Procurement Methods

Generally speaking, there are six procurement methods used by the procurement team in a company. The
actual names of these could vary depending on your company and industry, but the process remains the
same. The six times of procurement are open tendering, restricted tendering, request for proposal, two-
stage tendering, request for quotations and single-source procurement.

Open Tendering
Open tendering is shorthand for competitive bidding. It allows companies to bid on goods in an open
competition or open solicitation manner. Open tendering requirements call for the company to:

1. Advertise locally
2. Have unbiased and coherent technical specifications
3. Have objective evaluation measures
4. Be open to all qualified bidders
5. Be granted to the least cost provider sans contract negotiations

Arguably, the open tendering method of procurement encourages effective competition to obtain goods
with an emphasis on the value for money. However, considering this is a procedures based method a lot of
procurement experts feel that this method is not very suitable for large or complex acquisitions due to the
intense focus on the output process instead of stringent obedience to standards. In this Quality
Management course learn about the ways to evaluate quality products on incoming orders, and to
create quality products for sale.

There are course also disadvantages to this kind of procurement method including:

1. Complex requirements are typically not suited for this method

2. The timeline for needing the goods
3. Complications in defining the exact needs of the requirement by the procuring company

Restricted Tendering
Unlike open tendering, restricted tendering only places a limit on the amount of request for tenders that
can be sent by a supplier or service provider. Because of this selective process, restricted tendering is also
sometimes referred to as selective tendering. Like open tendering, restricted tendering is considered a
competitive procurement method, however, the competition is limited to agencies that are invited by the
procuring team. The procuring entity should establish a set of guidelines to use when selecting the
suppliers and service providers that will be on the invitation list. Randomized selections will not bode well
for procuring. This method is selective to find the best-suited and most qualified agencies to procure
goods and services from. It’s also employed as a way for the procuring team to save time and money
during the selection process.

Request for Proposals (RFP)

Request for Proposal is a term that is used all across the business world. Social media managers receive
RFP’s from potential clients all the time when a client is seeking a new manager of their venture. This kind
of proposal is a compelling and unique document stating why the business is the best fit for the type of
project at and. Similarly, in the procurement world, a RFP is a method used when suppliers or service
providers are proposing their good or service to a procurement team for review. If you’re a supplier,
understanding the in’s and out’s of quality service management is key to winning your bid. Read more
about this in service quality management.

Procurement teams are often on the hunt for the best valued, most marketable items to bring into
circulation. A client may feel they have all of the qualifications to fit the needs of fulfilling a specific
requirement of a procurement team – but they have to prove it. The agencies writing the RFP’s should
submit a two-envelope proposal to the procurement manager. The two-envelope process allows the
procurers’ to review the proposal through and through without knowing the financial component. The
financial proposal is sealed in the second envelope and should only be opened after the content of the
first-envelope proposal is approved or rejected. This eliminates any persuasion by cost and allows an
objective lens to look through when analyzing a good fit. The proposal with the best fit qualifications and
best price will be selected. If a lesser qualified (yet still qualified) selection has a lesser price, no contract
should be negotiated. The most qualified and appropriate proposal, regardless of price, should be
selected. Are you a supplier? Learn how to price your goods based on value in the course Value Centric
Selling.

Two Stage Tendering

There are two procedures that are used under the two stage tendering method. Each one of the procedures
has a two stage process. This can be disadvantageous for some procurement teams if there is a time limit
on securing a contract. In the same vein, this option is more flexible for both parties, allowing more room
for discussion to meet mutual needs.

The first procedure is very similar to the RFP method as discussed above. The procurement team receives
a proposal with two envelopes – one with the proposal itself and one with the associated financial
information. The difference is the bidder is required to submit a technical proposal that highlights their
solutions to fulfilling the requirements as specified by the procuring department. This proposal is scored
according to the relevance of the solution to the needs of the procurer. The highest scored proposal is
invited for further discussion in an attempt to reach an agreement. After the final agreement for the
technical proposal is reached, the bidder is invited to submit their financial proposal and then further
discussions ensue to negotiate a contract.

The second procedure is much like the above, however, instead of the bidder submitting a fully-completed
technical proposal, a partial proposal is submitted. The methodology and technical specifications will be
included but not to the fullest extent. This allows room for even more customization and discussion. Once
the highest qualified bidder is selected, they will be invited to submit a thorough technical proposal along
with a financial proposal. The technical proposal will be evaluated and only then will the financial
proposal be opened. The combined score of both the technical proposal and the financial proposal are the
grounds on which a bidder is contracted.

Request for Quotations

This procurement method is used for small-valued goods or services. Request for quotation is by far the
least complex procurement method available. If you have the option, use this method to ensure a fast
procurement process and not a lot of paperwork. There is no formal proposal drafted from either party in
this method. Essentially, the procurement entity selects a minimum of three suppliers or service providers
that they wish to get quotes from. A comparison of quotes is analyzed and the best selection determined
by requirement compliance is chosen.

Single-Source
Single source procurement is a non-competitive method that should only be used under specific
circumstances. Single source procurement occurs when the procuring entity intends to acquire goods or
services from a sole provider. This method should undergo a strict approval process from management
before being used. The circumstances which call for this method are:

 Emergencies
 If only one supplier is available and qualified to fulfill the requirements
 If the advantages of using a certain supplier are abundantly clear
 If the procurer requires a certain product or service that is only available from one supplier
 For the continuation of work that cannot be reproduced by another supplier

In the end, the type of procurement method you choose to use is highly relative to the conditions of the
procurement effort and the type of good or service being acquired. All procurement methods follow tight
legal frameworks to ensure all standards are being met and quality in the selection process exists. Learn
more about procurement and other business methods in the course anIntroduction to Business.

Filed Under: Business, Students