Objective 2.2 Flashcards
When a procurement professional has conducted due diligence to evaluate and choose suppliers, what does the next stage in the procurement cycle include?
To issue the request for quotation (RFQ) or invitation to tender (ITT)
What is the aim of a RFQ and ITT?
Although different in approach, both RFQ and ITT have the same aim: to establish which supplier can offer the goods and services for the best value for money.
What is the difference between RFQ and ITT?
ITT
- More formal
- Generally used for complex requirements
- More detailed than RFQ
- Medium to high value contracts
RFQ
- Less formal
- Generally used for less complex requirements
- Less detailed than an ITT
- Low to medium value contracts
Why should an organisation advertise the opportunity to work with the buying organisation?
Likely to increase the number of suppliers increasing interest. This will help to ensure that the best value is obtained. By limiting the supplier base, the opportunities for comparison are lower.
What is a downfall of advertising opportunities?
Leads to increase in expressions of interest which in turn generates more work in terms of selection so more resources are required
Ways organisations advertise their requirements depends on what factors?
- value of contract (e.g. higher value contract could justify a higher marketing budget).
- Strategic importance of contract
- Urgency if contract
- Resources available
Where are advertisements typically placed?
- professional magazines
- business journals
- newspapers
- supplier websites
- specialist tender portals
How do public sector organisations advertise their requirements?
The public sector has tools and systems available. For example, a centralised, government-sponsored procurement portal or official databases. This allows organisations in the public sector to easily reach the marker and promote the fact that they have contracts available on which to receive bids.
Public sector organisations advertise their requirements on their own dedicated public sector procurement websites as well as regional, national and continenta portais. In England and Wales, for example, Contracts Finder gives suppliers the opportunity to search for information about contracts with the government and its agencies worth over £10,000.
How do private sector organisations advertise their requirements?
Private sector organisations
advertise their requirements less frequently. The private sector is not accountable in the same way as the public sector. Public sector organisations, which are funded by taxation, need to be seen to consider every option for supply and to invite as many suppliers as possible into the process. They are required by the regulations to advertise.
What important information should be included in advertising?
- Awarding body/company - which organisation will be awarding and managing the contract.
- Overview of awarding body/company - Brief description of the type of organisation, history, vision, and mission.
- Project description - details of the requirements of the contract.
- Experience/qualifications/accreditations - Any specific requirements that are critical to the awarding of the contract.
- Deadline - The date and time by which bids must be received.
- Contact - Details of a contact for any queries.
What is request for information (RFI)?
A document used to gather information about suppliers and their capabilities prior to a formal procurement process.
How does RFI help procurement professionals?
A request for information (RFI) is a standard process used within procurement.
It collects information from potential suppliers to help the buyer evaluate a potential supplier’s suitability to work with the buying organisation.
RFls are sent to many potential suppliers across the market to get as much data as possible. This helps the procurement professional to create a strategy on how to carry out the procurement.
What does the RFI process look like?
Buyer
- Procurement professional seeks information from potential suppliers with the objective of creating a list of capable suppliers.
Supplier
- Suppliers submit response in the required format answering the questions and providing relevant information to highlight it’s suitable.
Buyer
- procurement professional receives the RFI response and evaluates the information to pre-qualify or reject the supplier.
Do potential suppliers have to respond to RFI?
No
How might a buying organisation send out a RFI?
A request for information may be sent in the form of a letter or e-mail to a Potential supplier, simply asking for details about them and their capabilties, or it may be a more formal document with a lot of questions.
Is a pre-qualification question a form of RFI?
Yes
What does RFI typically gather information on about potential suppliers?
- financial position
- capabilities
- capacity
- mission and vision
- ethical and sustainability policies
The information gathered from RFI’s is useful to procurement professionals as it generates what following data?
- number of capable suppliers
- number of suppliers with capacity
- amount of supplier competition
- amount of product/service competition
- acceptable lead times
- any market trends
- any expected changes in the marketplace
What can information received in response to RFI enable procurement professionals to do?
from the information received in response to RFls, the procurement function can create a suitable strategy for sourcing and begin to plan for the negotiation. If the information shows that there is a high level of competition in the marketplace, they can build a strategy for negotiation on the fact that the buyer has the power. fan agreement cannot be reached, the buying organisation can walk away and tiny to create a contract with another pre-evaluated supplier.
Does a PPQ or RFI have to be issued before a RFQ?
No, on lower value contracts, RFQ’s can be issued as the first step. However, all ideally all suppliers should be ore-qualified, so RFQ’s can be sent to any suppliers that are left in the process after the responses from RFI’s have been received and evaluated, that is, to the pre-qualified suppliers. It asks them to provide a cost for supplying goods and services documented.
RFQ can contain what following information?
- Specifications
- Technical Drawings
- Samples
- Quantities
- Delivery requirements
- Length of contract
- Terms and conditions
- Details of how the suppliers quotation will be evaluated
What does a RFQ attempt to assess?
An RFQ attempts to assess which supplier can achieve the Five rights of procurement for the buyer’s defined need, in the most cost effective way.
The right quantity
The right quality
At the right time
From the right place
At the right price
What are the 5 rights?
The original
‘five rights’ of procurement are traditionally: the right quantity, the right quality, at the right time, from the right place, at the right price
What are the purposes of RFQ’s?
• To align corporate strategy: RFQs form part of the procurement process which relates to organisational objectives and values
• To ensure a fair and transparent process: RFQs ensure that all suppliers receive the same information and have the same chance to win the contract. An RFQ is issued to potential suppliers so they can all submit bids on the same basis. This means the buyer can carry out a consistent evaluation
• To allow opportunities for many suppliers to bid: as a standard document, RFQs enable many suppliers to receive them and provide a quotation
• To enable procurement professionals to evaluate the market and obtain the best value for money: by receiving responses to RFQs, procurement professionals can establish trends in the market, determine levels of competition and ensure they achieve the best deal