6 procurement methods to find
reliable vendors
A
company's procurement team uses different methods to source for vendors. There
are six main types, but the names may vary according to the company:
1. Open tendering
Open
tendering is a competitive bidding procedure a company uses to allow suppliers
to bid for its contracts. Here's how it works—a company releases an invitation
to tender (ITT). Prospective vendors can then respond with how they intend to ful
fill the contract and persuade the company that they are the best for the job.
This
method provides the most competition among suppliers and encourages new or
emerging vendors to bid and obtain more work. Note that not all who bid are
suitable for the contract, especially complex acquisitions, and it takes time
to evaluate all the tenders to get the required standard.
2. Request for proposal
Request
for proposal is an open request a company makes to announce a project and
solicits qualified contractors to bid for it. This method comes in handy in the
procurement world when vendors and service providers propose their goods and
services to a procurement team.
It
involves preparing a statement of work describing the needs the company wants
to full fill and the timeline for completing it.
Request
for proposals opens up the competition, helping companies get the best-fit
supplier at the best price.
It
also advises bidders on how to prepare the proposals and the desired format the
bid should be presented in, like the samples here.
The
vendor usually submits these requests in two separate envelopes:
1.Technical proposals
2. financial proposals.
The
financial proposal is sealed and only opened after the technical proposal is
approved or rejected.
3. Two-stage
tendering
Two-stage tendering is a procurement strategy where the
buyer invites tender in two stages:
Stage 1: Tender has
complete information without prices from all bidders
Stage2: Tender
includes the price specifications from the selected bidders
The first stage is usually for bidders to submit their
proposals with their best solutions to fulfilling the request for offers, after
which each proposal is carefully evaluated and scored.
The vendor with the highest-ranked bid is invited to stage
two, where they submit a financial proposal after discussions to reach an
agreement for the proposed solution, and finally, contract negotiations.
One advantage of the two-stage tendering is that the
preferred supplier is more likely to understand the requirements, potentially
reducing implementation risks.
4. Request for quotations
Request for
quotations, also known as invitation to quote, simplifies procuring
small-value, readily available, off-the-shelf goods and services. It's fast and
doesn't require a lot of paperwork, unlike the above three procurement methods.
It's a non-competitive procurement method as the procuring company chooses the contractor, supplier, or service provider to request quotations from. At least three vendors are invited to submit quotes, and the best quote is selected based on compliance with the requirements.
5. Selective tendering
In selective tendering, suppliers can only submit tenders by invitation. This method is also known as restrictive tendering as it limits the request for tenders to a select number of suppliers or service providers.
Here the competition is confined to a certain number of vendors who are vetted based on their track record for a specific contract. Companies can ensure their requirements are met and satisfied more effectively and increase the quality of work.
6. Single source
Single source is a non-competitive
procurement method where goods and services are acquired from a single vendor.
The management conducts a strict
approval process before using this method.
Single source procurement is only
used under exceptional circumstances like:
1.Emergencies,
2.When only one vendor is qualified
to fulfill the requirements,
3.Where there is a continuation of
previous work which another vendor cannot do due to patent rights,
4.The procurement of related items
is only available from a specific source
5.Where there is a clear advantage
of using this method over other competitive methods
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