What is procurement?

Procurement is the process of purchasing goods, services or construction works to meet an organization's needs. In Norway, a distinction is made between public procurement , which is subject to strict regulations, and private procurement , which has greater freedom in choosing suppliers and procedures.

Public Procurement

Public procurement is regulated by the Procurement Act and related regulations. The purpose is to ensure that public funds are used efficiently and that all suppliers are given equal opportunities to compete for public contracts.

Thresholds and Procedures

The procurement regulations operate with various threshold values ​​that determine which procedures must be followed:

Contract value	Procedure	Announcement
Under 100,000 kr	Simplified process	Not required
100,000 - 1,300,000 kr	National competition	Dolphin
Over 1,300,000 kr	EU competition	Dolphin + TED
Construction contracts over 33,500,000 NOK	EU competition	Dolphin + TED

The amounts are exclusive of VAT and apply to 2024.

Tender procedures

There are several types of tender procedures in public procurement:

1. Open tender competition

• All interested suppliers can submit offers
• Most commonly used procedure for standardized procurement
• No pre-qualification of suppliers

2. Limited tender competition

• Prequalification of suppliers
• Only invited suppliers can submit offers.
• Used when specialized expertise is required

3. Competition with negotiation

• Possibility of negotiations with suppliers
• Used for complex procurements
• Requires special justification

4. Competitive dialogue

• Dialogue between client and suppliers
• Used when the solution is not known in advance
• Most flexible procedure

Evaluation criteria

Public procurement shall be awarded based on the most economically advantageous tender (MEAT). This can be assessed based on:

• Price or cost
• Quality of goods/services
• Environmental considerations and sustainability
• Social considerations
• Innovation and technical features

Private Procurement

Private businesses have greater freedom in their procurement, but must still follow good business practices and any industry standards.

Purchasing strategies

Private companies can choose between different purchasing strategies:

Strategic Purchasing

• Long-term supplier relationships
• Focus on value creation
• Integrated with business strategy

Operational Purchasing

• Daily shopping needs
• Focus on efficiency
• Standardized processes

Project-based Procurement

• Specific project needs
• Temporary supplier relationships
• Tailor-made solutions

Contract Types and Agreement Forms

Regardless of whether it is public or private procurement, there are several types of contracts:

Pricing models

Contract type	Description	Risk for buyer	Risk for supplier
Fixed price	Agreed price regardless of costs	Low	High
Cost plus	Actual costs + markup	High	Low
Unit price	Price per unit/hour	Medium	Medium
Incentive contract	Bonus/malus based on results	Low-Medium	Medium-High

Framework agreements

Framework agreements are particularly important in public procurement:

• Establishes terms for future purchases
• Valid for up to 4 years
• Can have multiple suppliers
• Requires mini-competition when ordering

Accounting Treatment

Acquisitions have significant accounting consequences that must be handled correctly.

Classification of Procurement

Acquisitions are classified differently in the accounts:

Operating costs

• Consumer goods and services
• Expenses are recognized immediately.
• Examples: office supplies, cleaning services

Fixed assets

• Fixed assets over NOK 15,000
• Depreciated over the useful life
• Examples: machinery, IT equipment, cars

Inventory

• Goods for resale
• Valued at the lower of cost and net realizable value
• Requires inventory management and periodic counting

Accounts Payable and Invoice Processing

Correct processing of supplier invoices is critical:

1. Receipt and registration of invoices through document receipt
2. Control over ordering and delivery
3. Approval of authorized person through attestation
4. Accounting in the correct period
5. Payment by due date

Periodization

The accrual principle requires that costs be recorded in the correct period:

• Accrued costs : Services received but not invoiced
• Prepaid costs : Paid for future services
• Accounts payable : Invoiced but unpaid purchases

Digitalization of Procurement

Modern procurement is becoming increasingly digitalized, which affects both processes and accounting .

E-commerce and Purchasing Platforms

• Electronic catalogs for standard goods
• Automated orders based on inventory levels
• Integrated ERP systems
• Electronic invoicing (EHF format)

Artificial Intelligence in Procurement

AI technology is revolutionizing procurement processes:

• Predictive analytics for demand forecasting
• Automatic supplier assessment
• Price optimization based on market data
• Risk management and compliance monitoring

Sustainable Procurement

Sustainability is becoming increasingly important in procurement processes, both in the public and private sectors.

Environmental requirements

• Environmental certifications (ISO 14001, EMAS)
• Life cycle analysis of products
• Carbon footprint and climate accounting
• Circular economy and reuse

Social Requirements

• Working conditions at suppliers
• Human rights in the supply chain
• Local value creation
• Diversity and inclusion

CSRD and the Supply Chain

For larger Norwegian companies covered by the CSRD (Corporate Sustainability Reporting Directive) , sustainable procurement becomes even more important. The CSRD requires reporting on the value chain , including suppliers' working conditions and environmental impact.

This means that companies must: * Mapping sustainability practices among suppliers * Document ESG data from the supply chain * Report on the value chain's impact on people and the environment

Supplier management

Effective supplier management is critical for successful procurement.

Supplier assessment

Systematic assessment of suppliers based on:

Criterion	Weighting	Measurement
Quality	30%	Complaints, deviations
Delivery precision	25%	On-time delivery
Price	20%	Competitiveness
Service	15%	Response time, support
Sustainability	10%	Certifications, reports

Contract follow-up

• Regular supplier meetings
• KPI monitoring and reporting
• Continuous improvement
• Risk management and emergency plans

Legal Aspects

Procurement involves complex legal matters that must be handled professionally.

Contract law

• The Contracts Act and the Sales Act
• Standard contracts (NS series)
• International trade terms (Incoterms)
• Dispute resolution and arbitration

Intellectual Property Rights

When procuring IT solutions and services:

• Software copyright
• License agreements and usage rights
• Data processing agreements (GDPR)
• Source code and escrow agreements

International Procurement

Cross-border procurement requires special attention.

Customs and Duties

• Tariffs and preferential agreements
• Value added tax on imports
• Special taxes on specific goods
• Documentation and declaration

Currency risk

• Hedging of large contracts
• Currency clauses in agreements
• Accounting treatment of capital gains/losses
• Reporting to Altinn

The Future of Procurement

The procurement field is in continuous development, driven by technology and changing expectations.

Trends and Developments

• Automation of routine processes
• Blockchain for traceability
• IoT and real-time data
• Sustainability as a competitive advantage

Competence development

Modern procurement requires new competencies:

• Strategic thinking
• Technology understanding
• Sustainability knowledge
• Data analysis and interpretation

Procurement is a complex field that requires legal, financial and technical expertise. For companies that want to optimize their procurement processes, it is important to have good systems for both purchasing and accounting for procurement.