Capacity (Procurement Authorization)

“Capacity” is the authorisation to make purchase orders/enter into contracts to procure goods and services on behalf of a commercial organisation.

Authority for purchasing transactions is usually placed with specified individual, typically a senior purchasing manager or the general procurement manager, depending on the rules of the organisation and the purchasing strategy of the corporation. For example, large, multinational corporations will likely use regional purchasing offices to secure local supply for some categories of product. Other categories of product will be bought through the central office only, and local purchasing of a similar product would be a serious misdemeanour. Smaller organisations might not centralise purchasing so effectively, and if operating internationally, may view purchasing as a local, that is independent, activity and leave all capacity to the local purchasing office and its manager.

However, maximum economies are obtained by centralised, high volume purchases of universal products. For this reason, there is a trend in purchasing practice to favour the central, concentrated, very high volume purchasing model. In either case, authority for purchasing will reside in a specified department, or even a single individual, depending on how tightly centralised and monitored purchasing control is as a corporate activity. Some companies allow relatively junior staff to make purchases of small value products or commodities, or to oversee the regular procurement of routine products and commodities. If commodity or product purchasing is key to overall corporate strategy, it is more likely that purchasing activity will be centralised, or at the very least, made the responsibility of a very senior local, regional, or national purchasing manager. Contracts and purchase orders not signed by the specified individual will likely be invalid according to internal company policy. In purely legal terms however, a signed purchasing order or contract will likely still be binding. Purchasing departments usually follow strict guidelines on order issuance and contract purchasing.