Procurement Policy Manual

Title page
Salmat Procurement Policy

Purchasing and Approval Policy
Document version:
Status:
Issue date:
Draft
1-Dec-2014
Commercial in Confidence
Copyright 2014 Salmat
Copyright 2014
Salmat Information Technology Group
1416 Chandos Street
St Leonards NSW 2065
The information in this document is for the sole use of Salmat Pty Limited staff. It contains
Company Confidential information. No part of it may be copied, reproduced, translated or reduced
to any electronic medium or machine-readable form without prior written consent from Salmat Pty
Limited.
This document should not be circulated outside Salmat without the written consent of the release
authority listed below. Where no release authority is listed, the State Managers written consent
must be obtained before the document is circulated outside Salmat.
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Contents
Title page............................................................................................................................ 1
1
Introduction.............................................................................................................. 4
1.1 Purpose and Scope........................................................................................ 4
1.2 Scope............................................................................................................. 4
1.3 Documentation............................................................................................... 4
1.4 References..................................................................................................... 4
1.5 Definitions...................................................................................................... 5
1.6 JD Edwards OneWorld System......................................................................5
2
Vision....................................................................................................................... 7
3
Employee Obligations.............................................................................................. 8
4
Responsibility of Management.................................................................................9
4.1 Training and Communication..........................................................................9
4.2 Responsibility and Authority...........................................................................9
5
Procurement Policy................................................................................................10
5.1 Procurement Principles................................................................................10
5.1.1
Efficient procurement processes....................................................10
5.1.2
Value for money..............................................................................11
5.1.3
Effective competition......................................................................11
5.2 Procurement Methods..................................................................................12
5.3 Goods requiring a Capex.............................................................................12
5.4 Goods not requiring a Capex.......................................................................13
5.5 Purchasing Authority levels..........................................................................13
5.5.1
Capital Expenditure........................................................................13
5.5.2
Operating Expenditure...................................................................14
6
Procurement Process............................................................................................. 15
6.1 Overview...................................................................................................... 15
6.2 Process Flowcharts......................................................................................16
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This copy is uncontrolled if you are reading it on paper. Refer to the online copy for the latest version. Commercial in Confidence.
1 Introduction
1.1 Purpose and Scope
This document defines the procurement policies in place throughout the Salmat
organisation. The policies in this document are to ensure that:
Salmat operates with honesty, integrity and fairness
Salmat consistently meets and exceeds client expectations
Salmat operates in accordance with applicable laws.
This policy document is to be read in conjunction with other relevant policy

documents within Salmat.
1.2 Scope
This procedure applies to all products and services procured within Salmat,
including operating expenditure and capital expenditure.
1.3 Documentation
All relevant documentation and templates can be found on the Salmat Intranet.
1.4 References
Capital Expenditure Request forms
Purchase Orders
Incoming Stock Registration from
Purchase Order Request form
Purchase Order form
Corrective Action Request
Corporate Capital Expenditure procedure
Server installation control form (ITG related)
PC installation control form (ITG related)
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1.5 Definitions
Term
Definition
Con Note
Consignment Note used in transit.
Purchaser
An employee of Salmat who identifies a need to make

a purchase.
Procurement Officer
A person appointed to a senior manager who has

authority to generate purchase orders.
Departmental Manager
A Department Manager is a person who, irrespective

of job title, has the necessary authority and
responsibility to run a department, or team, within a
business of Salmat.
Fixed Asset
An item that is not a consumable or repair. Fixed

assets can include:
plant and machinery
office equipment
motor vehicles
Furniture
Buildings
Consumable
A item purchased for an employee
Capital Expenditure
Any expenditure over $1,000 for new fixed assets or

any purchase of computer hardware and software.
Capex
Abbreviated form of Capital Expenditure Request
Sub-contractor
A supplier who contracts to provide a product and / or

service.
1.6 JD Edwards OneWorld System

The JD Edwards (JDE) OneWOrld product is the computer system that Salmat is
introducing to manage many aspects of its operation. The following JDE modules
will be used in relation to procurement include the following:
Purchasing
Accounts Payable
Fixed Assets
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The key functionality of the OneWorld system in relation to procurement is as

follows:
Vendor details
Purchase orders
Purchase order approvals
Invoice details
Payment information
JDE generates a range of useful reports that will allow Salmat to effectively
monitor procurement activities and trends. Some aspects of procurement, such as
the required levels of approval, will still have to be done manually.
All staff required to use the JDE Purchasing Module will receive specific JDE
training. This manual does not describe how to use JDE for procurement.
For additional information on JDE, refer to the JDE User Manuals or call the ITG
Help Desk.
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2 Vision
Salmat was listed on the Australian Stock Exchange on 2nd December 2002 and
operates in an increasingly competitive environment.
Salmat continues to focus on opportunities to minimse cost and maximise value.
This is being done through a number of business strategies, one of which is the
new Procurement Policy designed to enhance the efficiency of the procurement
process.
The Procurement Policy:
aims to generate effective and efficient procurements
introduces flexibility to the procurement process by making a number of

procurement methods available
empowers staff to select a procurement method which is suitable to the type

of procurement
streamlines the approvals process and allows for feedback.
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3 Employee Obligations
Employees of Salmat who procure or approve the procurement of goods and
services are expected to be familiar with the policies embodied in this document.
Employees are also required to be aware of and understand the policies and
procedures that directly relate to their roles.
Employees are responsible for complying with procurement policies to the extent
to which they relate to their role. Employees are encouraged to ask questions,
seek guidance, and express any concerns they may have with regard to Salmat
procurement policies.
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4 Responsibility of Management
Managers are responsible for ensuring that the intent of the Salmat Procurement
Policy are reflected in business transactions initiated by their organisational unit.
It is essential that management are committed to ensuring compliance with the
Salmat Procurement Policy and associated procedures.
Managers are responsible for communicating the intent of the Salmat Procurement
Policy to all staff involved in the procurement process.
4.1 Training and Communication

Business Unit Managers are responsible for ensuring that the intent of the Salmat
Procurement Policy is reflected throughout the business management systems
(such as JD Edwards) and practices within each Business Unit. Changes to the
Procurement Policy are to be communicated to all staff involved in the
procurement process.
4.2 Responsibility and Authority

Details of responsibilities and authorities for all personnel are defined in
procedures and / or job descriptions maintained by the relevant Salmat business.
In the absence of an employee with designated responsibility and authority,
responsibility and authority is designated upwardsa as per the relevant
organisation chart for re-delegation.
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5 Procurement Policy
5.1 Procurement Principles
Salmatss Procurement Policy relies on the following principles:
efficient procurement processes;
value for money; and
effective competition.
5.1.1 Efficient procurement processes

Efficient procurement processes will help Salmat achieve its corporate objective
to operate as a successful business and to maximise profitability.
Salmat will improve existing procurement process by:
closer relationships with strategic suppliers through a range of preferred

supplier arrangements; and
introducing new streamlined procedures as part of the JD Edwards financial

management system implementation project.
Creating preferred supplier arrangements allows Salmat to leverage its significant

buying power to achieve price and volume discounts and to ensure consistent
quality and service levels across the organisation.
Through a process of strategic sourcing Salmat will reduce the number of vendors
it deals with and reduce the administrative overhead of creating and maintaining
vendors on the system.
Salmat will also streamline its purchasing procedures, including the introduction
of purchase orders for a range of transactions. By requiring approval for
transactions before the commitment is made, Salmat will ensure costs are
minimised.
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5.1.2 Value for money

Salmat will achieve value for money by purchasing products and services
according to the following criteria:
fitness for purpose;
quality;
whole-of-life-cycle costs;
price;
after sales support; and
suppliers past performance record.
It is important to highlight that price and quality are not the only factors to be
taken into account when purchasing goods and services. For example, it is
essential that whole-of-life-cycle
5.1.3 Effective competition

Effective competition requires a trade off between the level of effort required to
create a competitive environment and the benefits to be achieved from obtaining a
lower price.
In the case of low value items, it will be sufficient for staff to source goods and
services at typical open market rates. As the value of the goods and services rise it
is necessary to use a more formal approach. The relevant authority levels that
apply are outlined in Section 5.5.
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5.2 Procurement Methods

The key procurement methods within Salmat include the following:
Petty Cash for items less than $100.
Corporate Card (Amex and Diners) to be used by senior managers for

travel, accommodation, meals, entertainment and other related expenditure.
Purchasing Card (Pilot from 1st January 2004) to be used for ad hoc
purchases of less than $1,000 where an existing vendor relationship does not
exist with Salmat. The Purchasing Card will ultimately replace Amex and
Diners cards and will then be used for travel, accommodation, meals,
entertainment where the holder is authorised to use the card for those
purposes.
Voucher where a payment is made based on an invoice or statement

received from a vendor. No purchase order is created. Types of expenses that
will be paid using the voucher only approach include telecommunications
costs, utilities, council rates and office rent.
2-way matching where a purchase order is raised to trigger the purchase of a

good or service and the payment is made based on the invoice matching the
purchase order.
3-way matching where a purchase order is raised to trigger the purchase of a

good or service and the payment is made when (a) the goods or services are
receipted into the system and (b) the invoice is received and matches both the
good receipt note and the original purchase order.
Payroll in respect of services provided by employees and the

reimbursement of expenses claimed on Salmat.
The use of purchase orders it mandatory in respect of items that are purchased
under 2-way and 3-way matching arrangements. A full list of procurement
methods by vendor are included in Appendix A.
5.3 Goods requiring a Capex

All Salmat employees requesting the purchase of capital items or technology
related goods are required to follow the Corporate Capital Expenditure Procedure.
All technology related goods are to be purchased through Information Technology
Group by using a Capital Expenditure Request form.
A capex is required for the purcahse of all technology related goods if the value is
great than $1,000. Purchasing authority levels are outlined in the following
sections.
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5.4 Goods not requiring a Capex

Goods with a value of less than $1,000 can be purchased without a Capital
Expenditure Request. Wherever possible, a Purchase Order should be used to
trigger the purchase of goods or services.
5.5 Purchasing Authority levels

5.5.1 Capital Expenditure
The Salmat Purchasing Authority levels for capital expenditure are as follows:
Range
Authority
Details
Up to
$1,000
Treat as expense refer

to above authority levels
Prices must be considered

reasonable and consistent with
normal market rates for items of a
like nature.
Requirements must not be split into

components nor succession of orders
for the same goods or services for
the purpose of avoiding the Salmat
purchasing policy.
$1,000 to
$5,000
Executive Director /
CFO / Business Unit
Manager / State or
General Manager / HO
Function Manager
Minimum of three (3) verbal

quotations should be obtained for
non preferred supplier purchases.
$5,001 to
$10,000
Capital Expediture
Committee

Greater
than
$10,000
Managing Director
Minimum of three (3) written

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5.5.2 Operating Expenditure

The Salmat Purchasing Authority levels for operating expenditure are as follows:
Range
Authority
Details
Up to
$100
Designated employees
(such as secretaries, PAs
etc.) approved by
business unit managers
Prices must be considered

like nature.
Reimbursement via Petty Cash.
Rates must be considered

like nature.
Requirements must not be split into

components nor succession of
orders for the same goods or
services for the purpose of avoiding
the Salmat purchasing policy.
$101 to
$1,000
Designated employees
(such as secretaries, PAs
etc.) approved by
business unit managers
$1,000 to
$5,000
Sales Manager /
Operations Manager

$5,001 to
$20,000
Departmental Manager
(with allocated budget
responsibility)
As above.
$20,001 to
$50,000
Business Unit Manager /

State Manager / HO
Function Manager
$50,001 to
$100,000
Executive Director /
CFO
As above
Greater
than
$100,000
Managing Director
Documentation at the discretion of

the Managing Director.
Minimum of three (3) written

NB: Monetary figures are inclusive of GST.
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6 Procurement Process
6.1 Overview
The characteristics of the non stock procurement process are typically that:
The details of the product or service being purchased are known
The product is readily available in the market
The product has been purchased previously by Salmat
There is a competitive market
The primary selection criteria is price and availability
There are low risks associated with the purchase.
The high level procurement process is summarised as follows:
Define the need and specification
Establish potential sources of supply
Determine the procurement method (buying from Salmat preferred supplier,

verbal or written quotations, purchase without quotations)
Obtain the appropriate approval
Invite offers / quotations
Evaluate responses and select the service provider
Obtain approval for the decision
Monitor performance of the service provider.
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6.2 Process Flowcharts

The purchasing process for items that are acquired without a purchase order (e.g.
telecommunications, utilities, council rates and rent etc.) is as follows:
Purch
Inv Only
Purchasing Process - Payment on Invoice

Service Provider
1. Deliver
service
Authorised Staff Member
2. Submit
invoice
Manager
4. Enter details from

invoice into JDE
and code
transaction
3. Receive invoice
and scan image
5. Review purchase
order and coding
6A. Contact supplier

to sort out
discrepancy
No
Approve?
Yes
Invoice
adjustment
required?
No
6. AP makes EFT
payment to supplier
Yes
7. Issue
amended
invoice
Under this scenario, it is assumed that a relationship already exists with the
vendor and that the purchase of the goods or services have been approved before
the invoice is received.
The main tasks under this process are to establish whether the invoice is correct
and to process the payment. If the invoice is not correct the manager or an
authorised staff member needs to contact the vendor. If the invoice is correct a
payment should be processed. If the invoice is not correct an adusted invoice
should be requested from the vendor.
The purchasing process for services (2-way matching) is as follows:
Purch
2-way
Services Purchasing Process - 2-way matching
Service
Provider
1. Define need
and service
specification
2. Determine
procurement
method - i.e.
preferred supplier?
Manager
4. Raise purchase
order on JDE and
code to correct GL
account
3. Select
appropriate
supplier
5. Review purchase
order and coding
6A. Adjust
purchase order and
resubmit for
approval
Yes
Recycle?
No
Approve?
Yes
No
End of
process
6. Send purchase
order to supplier
(fax or email)
7. Deliver
service
8. Submit
invoice
9. Receive invoice
and scan image
10. Enter details

from invoice into
JDE
Invoice
matches
purchase
order?
No
Invoice
correct?
No
Yes
12. Issue
amended
invoice
11. AP makes EFT

payment to supplier
11A. Call supplier

and request
amended invoice
Yes
Approve
amended
purchase
order?
11B. Contact
supplier to sort out
discrepancy
No
Yes
No
Invoice
adjustment
required?
Yes
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The procurement process for services involves a 2-way matching i.e.

matching the purchase order raised by Salmat (using JDE) and the invoice issued
by the vendor.
The process begins with identifying the need and the specification for the service
to be provided. The next step is to identify the supplier to be used. In many cases
the supplier chosen will have an existing relationship with Salmat and may be a
preferred supplier of Salmat. Once the supplier has been selected a purchase
order is raised in JDE. The purchase order is routed electronically to a manager
for approval. The manager has three choices in how he/she deals with the
purchase order:
1. Approve the purchase order
2. Recycle the purchase order. In this case the manager may request more
information or may ask the requester to use a different supplier.
3. Deny the purchase order. In this case the transaction will not proceed.
The purchase order may be despatched to the supplier by fax direct from JDE or
may be printed by the requester and forwarded to the supplier.
Once the service has been delivered the vendor will forward an invoice to Salmat
for payment. The invoice is scanned, indexed and linked to JDE. If there is a
match between the purchase order and invoice the amount can be paid by the
Accounts Payable area.
Where there is not a match further processing will be required. In the event that
the invoice is incorrect the requester needs to contact the supplier and request a
fresh invoice.
Where the invoice is correct and is for a different amount to that which was
originally approved, the manager needs to approve the change. If the manager
choose not to approve the adjustment he/she will have to contact the supplier to
sort out the discrepancy. The agreed resolution may be for the supplier to submit
an amended invoice for payment. On the second iteration the invoice should
match the invoice and a payment will be processed.
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The purchasing process for goods is done using a 3-way matching approach. The
process is as follows:
Purch
3-way
Page 1
Service
Provider
2. Determine
procurement
method - i.e.
preferred supplier?
1. Define need
and service
specification
Manager
4. Raise purchase
order on JDE and
code to correct GL
account
3. Select
appropriate
supplier
6A. Adjust
purchase order and
resubmit for
approval
7. Deliver
goods
3
5. Review purchase
order and coding
Yes
Recycle?
No
Approve?
Yes
No
End of
process
6. Send purchase
order to supplier
(fax or email)
8. Receive goods
and enter details
into JDE
8. Submit
invoice
10. Enter details

from invoice into
JDE
9. Receive invoice
and scan image
P.O., Inv
and GRN
match?
No
Yes
12. Issue
amended
invoice
11. AP makes EFT

payment to supplier
Purch
3-way
Page 2
Service
Provider
Part
receipt of
goods?
Yes
Make
payment
for part
shipment
No
No
Manager
12. Wait for balance

of shipment of
goods
Yes
3
2
Invoice
correct?
Approve
amended
purchase
order?
Yes
No
No
14. Contact supplier

to sort out
discrepancy
Yes
13. Call supplier

and request
amended invoice
No
Invoice
adjustment
required?
Yes
The process is similar to the 2-way matching process except that there is a third
item of documentation involved the Goods Received Note (GRN) or Delivery
Docket.
Under this process, a 3-way match is required after task 10. If there is a 3-way
match the vendor is paid. If there is not a 3-way match then various actions may
follow. In the event that the mismatch resulted from goods being partially
delivered, the authorised staff member needs to determine whether a further
delivery is likely. If there is a further delivery to be made, the transaction will be
held in the system until the balance of the goods have been received. If not a
payment can be made in respect of the part receipt. This will result in the
transaction being completed in the system.
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If the GRN and the purchase order match and the invoice does not, either the
invoice is incorrect and should amended by the supplier or the invoice is correct
and the manager needs to either accept or reject the change.
Once the adjustment has been processed (either in JDE or by the supplier) the 3way match can occur and payment to the vendor can be made.
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Title page

Salmat Procurement Policy

Copyright 2014 Salmat

Sidebars can be used to indicate the last changes.

Release approval number

Salmat operates with honesty, integrity and fairness

Salmat consistently meets and exceeds client expectations

Salmat operates in accordance with applicable laws.

This policy document is to be read in conjunction with other relevant policy

Capital Expenditure Request forms

Incoming Stock Registration from

Purchase Order Request form

Purchase Order form

Corrective Action Request

Corporate Capital Expenditure procedure

Server installation control form (ITG related)

PC installation control form (ITG related)

Consignment Note used in transit.

An employee of Salmat who identifies a need to make

A person appointed to a senior manager who has

A Department Manager is a person who, irrespective

An item that is not a consumable or repair. Fixed

plant and machinery

A item purchased for an employee

Any expenditure over $1,000 for new fixed assets or

Abbreviated form of Capital Expenditure Request

A supplier who contracts to provide a product and / or

1.6 JD Edwards OneWorld System

The key functionality of the OneWorld system in relation to procurement is as

Purchase order approvals

aims to generate effective and efficient procurements

introduces flexibility to the procurement process by making a number of

empowers staff to select a procurement method which is suitable to the type

streamlines the approvals process and allows for feedback.

4.1 Training and Communication

4.2 Responsibility and Authority

efficient procurement processes;

value for money; and

5.1.1 Efficient procurement processes

closer relationships with strategic suppliers through a range of preferred

introducing new streamlined procedures as part of the JD Edwards financial

Creating preferred supplier arrangements allows Salmat to leverage its significant

5.1.2 Value for money

fitness for purpose;

after sales support; and

suppliers past performance record.

5.1.3 Effective competition

5.2 Procurement Methods

Petty Cash for items less than $100.

Corporate Card (Amex and Diners) to be used by senior managers for

Voucher where a payment is made based on an invoice or statement

2-way matching where a purchase order is raised to trigger the purchase of a

3-way matching where a purchase order is raised to trigger the purchase of a

Payroll in respect of services provided by employees and the

5.3 Goods requiring a Capex

5.4 Goods not requiring a Capex

5.5 Purchasing Authority levels

Treat as expense refer

Prices must be considered

Requirements must not be split into

Minimum of three (3) verbal

Minimum of three (3) verbal

Minimum of three (3) written

5.5.2 Operating Expenditure