What is Services Procurement?

Malcolm Tatum

Services procurement is the process of identifying, evaluating, and obtaining different types of services that are important to the general operation of a business. In many cases, this process of procurement is conducted using in-house resources. However, companies may also utilize procurement systems and consultants to locate and contract the services they need.

Construction procurement contracts are common.
Construction procurement contracts are common.

There are many different types of services that a company may need in order to function properly. Securing communications services such as telephone, long distance, cellular, and Internet services are often important to companies of all sizes. In addition, a company may engage other services such as computer and server maintenance, marketing and public relations, and mass printing and mailing services.

In large corporations, a central purchasing department often handles the process of services procurement. This department is responsible for finding prospective vendors that can provide the services needed, compare their services with those of their competitors, and negotiate the best possible terms. Purchasing agents and managers often have the authority to enter into procurement contracts with vendors, as long as the contracts meet with company standards and regulations. When a purchasing department is part of the corporate structure, all other departments submit their requests for new services to a purchasing agent rather than seeking services on their own.

Smaller companies sometimes manage services procurement by granting department heads the authority to seek services on their own. With this scenario, the department head usually has the first contact with a prospective vendor. Once it is determined that the company would benefit from creating a working relationship with the vendor, a central decision maker, such as the owner or a company president, commits the company to a procurement contract with the vendor.

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A third alternative in services procurement is to outsource the function to a representative or consultant. The consultant evaluates the needs of his or her client, then identifies prospective vendors to supply those services that are needed or desired. With this approach, the consultant handles all the screening and qualifying of vendors. Often, this also includes negotiating the best service agreement possible on behalf of the client. However, consultants are rarely able to commit to a contract for their clients. Instead, the client must make that commitment after conferring with the consultant.

Services procurement in all its forms has the goal of obtaining the highest quality business services at the lowest possible price. When conducted in a logical and responsible manner, a procurement process of this type can save any business a great deal of money. To this end, there are a number of educational opportunities, including seminars and workshops, that can help purchasing professionals hone their abilities to engage in the task of services procurement effectively.

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Discussion Comments


@Steelfethers - I prefer it when a company has a centralized services procurement department like your employer has. Outside consultants are expensive for companies to utilize, and they don't always understand the company's needs like insiders do.


Where I work, we have to obtain written price quotes from three vendors for any products or services the department wishes to purchase that cost over a certain amount. Then, if the vendor we prefer is not the cheapest, we have to write a justification letter and submit it to the purchasing department with our reasons for thinking it is better to purchase from that vendor than the less expensive one. In some cases, the legal department has to review any contracts and approve them before they are signed. It's a pain and a lot of red tape, but the process helps the university save costs and satisfies the auditors.

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