4.1 Definition of order and prerequisite order documents

Once a need has been approved, a supplier has been chosen and the money is available, the procurement office turns the decision into an order. The order is the point at which the organisation commits itself to a supplier, so it may only be raised when the documents that justify it are complete and approved. A procurement officer who issues an order without these documents exposes the organisation to unbudgeted spending, disputes with suppliers and audit queries.

Meaning of an order

An order is a formal written instruction from a buyer to a supplier to supply stated goods, or to perform stated services, of a given description and quantity, at an agreed price, by an agreed date and to an agreed place. When the supplier accepts it, in writing or by delivering against it, the order becomes a binding contract between the two parties. Example: after evaluating quotations for 50 reams of A4 photocopy paper, the procurement office of a manufacturing firm issues an order to the lowest evaluated supplier stating the paper grade, quantity, unit price, total price, delivery date and the main store as the delivery point.

An order differs from a requisition. A requisition is an internal request from a user department asking the procurement office to buy something. An order is an external document sent to a supplier that commits the organisation to buy.

Elements of a valid order

For an order to be enforceable and easy to check at delivery, it carries the following elements:

• Parties: the full name and address of the buying organisation and of the supplier, so that both can be identified if a dispute arises.
• Unique order number and date: a serial number that links the order to the requisition, the purchase register, the delivery note, the goods received note and the invoice.
• Description and specification: a clear statement of what is being bought, matching the specification in the requisition and in the accepted quotation or proposal.
• Quantity, unit price and total price: stated in figures and, for the total, in words, with taxes shown separately where they apply.
• Delivery terms: the delivery date or period and the delivery point, such as the main store or a project site.
• Payment terms and conditions: when and how the supplier will be paid, and the standard terms of the organisation printed or attached.
• Authorisation: the signatures of the officers who prepared and approved the order, which show that it was issued within delegated authority.

Prerequisite order documents

Prerequisite order documents are the documents that must exist, and be approved, before an order may be prepared. Each one answers a control question: is the item needed, is it planned and budgeted for, was the supplier chosen fairly, and is the money available?

• Procurement plan and budget: the item, or the category it falls under, should appear in the approved procurement plan and have a budget line. In a public entity the Public Procurement and Asset Disposal Act, 2015 expects procurement to be planned and budgeted for before it is started.
• Approved purchase requisition: the request from the user department, signed by the head of that department and approved for procurement. It proves that a real need exists and gives the specification and quantity.
• Specifications or terms of reference: the technical description of the goods, or the scope of the services, against which offers were invited and against which the delivery will later be inspected.
• Solicitation and offers received: the request for quotations, request for proposals or tender document that was issued, and the quotations, proposals or bids received in reply.
• Evaluation report: the record of how offers were compared and which supplier was recommended, signed by the evaluating officers or committee.
• Award approval and notification: the approval of the recommended award by the officer with authority to award, and the letter notifying the successful supplier. For larger purchases a signed contract also comes before the order.
• Confirmation of funds: a confirmation from the finance office that the amount is available in the budget line and has been committed, so that the same money cannot be spent twice.
• Supplier records: the supplier's registration details and any compliance documents the organisation requires before doing business, such as a valid tax compliance certificate.

Checking prerequisites before raising an order

Before preparing the order, the procurement officer confirms that every prerequisite is in the file:

1. Retrieve the approved requisition and check that the description and quantity have not changed since approval.
2. Confirm that the item is in the procurement plan and that the budget line named on the requisition is correct.
3. Check that the solicitation method used was the right one for the value and nature of the purchase under the organisation's procurement procedures.
4. Read the evaluation report and confirm that the order will go to the supplier it recommends, at the price evaluated.
5. Confirm that the award has been approved by the authorised officer and that the supplier has been notified.
6. Obtain the confirmation of funds from the finance office and quote its reference on the order.
7. Check that the supplier's compliance documents are valid on the date of the order.
8. Only then prepare the order, quoting the requisition number, the quotation or tender reference and the budget line.