The process of selecting suppliers is the subject of detailed methodologies.

The style of selection will vary according to your needs and there is a large range of contractual situations to consider. The more significant the contract, the more attention you are likely to pay to the selection and procurement processes.

Styles also vary noticeably between the public and private sector:

  • In the public sector, the emphasis tends to be on completeness and fairness. All potential vendors should be identified and given an equal chance to win. Various rules, norms, standards and legal requirements apply to regulate the process. Certain types of purchase can be made from standard approved suppliers without the need to enter into a full selection process. Rules are also relaxed for low-value contracts.
  • In the private sector, the objective is usually to gain maximum benefit. That might be achievable by making a rapid choice from a small number of leading suppliers. It might also be possible to partner with a single reliable supplier. Selection exercises are used only where there is a genuine need to search the marketplace for the best supplier.

Start by dcontract-management-6defining what you need. Try to limit this to the genuine business requirements. Do not make assumptions about the solution nor add in unnecessary detail. To do so would restrict the vendors’ ability to propose the best overall solution to meet your needs.

Make sure it is clear (both to yourself and to potential bidders) which requirements are so vital that you could not consider any proposal that failed to address them. If the vendor can see that their proposal will be rejected, there is no point in the bidder wasting their time or yours by responding to a Request for Proposal. Be very careful, however, to restrict this to absolute needs that could not be addressed some other way. It is common for people preparing requirements documents to claim many things are mandatory – only to change the rules when they realize no vendor can do everything.

In a classic selection process, these requirements are used to formulate a Request for Proposal (RFP), which will be issued to potential vendors. (Organizations use many different names for this concept – find out what language is used in your organization.) Each vendor will consider his or her response. They will often need further interaction with you to explore your precise requirements or explore possible directions. (In the public sector scenario, anything you tell a competing vendor must be relayed to the others.)

After a reasonable period, the vendors submit the proposals to you for evaluation. Before they arrive, you should have taken the time to define how you will assess the responses. Develop a balanced view of the relative importance of various requirements. Just because you asked 100 questions about accounting and only 10 about the eleccontract-management-7tronic storefront does not mean the accounting issues outweigh the customer perspective.

You will probably want to perform other investigations to complement the information in the formal proposal. For example, you might ask for demonstrations, interview existing customers, investigate the vendor’s financial status, and check their record of accomplishment.

With a large number of potential vendors, it is common to narrow the field in stages, maybe starting with a Request for Information to arrive at a short list, followed by the Request for Proposal, and then narrow the field again before conducting detailed investigations.

Where it is not necessary to make a selection decision based on formal tenders received, it may be more efficient to study the vendors, services and products available then make a straightforward purchase decision. To do so, you would need access to sufficient knowledge or information about the competing options.

You might still approach several vendors and request information, prices etc. The key difference is that you collect the information you need, and then make a decision. You do not ask them to submit formal bids against a specially prepared RFQ document.

Following your decision in principle, typically you would still enter into negotiations with the vendor to ensure you get a good deal that meets your needs and avoids any contractual pitfalls.

contract-management-8The great advantage would be the time saving. Preparing a formal RFP can often take several weeks. It will take a further period of weeks for it to be received by the vendors, studied, queried, and responded to. On receipt of the vendors’ proposals you might then spend weeks reading, querying, investigating, and evaluating the detail.

This style of procurement is also the typical way you would hire individuals as sub-contractors – for example contract programmers. You would evaluate the individuals’ career histories and capabilities, interview them, then attempt to come to mutually agreed terms with those that you consider the most appropriate.

Where the contract concerns a commodity item, you might pay even less attention to the choice of item and vendor. If you need a projector, you might simply find the nearest supplier and buy or hire one.

In some cases, significant contracts can be handled in this way, provided the content is subject to pre-existing, approved purchase lists. For example, you might be able to buy 100 PCs directly from an approved supplier or you might be able to hire consultants through a framework contract.

Even in such cases, you may need to consider the detail of the contractual relationship. Unless the transaction is a simple consumer purchase, you will need to check the small print for warranties, terms, and conditions etc.

Be particularly careful if the minor components are essential to your overall solution. For example, if your design were based on a particular type of mobile device you would not want to find that it ceases production shortly after you have finished.