Source Selection

April 14, 2010
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Introduction

Selecting the right source for a crucial procurement could easily make or break a project. Thus the criteria to evaluate and the evaluation process has to be very robust and be able to pick the right sources for the procurement action. There is a whole range of criteria that can be used. Quite often this is guided by the collective wisdom of the organization that specifies what criteria are important. Yet, many of these apply to selection of sellers of products or services across industry segments. These are discussed here.

Selection criteria of Sellers

The detailed items to be used in the selection of a vendor are quite often included in the documents seeking a proposal. These will need to be developed as part of developing the procurement plan and should be as detailed as possible. Not all of these could be objective, some will have to be subjective too. Usually a small committee scores the responses from vendors to arrive at possibly a even shorter list of vendors. These are the potential candidates for the proposal award. Actual award may take place after price negotiations and contract negotiations have taken place. With standard items though the purchase price may be the only criterion used for selecting a vendor.

Whether the SOW is well understood by the vendor may quite often be a crucial criterion in a complex project. How well the vendor has understood the SOW will come out clearly from the way the seller responds to the questions requested as part of the proposal and the way the vendor proposes a solution, structures his project and so on.

Technical capability is again a vital consideration. If the vendor has the skills already that would be a strong plus. Else one should make a judgment call if the vendor is capable of acquiring the skills necessary easily and quickly enough. Even when the vendor may have the skilled resources within the organization it is crucial to find out of he is capable of mobilizing them quickly enough.

Technical and management approach of the vendor is an important consideration. The buyer should be able to take a call on if the seller’s technical methodologies, technical approach, techniques, solutions and services would be sufficient for him to meet the requirements of the procurement initiative. Similar judgment needs to be made about his managerial approach and taking a call on if the project can be easily executed by the seller. Alternately can he be depended on to acquire and put these management skills in place quickly if awarded the project.

Total cost of ownership, that includes not only the purchase price but also any operating costs that may be involved is a criterion that is possibly the most important having determined the seller’s capability of providing the item.

On the assurance of the products and services by the seller there are aspects one should check on. The kind of warranty the seller is going to provide and for what duration is an important consideration. Past performance of the vendor in supplying items on earlier occasions can add to the confidence. An assessment of his stability and interest in providing future services should be taken into consideration too. The ability of the seller to provide references of actual customers who would willingly speak about the capability of the vendor is another aspect to be checked.

Beyond these considerations what one needs to asses is the long term stability of the vendor organization and the financial capability to deliver the product or services being sought by the buyer. His business size and type, financial stability, if he has control over the IPR he is likely to use and of course if he has proprietary control over the processes, products or services are to be used in the procurement action.

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