Using Third-Party Providers in Supplier Pre-Qualification

We’ve featured a couple of extracts here from our recent research Paper, sponsored by Achilles, and  titled - Is your Supplier Selection Process a Source of Competitive Disadvantage? (Download it now via that link – free to practitioners, requires PRO subscription for providers)

Today we’re looking at the use of third parties within the pre-qualification process. It is, in a sense, a form of outsourcing – taking work that might have previously been done in house and moving it to an external provider. Although in our experience, it is often work that wasn’t really being done at all – for instance, it is rare to see procurement teams undertaking real verification of supplier information or claims themselves.

The option gets even more interesting when buying organisations can share the workload on an industry basis perhaps. As always, there are pitfalls and points to consider – but it’s an option worth considering. So here’s an extract – and I hope you'll download the whole Paper.

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Third-party providers – an option worth considering?

The cost of the process, and the time required to run proper pre-qualification is one reason for the growth of third party services in this field. There are obvious economies of scale in a single organisation carrying out some combination of registration, verification, qualification and selection, then making the results of that work available to multiple users.

A buyer may then directly access, for instance, a pre-qualified list of potential suppliers for a particular industry who have a defined capability, with appropriate certification if required, a healthy financial situation, no nasty surprises in terms of legal or  regulatory issues, and listed by country or region. And that can be done very quickly.

“Please find three firms (to whom I can then issue a tender), fully qualified and certified to carry out underwater oil-rig maintenance work off the coast of the Philippines, with at least three years’  experience, a stable financial position and strong environmental awareness and policies in place”

It’s easy to see how much time and effort a buyer might have to exert in order to answer that question. But if it came from an internal senior stakeholder, who is in a situation of some urgency, the buyer may not have the luxury of time. However, an existing database, with verified and accurate information, provided by a third party who specialises in this sort of work, could provide an answer instantly. And that can be achieved without any compromise on the risk element of the process.

Indeed, a reputable third party is likely to put more effort into the verification element of the process than individual buyers generally have the time or resource to do. Some organisations operate what we might call a “hybrid” model for pre-qualification. That means they use third parties for some categories of spend, but not for others, where they may run their own processes. Or the buyer may use an external database to arrive at a long-list of suppliers, but then issue some selection type questions (as we described earlier) to these firms in order to reduce the field further to a suitable number for the tender.

So in the case above, if the database turned up twelve firms who met the requirement in terms of oil-rig work, rather than three, a short questionnaire with three or four questions, perhaps looking in more detail at some specific aspects of their experience, might enable the buyer to quickly choose three or four to take part in the final tender.

Third-party providers can therefore offer a way of reducing cost, shortening timescales and increasing the efficiency of the pre-qualification process, in some cases by working across industry sectors and collaborative user groups. They can also offer a strong risk management focus. They are unlikely to meet your needs for every procurement or pre-qualification exercise that is necessary; but in the appropriate circumstances, they are an option worth serious consideration.

First Voice

  1. John Diffenthal:

    The form to complete for download was virtually invisible on my screen. I’ll try it later from home, but I suspect that your designer needs to check accessibility requirements for forms of this type.

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