Choosing a Vendor

by Joseph_Phillips on February 12, 2013

Happy birthday, Abe!

Choosing the vendor, the right vendor, can be a lot of work. After the buyer has sent the vendors the appropriate procurement documents the buyer may host a bidders conference. A bidders conference is a meeting where all of the potential vendors are invited to ask questions and clarification in the SOW. Any clarifications to the SOW typically results in an updated SOW which is redistributed to the participants of the bidders conference. After the bidders conference the bidders supply the buyer with the corresponding procurement document: a bid, a quote, or a proposal.

The buyers then evaluate the bids, quotes, and proposals to determine which vendor can best answer the project’s needs. Organizational policies may dictate how a vendor gets selected, but most organizations choose a vendor based on one or more of the following:

  • Weighted system. Categories are identified, such as cost, time, experience, references, and points are assigned to each category. Each vendor’s bid, quote, or proposal is measured and scored in each of these categories. The vendor that receives the highest score is awarded the contract.
  • Independent estimates. This approach is also called a “should-cost” estimate. The buyer hires a third-party to create an estimate for the project’s procured work. This third-party estimate serves as a means for the project work to be procured – as a guide to what the work “should cost.”
  • Screening systems. This popular approach identifies qualifications and specifications the proposed vendors must have in order to qualify for the project. If the vendor doesn’t have these qualifications they’re screened from the selection process.
  • Negotiation. Negotiation is the process of the buyer and the seller giving and taking components of the work, the deliverables, the pay, and the schedule to reach an agreeable conclusion for both parties. Negotiations are often handled by a buyer’s agent or purchasing agent on behalf of the project manager.
  • Seller rating systems. Many organizations utilize a seller rating system. This is a database where project managers can rate their experience with vendors they’ve utilized in the past. Other project managers can use the database as a precursor to negotiations and awarding the project contract.

Once the buyer and the seller have reached an agreement a contract is entered into by both parties. A contract is a legally-binding agreement between the two parties and is backed by the United States court system. Both parties are expected to live up to their agreement, otherwise claims, mediation, or even arbitration ensues. Most contracts have provisions for how issues are escalated and if necessary into what court system.

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