THE EVANGELICAL

COLLEGE OF
THEOLOGY JUI

NAME: DANIEL FORBIE

ID NUMBER 2974

COURSE: PROCUREMENT

ASSIGNMENT
Procurement methods refer to the approaches used by an organization to
obtain goods and services. These methods can vary depending on factors such
as the value of the purchase, the ur
gency of the procurement, the complexity of the goods or services required,
and the organization's policies.
Common Procurement Methods:
1. Open Tendering:
o Description: This is the most common method, where an
organization invites bids from all interested suppliers. It's
transparent and competitive.
o Advantages:
 Wide pool of potential suppliers.
 Transparency and fairness.
 Competitive pricing.
o Disadvantages:
 Time-consuming due to the need to evaluate multiple bids.
 Can be challenging for smaller businesses to participate.
2. Restricted Tendering:
o Description: Only pre-qualified suppliers are invited to tender. This
method is used when the procurement requires specific expertise
or resources.
o Advantages:
 Streamlined process as fewer suppliers are invited.
 Often faster than open tendering.
o Disadvantages:
  Limited supplier options, which can lead to higher costs or
reduced competition.
 Requires proper pre-qualification to ensure quality.
3. Request for Quotation (RFQ):
o Description: Involves requesting price quotations from a small
number of suppliers, typically for lower-value purchases.
o Advantages:
 Quick and easy to use for low-value items.
 Less formal than tendering.
o Disadvantages:
 Limited competition, so potentially higher prices.
 Less rigorous evaluation compared to tendering.
4. Direct Procurement (Single Source Procurement):
o Description: This method involves purchasing goods or services
from a single supplier, without competitive bidding. It is often used
for specialized products or when there is only one supplier
available.
o Advantages:
 Saves time and simplifies the process.
 Useful for urgent needs or highly specialized goods.
o Disadvantages:
 Potentially higher costs as there is no competition.
 Lack of transparency in pricing and decision-making.
5. Framework Agreement:
o Description: A long-term agreement with one or more suppliers,
setting terms and conditions for future purchases without
specifying exact quantities or prices.
 o Advantages:
 Ensures consistent pricing and quality over a longer period.
 Reduces procurement cycle time.
o Disadvantages:
 Less flexibility if needs change.
 Requires careful management to ensure suppliers meet
expectations.
6. Electronic Procurement (E-Procurement):
o Description: Involves the use of electronic systems to manage
procurement processes, from ordering to payment. It can include
online tenders, RFQs, and invoicing.
o Advantages:
 Streamlines the procurement process and reduces
paperwork.
 Provides real-time tracking and transparency.
o Disadvantages:
 Requires technology infrastructure and training.
 Can be challenging for less tech-savvy suppliers.
7. Negotiated Procurement:
o Description: This method involves direct negotiation with one or
more suppliers, typically used for complex or high-value contracts
where open bidding is not practical.
o Advantages:
 Flexibility in negotiating terms.
 Can result in better value for money, especially for complex
contracts.
o Disadvantages:
  Can lack transparency and competition.
 Time-consuming negotiations.

Choosing the Best Procurement Method

When selecting the best procurement method, consider the following factors:
1. Value and Complexity of the Purchase:
o For low-value, simple purchases, an RFQ or direct procurement
might be sufficient.
o For complex or high-value purchases, open tendering or restricted
tendering would provide more transparency and competitive
pricing.
2. Urgency:
o If speed is important, direct procurement or negotiated
procurement might be the best options, as they allow for faster
decision-making.
o Open or restricted tendering is slower due to the need for formal
bidding processes.
3. Supplier Availability:
o If there are few suppliers for a specific product or service, direct
procurement or a framework agreement might be more
appropriate.
o For a wider choice of suppliers, open or restricted tendering would
provide better competition.
4. Transparency and Fairness:
o Open tendering provides the highest level of transparency and
fairness.
o Negotiated procurement or direct procurement can be less
transparent and might raise concerns about favoritism or fairness.
 5. Cost Considerations:
o Open tendering and RFQs typically result in competitive pricing.
o Direct procurement may lead to higher costs due to the lack of
competition.

BEST PROCUREMENT METHOD: REQUEST FOR QUOTATION (RFQ)

INTRODUCTION:
The Request for Quotation (RFQ) is a commonly used procurement method
where an organization invites suppliers to submit price quotes for specific
goods or services. It is a more straightforward and less formal approach
compared to methods like open tendering but is highly effective in situations
where the requirements are clear, and the primary consideration is cost. This
procurement method is best suited for lower-value purchases or when the
specifications are well-defined, and the supplier's performance is relatively
easy to evaluate.

Why Request for Quotation (RFQ) is a Good Procurement Method:

1. Efficiency and Simplicity:
o The RFQ process is relatively simple and efficient, making it a great
option for organizations looking to procure goods or services
quickly and with minimal administrative effort. It is particularly
useful for straightforward purchases where the organization
knows exactly what it needs.
o The request typically involves less paperwork and fewer
formalities compared to other methods like open tendering,
saving time and effort.
2. Cost-Effective:
o Competitive Pricing: Like open tendering, RFQs invite suppliers to
compete, helping organizations obtain competitive pricing for the
goods or services they need. Suppliers are motivated to offer the
 best possible prices to win the contract, resulting in cost savings
for the organization.
o Reduced Procurement Time: The RFQ process is often faster
because it typically involves fewer suppliers and less complex
evaluations, leading to quicker decision-making and procurement.
3. Clear Specifications:
o RFQs are most effective when the requirements are clearly
defined, and the organization has a good understanding of the
product or service it needs. This clarity reduces the risk of
misunderstandings and allows suppliers to provide accurate and
competitive quotes.
o RFQs are ideal when the organization knows what it is buying and
doesn’t need to spend time evaluating the technical details or
qualifications of suppliers.
4. Transparency:
o Even though RFQ is less formal than open tendering, it still
promotes transparency, as all suppliers are asked to submit their
prices for the same specified items or services. This allows the
organization to compare quotes directly and choose the best value
offer.
o The process is simple enough to avoid manipulation, and there is
often a clear audit trail of how the quotes were evaluated.
5. Flexibility:
o RFQs provide some flexibility in terms of the suppliers who can
participate in the process. While it is typically open to a broad
range of suppliers, organizations can choose to limit the RFQ to
certain prequalified suppliers if needed, offering a balance of
competition and vendor relationships.

How Request for Quotation (RFQ) Works:

The RFQ process generally involves the following steps:

1. Preparation of RFQ Document:

o The organization prepares an RFQ document outlining the
specifications, quantities, delivery schedules, and any other
relevant terms and conditions for the goods or services needed.
This document is typically short and straightforward.
2. Issuance of RFQ:
o The RFQ is sent to a list of suppliers or made publicly available if
the organization prefers an open process. The RFQ may be sent via
email, posted on a procurement website, or delivered directly to
selected vendors.
3. Receiving Bids:
o Suppliers submit their price quotations by the specified deadline.
The bids may also include other important information, such as
delivery terms, payment schedules, and any additional services or
guarantees offered.
4. Evaluation of Quotes:
o The procurement team evaluates the submitted quotations,
usually based on price, delivery terms, and any other factors
specified in the RFQ. In some cases, qualitative factors like supplier
reliability or customer service may also be considered.
o Unlike open tendering, where a detailed evaluation matrix may be
used, RFQs typically involve a more straightforward evaluation,
focusing primarily on price and compliance with the terms
outlined in the RFQ.
5. Awarding the Contract:
o The contract is awarded to the supplier with the best offer, based
on the evaluation criteria. The supplier may be notified directly,
and the terms of the agreement are finalized.
 o The supplier must provide goods or services as per the agreed-
upon terms and conditions.
6. Purchase Order Issuance:
o Once the RFQ process is completed and the supplier is selected, a
purchase order (PO) is issued to formalize the procurement
contract. The PO serves as an official request to the supplier to
deliver the agreed-upon goods or services.

Advantages of RFQ:
1. Speed: The RFQ process is quick because it is typically used for smaller
and less complex purchases. The time from request to award is shorter
than more formal procurement methods like open tendering.
2. Simplicity: RFQs are straightforward, with minimal documentation
required, making them easy to issue and process. They are particularly
suitable for routine and low-value procurements.
3. Cost Savings: Suppliers often offer competitive prices when responding
to RFQs, helping the organization save money on goods and services.
4. Suitable for Repetitive Purchases: If an organization regularly purchases
the same or similar goods and services, RFQs can be a highly effective
method, as suppliers may already be familiar with the specifications.
5. Reduced Administrative Burden: Since RFQs do not require as much
formal documentation or a lengthy evaluation process, they help reduce
administrative overhead compared to more complex procurement
methods.

Challenges of RFQ:
1. Limited Evaluation Criteria:
o While RFQs are great for straightforward purchases, they may not
allow for detailed evaluation of suppliers based on factors like
technical capability or long-term reliability. RFQs typically focus
 more on price and may not consider the supplier's broader
performance history or quality assurance practices.
2. Risk of Lowest Price Focus:
o RFQs are often price-driven, and organizations may prioritize low-
cost bids over other important factors such as quality, supplier
reputation, or after-sales support. This can sometimes result in
suboptimal choices, where the lowest price does not equate to the
best value.
3. Potential for Limited Supplier Pool:
o RFQs may limit the number of suppliers who can participate,
especially if the organization uses a closed RFQ process. This can
reduce the level of competition and the chance of receiving the
best offer.
4. Not Suitable for Complex or Custom Requirements:
o RFQs work best for straightforward purchases with clear
specifications. For more complex or highly customized
requirements, a more detailed procurement method (such as
open tendering or negotiation) may be more appropriate.

Conclusion:
Request for Quotation (RFQ) is an effective procurement method for
organizations looking for a quick, straightforward, and cost-efficient way to
procure goods or services. It is most suitable when the specifications are clear,
the focus is on price, and the procurement requirements are simple. While
RFQs offer speed and efficiency, organizations should carefully evaluate bids
based on more than just price, ensuring they get the best overall value for
money.
For lower-value or repeat purchases where quality is fairly standardized, RFQs
can be the best method, providing competitive pricing and reducing the
procurement timeline. However, it may not be ideal for complex, high-value, or
highly technical procurements, where a more formal or detailed approach like
open tendering would be necessary.