Procurement Methods
there are six procurement methods, The six types of procurement are open tendering,
restricted tendering, request for proposal, two-stage tendering, request for quotations and
single-source procurement.
1. 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
2. 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.
3. Request for Proposals (RFP)
Request for Proposal is a term that is used all across the business world. Social media
managers receive RFPs 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.
4. 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.
5. 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.
6. 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.
BVP
Traditional procurement methods leave much room for improving risk management and value
creation. However, Best Value Procurement (BVP) is designed to increase project value by
mitigating risks and increasing the transparency by underscoring the pre-award phase. This shift
in paradigm is reached by following a sequence of elements with the principles of transparency,
performance information measuring and contractor clarification.
Although BVP is a new procurement method, it does build on procuring and tendering according to
the MEAT principle (most economically advantageous tender). The principle enables the contracting
authority to take account of criteria that reflect qualitative, technical and sustainable aspects of the
tender submission as well as price when reaching an award decision.
The BVP philosophy is developed in the USA. Following is the Netherlands which has practiced
it in many projects.
This method was created by Dean Kashiwagi at Arizona State University and it is about
selecting the best vendor suitable for the job after the client has identified the needs and
facilitating the space required for him to come through and minimizing the client’s management
and control. BVP is about less and management and more added value throughout the entire
supply chain. The method has been applied throughout many industries and has been shown a
substantial impact on quality and efficiency. It has proven to be one of the few methods to both
contribute to the client’s as well as the vendor’s benefit.
BVP can create a transparent relationship with minimized risks by making the expert vendor
responsible. It aligns available knowledge in the best way to come to a win-win situation. Project
risks are with the client but its management and control are shifted towards the vendor who is
selected to be the expert. He is the one who can see the project from beginning to end and is
most capable of identifying these risks, handling and minimizing them throughout the entire
chain. This can lead avoiding unnecessary difficulties. The work is executed in much more
effective and efficient manner and the project’s relationship will improve significantly. After the
client has identified his need, the contractor takes over and is in the lead from the Execution
Phase. The contractor is the one who will finally decide what will be delivered. This lowers
decision making and decreases the risk level, especially when the client would make these.
Rather than trying to reduce the impact of risks in the Execution Phase with the traditional ways,
BVP enables to identify and mitigate additional work upfront.
To answer “What is Best Value Procurement?” one should address the foundation on which the
BV philosophy was developed; the Information Measurement Theory (IMT). It revolves around
the predictability of events with the information available about the event to go from low bid
environment to an information environment by using performance characteristics. It states that
all events’ exclusive final conditions would be predictable if one has all the required information
based on initial conditions and the natural laws. BVP is parallel to where the time spend up front
of the Execution Phase is used for the vendor to identify their performance measurements,
predict all possible outcomes and recognize the best way to merge their expertise with the given
problem.
The theoretical framework of BVP contains four phases; the Pre-qualification, Selection,
Clarification and Execution Phase.
Decision making and bias are traded for selecting vendors in a process which is based upon an
automated process. This results in more effectiveness and efficiency for the client decision
making process. This is done with the following filters applied to all vendors in the Selection
Phase to find the best value one based upon performance information: Selection Filter I: Project
capability; Selection Filter II: Interview of key personnel; Selection Filter III: Prioritization using
all the ratings; Selection Filter IV: Dominance check of the best value vendor. The nature of
these filters allows clients to select the best expertise vendor based upon dominant information;
simple and without requiring expert knowledge. They are based on transparency appreciating all
expertise. But, especially in markets where many participants are qualified, pre-qualification can
be attractive to use which limits the used resources both from client and non-qualified vendors.
There is an argue that a deviation from the use of these filters in the BVP ‘path’ can in a later
stage result in greater risks.
There are three basic stages to choosing factors to guide a procurement toward best value:
1. Identify possibilities. List all the possible solutions, and the possible pros and cons of each.
Conduct market research, consult others, and collaborate with stakeholders.
2. Choose relevant factors. Decide what is relevant to each specific acquisition.
3. Assign values or “weights” to the chosen factors and create selection criteria.”
This system is claimed to be beneficial because it needs less decision-making, prepares for the
future, and minimizes risk. Even if risks occur, they can be effectively controlled or managed.
One of the most important aspects of best value procurement is looking at past performance. It has
a vision and method for procuring and tendering in which the main focus is not price, but the
performance of market parties.
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