As a Procurement Director, one of my core responsibilities is ensuring that purchasing processes are efficient, transparent, and balanced between control and speed. One effective tool for achieving this is the RACI model, a framework used to define roles and responsibilities in projects and processes.

In procurement, RACI helps to clarify who holds authority, who is involved in decision-making, and who needs to be informed, making it an ideal tool for allocating authority when signing contracts and purchase orders (POs).

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What is RACI?

The RACI model stands for:

• Responsible: The person or group responsible for completing a task. In procurement, this could be the buyer responsible for negotiating a contract.
• Accountable: The person who has the final authority over the task. They ensure that everything happens correctly and on time. In procurement, this would often be a senior manager who signs off on large contracts.
• Consulted: People who provide input and feedback. These stakeholders are typically experts or individuals affected by the outcome of the task, such as legal or finance teams in procurement.
• Informed: Those who need to be kept in the loop but don’t directly contribute to the task. For example, department heads who will use the procured materials may need to be updated on the contract status.

The RACI matrix visually maps these roles for each task or decision, helping organizations avoid confusion about who should be involved at what level.

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Why Implement RACI in Procurement?

Procurement often involves a range of stakeholders—from buyers, legal teams, and finance to department heads and executives. When roles are unclear, it can lead to confusion, delays, and even mistakes in contract approval. RACI helps streamline this by clarifying who has authority to act and who needs to be involved at each step.

Benefits

1. Clear Accountability: By assigning responsibility and accountability clearly, RACI prevents tasks from being overlooked or delayed.
2. Increased Efficiency: By knowing who needs to be consulted and who should be informed, the process becomes smoother, avoiding bottlenecks.
3. Reduced Risk: RACI ensures that the right people are involved in key decisions, which reduces the risk of non-compliance or poor contract terms being agreed upon.

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A Real-Life Case: Implementing RACI in a Procurement Organization

Let me illustrate how RACI can be applied in a real procurement scenario:

Scenario

The procurement team is negotiating a long-term contract with a supplier for raw materials critical to manufacturing. The contract is high-value, requires detailed legal review, and impacts multiple departments.

Step 1: Define the Tasks

In this case, the key tasks could be:

• Negotiating contract terms
• Legal review of the contract
• Signing off on financial implications
• Final approval and signature of the contract

Step 2: Apply the RACI Model

Task	Responsible	Accountable	Consulted	Informed
Negotiate terms with supplier	Buyer	Procurement Director	Legal, Finance, R&D	Operations
Review contract for legal issues	Legal team	Legal Manager	Buyer, Finance	CEO, CFO
Financial assessment	Finance team	CFO	Buyer, Operations	Procurement Director
Final contract approval	Procurement Director	CEO	Legal, Finance	Department Heads

Step 3: Implement and Monitor

Once the matrix is developed, it is communicated to all stakeholders. Everyone understands their role and the authority boundaries, making the process more transparent and efficient. As the procurement director, I oversee the entire process but delegate specific responsibilities, ensuring that no steps are missed and the right people are consulted at the right time.

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Balancing Control and Speed: Key Considerations

Implementing a RACI model requires balancing control and speed. Procurement processes, particularly for high-value contracts, often demand rigorous oversight. However, too many layers of approval can slow down decision-making, leading to missed opportunities or delays in project execution.

Key Considerations

1. Risk vs. Value: High-value contracts or those that introduce significant risk (e.g., long-term supplier relationships) require more oversight and involve multiple departments (legal, finance, etc.). For lower-value purchases or repeat orders, you might reduce the number of stakeholders involved, allowing for faster decision-making.
2. Standardization vs. Flexibility: Standardized processes are key for ensuring compliance and reducing risk, but they can also create bottlenecks. RACI helps you assign more flexible roles for lower-risk contracts, enabling faster turnaround.
3. Communication: Ensure the “Informed” parties receive updates at critical milestones. This is especially important for executives who may not need to be consulted on day-to-day activities but should be aware of strategic decisions.

Case in Point: A Learning from Other Organizations

In my experience, I’ve observed that companies implementing RACI often fall into one of two traps:

1. Over-complicating the Matrix:
   Some organizations assign too many people to the “Consulted” or “Informed” categories, leading to slow decision-making. In one case, a large manufacturing company struggled with procurement approvals because the RACI matrix included too many layers of consultation. This was streamlined by reducing the “Consulted” list to only those directly impacted by the decision.
2. Lack of Flexibility:
   Another organization had rigid RACI roles, meaning even low-risk, low-value contracts required multiple approvals. This slowed down routine purchasing and frustrated operational teams. By introducing a tiered RACI approach—where the matrix becomes more streamlined for low-value contracts—they found a balance between control and speed.

The Role of Sourcing Board

The Sourcing Board acts as a formal governance tool within the sourcing process, often used to approve or reject key decisions at various stages or tollgates in a procurement cycle. Tollgates are decision points where the sourcing process must meet predefined criteria before moving forward. When integrated with the RACI model, the Sourcing Board provides clarity around who has final approval and who is consulted or informed throughout the sourcing process.

1. Tollgates and Approval Process: In any strategic sourcing initiative, there are usually several stages such as supplier selection, contract negotiation, and final contract approval. At each stage, the Sourcing Board acts as the oversight body that passes or blocks the process from moving forward. This ensures that critical decisions align with the company’s strategic goals, financial parameters, and risk management policies.
2. Alignment with the RACI Model: When combined with RACI, the Sourcing Board plays the “Accountable” role at key tollgates. For example:
   • The Procurement Director or CFO might be Accountable for signing off on high-value contracts.
   • The Legal and Finance teams are often Consulted to ensure compliance and budget alignment.
   • Department heads or operational leaders may be Informed of the progress to ensure downstream alignment.
   In this scenario, the Sourcing Board takes on the responsibility of making final decisions after all necessary consultations and inputs have been gathered, ensuring all key stakeholders have been involved appropriately.
3. Real-Life Example of RACI and Sourcing Board Integration: Consider a large manufacturing company sourcing a new raw material supplier. The RACI model might look like this for each tollgate:
   • Tollgate 1 (Supplier Shortlist):
     • Responsible: Buyer
     • Accountable: Sourcing Board
     • Consulted: R&D, Finance
     • Informed: Operations
   • Tollgate 2 (Contract Negotiation):
     • Responsible: Procurement Manager
     • Accountable: Sourcing Board
     • Consulted: Legal, Finance
     • Informed: C-level executives
4. Balancing Control and Speed: A common challenge when using a Sourcing Board is balancing the need for control with the speed of decision-making. The board ensures decisions are made with full oversight, but this can also slow down the process if approvals are delayed. To strike this balance:
   • Establish clear criteria for what decisions need Sourcing Board approval (e.g., only high-value contracts or high-risk purchases).
   • Use the RACI model to delegate authority for lower-value or routine purchases, allowing the procurement team to make faster decisions.
5. Learnings from Other Organizations: Many organizations have found that a well-structured Sourcing Board, combined with RACI, improves accountability and risk management. However, successful implementations often emphasize the importance of keeping the process flexible. For example, some companies use tiered decision-making, where lower-risk projects bypass the Sourcing Board and go through fast-track approvals. This minimizes delays while ensuring appropriate oversight on critical decisions.

Tying Value into RACI for Effective Procurement

Tying value into the RACI model in procurement ensures that roles and responsibilities are aligned with the financial and strategic significance of a project or contract. The idea is to adjust the level of oversight and involvement in proportion to the value or risk associated with the sourcing project.

Here’s how value can be incorporated into the RACI model:

1. Define Value Tiers for Projects

Before integrating value into the RACI model, define clear value thresholds that determine how much oversight is required. For example:

• Low-value projects: Routine purchases or contracts under a certain financial limit (e.g., under $50,000).
• Medium-value projects: Mid-level purchases that require moderate attention, possibly between $50,000 and $500,000.
• High-value projects: Large contracts above a threshold, like $500,000, or those that introduce significant business risk.

These thresholds can vary based on industry, company size, and strategic importance.

2. Adjust RACI Roles Based on Value

The level of authority and consultation should vary according to the value tier:

• Low-Value Projects: In low-value projects, responsibility and accountability can rest with mid-level procurement professionals, with minimal consultation from legal or finance, and approval limited to a single accountable individual.
  • Example RACI for Low-Value Sourcing:
    • Responsible: Buyer
    • Accountable: Procurement Manager
    • Consulted: None or minimal (optional finance or legal)
    • Informed: Department heads
• Medium-Value Projects: As the value increases, more senior involvement is typically required. Legal and finance may need to be consulted, but decision-making remains within the procurement or management team.
  • Example RACI for Medium-Value Sourcing:
    • Responsible: Senior Buyer
    • Accountable: Procurement Director
    • Consulted: Legal, Finance
    • Informed: Department heads, CFO
• High-Value Projects: High-value projects require the most scrutiny, with multiple levels of accountability and consultation. The Sourcing Board may take on the accountable role, with extensive consultation across departments, such as risk management, finance, and senior executives.
  • Example RACI for High-Value Sourcing:
    • Responsible: Procurement Director
    • Accountable: CEO, CFO, or Sourcing Board
    • Consulted: Legal, Finance, Risk Management
    • Informed: Executive leadership, Department heads

3. Role of Sourcing Board for High-Value Projects

For high-value contracts, the Sourcing Board or senior executives usually take the “Accountable” role in the RACI model. They ensure that all potential risks and returns are fully analyzed before the final sign-off. The Responsible role would typically fall to a procurement director or senior procurement manager who handles the operational side of the contract, while legal and finance teams are Consulted to mitigate risk.

4. Define Escalation Procedures

Tying value to RACI should also include escalation procedures. For example, a buyer may be responsible for negotiating terms in a low-value contract, but once it crosses a certain financial threshold, the decision escalates to the procurement director or CEO.

5. Balance Between Control and Speed

While it’s essential to assign multiple roles for high-value projects, too much oversight can slow down decision-making. Implementing a RACI matrix based on value helps prevent over-complication for low-value contracts, maintaining agility and speed while ensuring proper checks for high-value contracts.

Example of Tiered RACI in Action:

Imagine a company sourcing office supplies (low-value) and capital equipment (high-value).

• For office supplies (under $50,000), the Buyer is responsible, and the Procurement Manager is accountable, with no consultation needed from legal or finance.
• For capital equipment (over $500,000), the Procurement Director is responsible, but the CFO or CEO becomes accountable, while legal, finance, and operations teams are consulted to assess risk, ROI, and contract terms.

6. Lessons from Other Companies

Many organizations have found that applying the RACI model by value allows for better resource allocation. Instead of pulling in high-level executives for every decision, only the highest-value contracts demand their attention, freeing up their time while still ensuring oversight where it matters most.

For instance, a tech company applied a tiered RACI approach in their procurement process, where low-risk software purchases required minimal sign-offs, whereas high-risk, multi-year contracts involved executive decision-makers. This streamlined their sourcing process for routine purchases, improving speed without sacrificing control on critical projects.

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Conclusion: Making RACI Work for Your Procurement Team

Implementing RACI in procurement isn’t a one-size-fits-all solution. It requires careful thought about which roles are necessary at each stage of the process and a flexible approach depending on the contract’s value and risk level. When done right, RACI can be a game-changer for procurement efficiency and clarity.

The key takeaway for procurement leaders is to ensure the balance between control (to mitigate risks) and speed (to avoid bottlenecks). Over time, as you fine-tune your RACI model and learn from real-life cases, your team will become more agile, confident, and effective in handling procurement contracts.

By integrating a Sourcing Board with the RACI model, procurement organizations create a structured, transparent process that balances control with efficiency. The Sourcing Board provides critical oversight at key tollgates, ensuring that high-stakes decisions are thoroughly vetted, while the RACI framework ensures everyone involved knows their role. When implemented thoughtfully, this combination enhances procurement efficiency and mitigates risks while maintaining agility where needed.

Incorporating value into the RACI model allows procurement teams to match the level of oversight and decision-making authority to the size and complexity of the sourcing project. By defining clear value thresholds and adjusting roles accordingly, you can maintain a balance between speed and control. The RACI model, when tied to project value, empowers procurement professionals to make efficient, risk-aware decisions while ensuring appropriate levels of scrutiny for high-value or high-risk contracts.

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By structuring your procurement process using the RACI model, you create a clear framework where roles and responsibilities are well-defined. This not only ensures compliance but also empowers your team to make decisions faster and with confidence.

Learn more about Procurement Management

This course package Procurement management program aims to provide learners with a comprehensive understanding of the responsibilities typically on the agenda of a Chief Procurement Officer (CPO).

Information about LHTS Online Procurement courses in Swedish.

Note: Illustration to the blogpost was created by CHAT GPT on Sept 14, 2024.