A procurement policy is the internal instrument by which a procurer defines the principles, procedures, and authorities governing its procurement activity. Under Iraqi law, the substantive content of procurement policies is not, in the private sector, prescribed by statute, save where the procurer is a public entity bound by the Government Contracts Execution Instructions No. 2 of 2014 issued under the Public Financial Management Law No. 6 of 2019. In the private sector, the design of procurement policies is informed by the procurer’s exposure under the Penal Code No. 111 of 1969 and the Anti-Corruption Commission of Integrity Law No. 30 of 2011, by international anti-bribery legislation where extraterritorially applicable, and by the procurer’s broader governance framework.
Objectives of the Procurement Policy
The procurement policy should articulate the procurer’s procurement objectives, which conventionally include the obtaining of value for money, the maintenance of integrity in procurement decisions, compliance with applicable law, the management of supply-side risk, and the alignment of procurement activity with the procurer’s broader operational and strategic objectives. The articulation of the objectives provides the basis against which the procurement policy’s substantive provisions are designed and against which subsequent procurement decisions are reviewed.
Scope of Application
The scope of application defines the procurement activities and the persons to which the policy applies. The scope should specify:
- The categories of procurement covered, including goods, services, works, and intellectual property
- The corporate entities to which the policy applies, including subsidiaries and branches
- The threshold below which simplified procedures apply
- The categories of procurement subject to specific procedural requirements
- Any exceptions to the policy, with the basis on which exceptions are granted
Delegation of Authority
The delegation of authority defines who is authorised to commit the procurer to procurement contracts, and at what levels. Under the Companies Law No. 21 of 1997, the authority to bind a company in contract is vested in the persons identified in the company’s constitutional documents and corporate resolutions. The procurement policy operationalises that authority through:
- Definition of approval thresholds by contract value
- Identification of the persons authorised to approve at each threshold
- Requirements for joint approval at higher thresholds
- Definition of the persons authorised to execute contracts on behalf of the company
- Reservation to the board of directors or general assembly of strategic procurement decisions
The delegation framework should be documented in a delegation of authority matrix capable of being referenced and updated.
Segregation of Duties
Segregation of duties is the structural separation of incompatible procurement functions among different individuals or organisational units, with the purpose of preventing improper influence over procurement decisions and detecting irregularities. The principal segregations include the separation of the function of identifying procurement requirements from the function of selecting suppliers; the separation of the function of selecting suppliers from the function of approving the engagement; the separation of the function of approving the engagement from the function of executing payments; and the separation of operational procurement from internal audit and compliance review.
Conflicts of Interest
The procurement policy should address conflicts of interest of the procurer’s personnel involved in procurement decisions. Conflicts of interest arise where the personal interests of the personnel may influence, or may be perceived to influence, the discharge of their procurement responsibilities. The Iraqi Penal Code criminalises the abuse of position by public officials as per the law, with parallel provisions affecting commercial agents. The procurement policy should require:
- Disclosure by procurement personnel of personal interests that may give rise to a conflict
- Recusal from procurement decisions in which a conflict exists
- Approval mechanisms for engagements with vendors connected to procurement personnel
- Periodic refreshment of disclosure declarations
Anti-Bribery Integration
The procurement policy should integrate the procurer’s anti-bribery framework. Substantive elements include the prohibition of payments or benefits to vendor personnel outside the contractual remuneration, the prohibition of receipts by procurement personnel from vendors outside defined hospitality thresholds, due diligence requirements for vendors with elevated corruption risk, anti-bribery representations and warranties to be obtained from vendors at the engagement stage, and audit rights enabling the procurer to verify the vendor’s anti-bribery compliance during the engagement. The integration is particularly material for procurers with extraterritorial exposure under the United States Foreign Corrupt Practices Act of 1977 or the United Kingdom Bribery Act 2010.
Procurement Records
The procurement policy should require the maintenance of records sufficient to evidence the procurer’s compliance with the policy and with applicable law. The records should include the procurement requirement, the vendors considered, the due diligence performed, the basis of vendor selection, the authorisations obtained, the contract executed, the performance of the contract, and the payments made. The retention period should be aligned with the requirements of the Commercial Code No. 30 of 1984, the tax legislation, and any sectoral framework applicable to the procurement.
Review and Audit
The procurement policy should provide for periodic review of procurement activity by the internal audit function or by an equivalent independent reviewer. The review should address compliance with the policy, the effectiveness of the controls, the identification of irregularities, and the recommendation of remedial action. The review findings should be reported to the appropriate level of management, with significant matters escalated to the board of directors or the audit committee.
Training and Awareness
The procurement policy should provide for training of personnel involved in procurement activity, including procurement personnel, requisitioners, approvers, and personnel handling vendor relationships. The training should address the substantive content of the policy, the applicable law, the indicators of procurement irregularity, and the procedures for reporting concerns. The training should be refreshed on a periodic basis and supplemented by targeted training for personnel handling higher-risk engagements.
How We Can Help
Etihad Law Firm advises on the design and implementation of procurement policies in Iraq, including the drafting of policy documentation, the design of delegation of authority frameworks, segregation of duties arrangements, conflicts of interest mechanisms, integration with anti-bribery compliance, and the structuring of procurement-related audit and reporting frameworks.