Using Pre-Qualification as part of the Supplier Selection process

Our new research Paper, launched recently, and sponsored by Achilles, is  titled - Is your Supplier Selection Process a Source of Competitive Disadvantage?

One of the points that struck me while researching and writing it was the confusion around the pre-qualification process. For instance, suppliers often perceive that if they pass some pre-qual threshold, they will automatically be allowed to bid for the contract. But pre-qual can and often is used for selection processes.

Equally, procurement practitioners often don’t relate the process clearly to the risk profile of what they’re buying.  For instance, should you carry out verification of what the supplier is telling you in their pre-qualification response? That decision should be based on a careful risk analysis of the supplier and contract – but it often isn’t.

Anyway, here’s another excerpt from the Paper, covering the “selection” element of the  process.  It is now available for download, free for practitioners on registration – if you’re on the provider side, you need a subscription to Spend Matters PRO in order to access it.

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Selection

In many cases, the buyer will find that more potential suppliers pass the threshold and qualify than they wish to tender for the contract. (Our advice in most cases is that, for a single contract, no more than 6-8 bidders should be asked to tender.) This leads to a manageable tender process for the buyer and avoids excessive and unreasonable effort from the supply market. Indeed, if you ask a large number of firms to tender, some will refuse based on their assessment of their likely chance of winning set against the workload. The buyer may well therefore need to apply selection processes at this stage.

Selection can be made based on the suppliers’ responses to two types of question. There are those where the answer can lead to the disqualification of the supplier, along the lines previously described. That is obviously a simple form of assessment and selection (or de-selection to be accurate). Then there are questions which can be marked with some degree of differentiation rather than simply on a yes / no basis. These are often key to effective selection. Often, many suppliers will “pass” based on the basic yes / no questions, which leave these scored questions as the key to choosing your shortlist for tender  purposes. It is therefore important to select these questions carefully. The focus should be on elements of the contract that are the most important or differentiate clearly between suppliers.

There are many different marking schemes. A simple one uses a 0-5 scale. A response that “fully meets all our requirements in this area” scores five, a “no response” scores zero. Marks can then be summed across the questions to arrive at the ranked list of potential suppliers. The top 3, 6, 8, or whatever number required, are then taken through to tender stage.

One common mistake here is to simply use size and experience as the selection factors. If the selection consists solely of questions such as “how many consultants do you have”? Or “what is your total annual manufacturing capacity”, you will simply end up selecting the largest players amongst the bidding population. So look for questions that get at the real capability you are seeking. Asking for examples, or case studies is often a good way of achieving this...

Key pointers:

  • Use a small number of well-thought out questions for selection purposes
  • Ensure the questions really address the most important issues and capabilities that will determine the ultimate success of the supplier and contract
  • Don’t ask questions that simply reward size or current market share
  • Be fair and transparent in how you assess and mark the responses, and retain an audit trail of that process

Download the whole Paper here....

 

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