the need: a requester describes what is needed, when and why; the budget holder confirms the money exists. This first step, often called intake, decides which route the purchase will take.
2. Plan the purchase: check whether an existing contract, catalogue or framework agreement already covers the need, estimate the value, look at the market, through a request for information where needed, and choose the route: a direct order, quotations or a formal tender.
3. Select the supplier: write the specification and the evaluation criteria, then ask for quotations or proposals, either from the open market or, where a framework agreement or panel covers the need, from the suppliers on it only, and evaluate the answers. The suppliers invited are already registered and qualified: their record is created at registration and completed at qualification.
4. Award the contract: confirm the award decision against the announced criteria and notify every bidder; in public procurement, wait for the standstill period to end; then sign within delegated authority and enable the supplier in the ordering and payment systems. Any negotiation the procedure allows happens before the award decision, not after it. In practice, buyers often shortlist two or three bidders and finish the competition with them, through clarifications, negotiation rounds and a best and final offer, before selecting one; in public procurement, only where the chosen procedure provides for it.
5. Order: raise the requisition and the purchase order against the contract price and terms, and send the order to the supplier.
6. Receive and pay: record the goods or services received, check the supplier’s invoice against the order and the receipt, and pay on the due date.
7. Manage performance and close: track delivery, quality and service against the contract, handle changes and disputes, decide on renewal, and record what to do differently next time.

The order matters more than the labels. Talking to the market before writing the specification is good practice when it is recorded and neutral: the EU public procurement directive allows preliminary market consultations that do not distort competition (Directive 2014/24/EU, Article 40), and the UK Procurement Act 2023 calls the same step preliminary market engagement (section 16). What breaks the sequence is asking suppliers to price before the specification is fixed, or ordering before the contract is signed, because each skips a control the step provides. In public procurement, the standstill is a minimum wait between the award decision and signature, so that losing bidders can challenge it: at least 10 calendar days under the EU remedies directive when the decision is sent electronically, and eight working days from the contract award notice under the Procurement Act 2023, which does not impose it on call-offs under a framework. What procurement itself means, and how it differs from purchasing, is set out on the home page; this guide follows the steps.

Who does what at each step of the procurement process?

Each step of the procurement process has an owner, a document that proves it happened and a control that stops a bad decision moving downstream. The table sets them out, with what typically goes wrong when the control is skipped.

The last three steps form the operational cycle known as procure-to-pay, which details the requisition, the purchase order, the receipt, the three-way match and the payment. The first four belong to strategic sourcing, the requests for proposal and quotation explained in the RFP guide, and contract management. The supplier record, created when a supplier registers and completed when it is qualified, before any invitation to bid, is the subject of supplier management.

Why do procurement process models show 5, 7 or 13 steps?

Procurement process models count steps differently because they cut the same route at different points, not because the work differs. A five-step model usually merges planning into selection and receipt into payment; a seven-step model, like the one above, keeps them apart; a professional body’s model splits sourcing into its detailed tasks.

The Chartered Institute of Procurement and Supply (CIPS) publishes a procurement and supply cycle of 13 steps, from specification to asset management: specification, analysis, strategy, market, documentation, criteria, tender, evaluation, contract, delivery, performance, management and asset. US federal rules take a wider view of the same route: FAR 2.101 says acquisition begins when agency needs are established and includes describing requirements, soliciting and selecting sources, awarding the contract, contract performance and contract administration.

The CIPS cycle also attaches a gateway review, “stop, think, check”, to each of its steps: a deliberate pause to confirm the work of one step before starting the next. Organisations that buy large or risky items often formalise the same idea as approval gates between steps.

Does every purchase go through every step?

No. The value and the risk of a purchase decide how many steps it takes. A purchase covered by an existing contract skips supplier selection; a low-value purchase may need only an approval and an order; a large, complex or regulated purchase passes through every step, with a published notice and formal evaluation. A purchasing policy sets these routes as thresholds, so that requesters know in advance which one applies.

Company thresholds are set by each organisation and usually sit far below public ones. Whatever the route, the payment controls stay the same: even a purchasing-card purchase is reconciled and approved. How a request for quotation runs, and how quotes are compared on landed cost, is explained in the RFQ guide; a guide to the RFP process is in preparation.

What does the procurement process flow look like in practice?

The fictional example below follows one purchase through the procurement process flow. A company hires 40 engineers and needs a laptop for each, estimated at €52,000. Its purchasing policy, also fictional, requires a single quote below €5,000, three written quotes up to €100,000 and a formal RFP above that, so the purchase takes the quotation route.

Two decisions in the example save the most time. The specification was fixed in the request, so suppliers quoted the same machine; and the RFQ asked for a delivered price, so the quotes compared without freight estimates. The closing review also shows how the process feeds itself: a repeated need becomes a contract, and the next purchase takes the shorter route.

How does the process change for direct, indirect, construction and public buying?

The seven steps hold for every kind of purchase; what changes is where the effort goes and which documents carry it.

Direct and material procurement

Buying what goes into the product. The need comes from production plans and forecasts rather than from a requester, orders are often scheduled releases against long-term contracts, and receipt includes quality inspection. Supplier selection weighs capacity and quality as much as price.

Indirect procurement

Buying what the organisation needs to run: IT, services, facilities, travel. The difficulty is volume and dispersion, many requesters and many small suppliers, so intake, catalogues and approval rules carry the process.

Services

Receipt is replaced by acceptance of work, often against milestones or timesheets, and the specification describes outcomes and service levels rather than items.

Construction and capital projects

The contract step dominates: standard forms of contract, payment by valuation, and strict notice procedures. Under the NEC4 standard contracts, for example, a contractor that does not notify a compensation event within eight weeks of becoming aware of it generally loses the right to more time or money. Oil and gas and other capital-intensive sectors add supplier pre-qualification and the early ordering of long-lead equipment.

Public procurement

The steps are set by procurement law: published notices, defined procedures, minimum time limits, award criteria announced in advance and, in many countries, publication of contracts as open data such as the Open Contracting Data Standard.

E-procurement process

The same steps run in software: requests, sourcing events, contracts, orders and invoices are held in one system, with the controls enforced by workflow. What changes and what does not is explained in the e-procurement guide.

The difference between direct and indirect procurement, and why they are often run by different teams, is the subject of a dedicated guide in preparation.

Which controls keep the procurement process honest?

Three controls protect the whole procurement process: approval before commitment, separation of duties, and verification of the supplier before money moves. The first means no order or contract exists without an approved need and budget. The second means no single person can create a supplier, order from it and approve its payment; the US Government Accountability Office’s internal control standards (the Green Book, 2025 revision) treat this segregation of duties as a control activity, and allow smaller entities to compensate with added review where staff are too few to separate roles.

The third control has become the most urgent. Fraudsters impersonate suppliers and ask for bank details to be changed before a payment run. The FBI’s Internet Crime Complaint Center recorded 24,768 business email compromise complaints in 2025, with reported losses of about $3.05 billion, counting only the complaints filed with it. A process that confirms every bank-detail change through a known contact, never through the email that requested it, closes that door. The controls at each payment step are detailed in the procure-to-pay guide.

• Conflict-of-interest declarations from everyone who writes the specification or evaluates bids.
• Evaluation criteria and their weights fixed and recorded before any bid is opened.
• Delegated authority: who may sign contracts and approve orders, and up to what amount.
• No purchase order, no payment: invoices without a valid order go back to the supplier, except in categories the policy lists, rather than to an approver’s inbox.
• A record of each step kept with the purchase, so that the award and the price can be justified at audit.

What are the common challenges in the procurement process?

The common challenges in the procurement process sit at the hand-offs between steps rather than inside them: between the requester and procurement, between the contract and the ordering system, and between the order and the invoice. The table lists the frequent ones, the symptom that reveals each and the usual fix.

The cost of weak contracting after signature is measurable. A 2023 study by World Commerce & Contracting with Deloitte, drawing on more than 1,200 organisations, estimated average value erosion at 8.6% of contract value: money agreed in the contract that the organisation never actually captured.

How do you implement or redesign a procurement process?

Implementing a procurement process means writing down the route each kind of purchase takes, who decides at each step and which system holds the record, then making that route the easiest one to follow. A redesign follows the same method, starting from what happens today rather than from the policy on paper.

1. Map the current process from request to payment, with volumes per year and where requests wait longest.
2. Set the routes: thresholds by value and risk, and the categories that must use an existing contract or catalogue.
3. Assign roles: requester, budget holder, buyer, evaluator, signatory, receiver and accounts payable, with what each may approve.
4. Write the rules into a procurement policy and short procedures; a guide to procurement policy is in preparation.
5. Choose where each step runs: the ERP, a procure-to-pay tool or a wider suite, as compared in the procurement software guide.
6. Measure a few indicators, such as the share of spend under contract, the time from request to order and the share of invoices matched first time, and review them every quarter.

A lean procurement process removes waiting and rework rather than steps: approvals that add no information, re-keying between systems, and quotes requested for items already under contract. Whether the process is centralised, with one team buying for the whole organisation, or decentralised, with buyers in each business unit, the steps stay the same; what changes is who owns them. A dedicated guide to procurement process improvement is in preparation.

How does the procurement process relate to procure-to-pay and source-to-pay?

The procurement process is the full sequence from need to closure. Procure-to-pay is its operational end, from requisition to payment, repeated for every order. Strategic sourcing is its upstream end, deciding how each category is bought before any single purchase starts. Source-to-pay is the name given to the whole route when it is run as one connected chain, usually in one family of systems; a step-by-step guide to the source-to-pay process is in preparation.