LESSON 4: SUPPLY SOURCING

4.0 Sourcing Activities

Sourcing is the process of identifying sources of supply that can meet the organizations
current and future requirements for goods and services. Identifying sources of supply and
assessing supplier capabilities will either be carried out before customers are placing requests
on procurement or it will take place once a request has been received.
4.1. Sources of supplier information
Every organisation maintains a list of vendors, trade group-wise whom they approach for
their need of materials. This list is under constant review. Unsatisfactory suppliers are
eliminated and new suppliers are added to enhance competition. Also new suppliers have to
be found for newer materials required on ever expanding business. The sources of
information regarding the potential suppliers are:
i. Catalogues and Brochures. These may include internal aid organizational catalogues
containing information on sources of `standard' goods or suppliers that the
organization currently uses. Suppliers will often produce their own catalogue or
brochure of goods or services they sup-ply. These may be paper based catalogues but
it is now becoming more common, particularly for large suppliers,to produce these
catalogues on CD's or on line on their websites.
ii. ˆ Trade directories.
Trade directories are useful sources of information on the range of suppliers for particular
trade groups. They can give valuable information on location, size of business, facilities,
product ranges and contact details.
iii. The Internet.
The Internet has now become a major source of supply market and supplier information.
Search
engines enable specific requirements to be searched and accessed.ˆ Trade
exhibitions .Exhibitions provide the opportunity of comparing competing products and
meeting a range of suppliers in a short space of time. Exhibition catalogues also provide
details of the suppliers who are exhibiting and can be retained for future reference.
iv. Trade Journals.
Journals will provide information on new products, new suppliers and innovations in
products.
Journals will often contain letters and articles written by others involved in procurement and
can provide a means for sharing information and recommendations on suppliers.
 v. Government Offices.
Local or regional government offices will have information on the local market and on local
suppliers who are based in the area. Different local governments are organized in di#erent
ways but many will include local chambers of commerce (or similar organizations).
vi. Other people involved in procurement.
In larger organizations there will be others working at regional offices, head offices or in
other countries, who will also be procuring on behalf of the organization. These people are
potential sources of information on suppliers or on a particular market. They may also
provide information on specific suppliers that the organization will or won't use.ˆ Supplier
records.
The aid organization will be using current suppliers and will have used suppliers in the past.
These past supplier records are another potential source of information. This is an important
source of information in situations where personnel are responsible for procurement changes.
For example, a different person takes over procurement during an aid operation, the
information kept by the previous person is one of the most valuable sources of market
information.
vii. Professional bodies publications and magazines e.g. KISM
viii. Reference from other organizations, suppliers and customers
ix. Sales representatives

4.2 Supplier Selection

Choosing the right supplier involves much more than scanning a series of price lists. Your
choice will depend on a wide range of factors such as value for money, quality, reliability and
service. How you weigh up the importance of these different factors will be based on your
business' priorities and strategy. A strategic approach to choosing suppliers can also help you
to understand how your own potential customers weigh up their purchasing decisions.

4.2.1 Supplier Selection criteria

 Competitive pricing
 Ability to meet specifications and standards
 Product and service quality
 Product yields and durability (food)
 Reliable delivery methods
 Quality control methods and practices
  Technical abilities and leadership
 Financial stability & credit strength
 Adequate distribution/warehousing facilities and resources
 Warranty, insurance, and bonding provisions
 Proven performance and experience

4.3 Factors to consider in supplier evaluation (Carters 10 C's)

1. Competency
First, look at how competent this supplier is. Does your supplier have the skills to deliver the
materials you require? Make a thorough assessment of the supplier's capabilities measured
against your needs, but then also look at what other customers think. How happy are they
with the supplier? Have they encountered any problems? And why have former customers
changed supplier? Look for customers whose needs and values are similar to yours, to ensure
that the information you gather is relevant to your organization.

2. Capacity
The supplier needs to have sufficient capacity to enable it to operate flexibly. The more
flexible the supplier is, the more it can meet fluctuations in demand. Does the supplier have
an adequate “engine room” to produce your goods. Capacity can include equipment, human
resources and materials. Can your supplier flex their capacity in line with your requirements?
The supplier needs to have enough capacity to handle your firm's requirements. So, how
quickly will it be able to respond to these, and to other market and supply fluctuations?
Look at all of the supplier's resources, too. Does it have the resources to meet your needs,
particularly when commitments to other clients are considered? (These resources include
staff, equipment, storage, and available materials.)

3. Commitment
Quality is a key requirement for any business – does your supplier have the commitment to
maintain suitable quality performance? Your supplier needs to provide evidence that it's
committed to high quality standards. Where appropriate, look for quality initiatives within the
organization, such as ISO 9001
The supplier also needs to show that it is committed to you, as a customer, for the duration of
the time that you expect to work together. (This is particularly important if you're planning a
long-term relationship with the supplier.) You'll need evidence of its ongoing commitment to
delivering to your requirements, whatever the needs of its other customers.

4. Control
Query how much control this supplier has over its policies, processes, procedures, and supply
chain. Can the supplier ensure that its performance can be consistent? How will it ensure that
it delivers consistently and reliably, particularly if it relies on scarce resources, and
particularly if these are controlled by another organization? Control can take various forms,
for example, how much control does the supplier have in terms of its suppliers warning it
when goods become scarce or even stop being produced.

5. Cash
This is the financial standing of the supplier. Does your supplier have adequate financial
standing? Your supplier should be in good financial health. Cash-positive firms are in a much
better position to weather the ups and downs of an uncertain economy. So, does this supplier
have plenty of cash at hand, or is it overextended financially? And what information can the
supplier offer to demonstrate its ongoing financial strength?

6. Cost
Look at the cost of the product that this supplier provides. How does this compare with the
other firms that you're considering? Most people consider cost to be a key factor when
choosing a supplier. However, cost is in the middle of the 10 Cs list for a reason: other
factors, such as a commitment to quality and financial health, can potentially affect your
business much more than cost alone, particularly if you will be relying on the supplier on an
ongoing basis.

7. Consistency
Does the supplier guarantee a consistent product time and time again? How will this supplier
ensure that it consistently provides high quality goods or services? No one can be perfect all
of the time. However, the supplier should have processes or procedures in place to ensure
consistency. Ask this supplier about its approach, and get a demonstration and a test product,
if possible.
 8. Culture
Does the supplier share the same cultural values as your organization? Does it make sense
that your supplier shares similar values and attitudes to avoid strains in the future
relationship? The best business relationships are based on closely matching workplace values.
This is why looking at the supplier's business culture is important. For example, what if your
organization's most important value is quality, and your main supplier cares more about
meeting deadlines? This mismatch could mean that it's willing to cut corners in a way that
could prove to be unacceptable to you.

9. Clean
Clean is a reflection of increased environmental awareness. Clean is about ensuring that the
company complies with all statutory requirements and in particular environmental issues. So
in a sense, suppliers are asked to demonstrate their `green credentials'.
Does your supplier have an appropriate sustainability policy? This refers to this supplier's
commitment to sustainability, and its adherence to environmental laws and best practices.
Also, does this supplier treat its people and the people around it well; and does it have a
reputation for doing business ethically?

10. Communication
Although it may seem obvious, suppliers need to be asked how they will communicate with
you. Will it be by fax, email or telephone? Communication also covers the ICT software and
applications that the supplier has. If they only have very basic ICT facilities, they will be
unable to communicate effectively. And who will be your contact person at this firm?

It's also important to find out how the supplier will handle communications in the event of a
crisis. How quickly will it notify you if there's a supply disruption? How will that
communication take place? And will you be able to reach senior people, if you need to?.

4.4 Procurement Process

1. Need identification
The initiation of procedure starts with the recognition of the need by the needy section. The
demand is lodged with the purchase department in the prescribed Purchase Requisition Form
forwarded by the authorized person either directly or through the Stores Department. In
certain circumstances, particularly where there is an urgent need for goods, verbal requests
may be made by customers. In these circumstances, initiative should be used to decide if the
verbal request could be accepted if followed up with a written confirmation. Many
organizations will have a standard pre-printed requisition order form that customers need to
complete. This form will contain all the information required by the people who will
purchase the goods or services and the necessary authorization needed for that purchase to be
made.

A typical requisition order will contain:

i. A clear specification of what is required.
ii. What quantities are required including units of quantity if appropriate.
iii. The location for delivery.
iv. When the goods or services are required.
v. Who is the requester.
vi. Organization financial account codes to which the goods or services will be charged.
vii. An estimate of the expenditure.
viii. Specific or suggested sources of supply.
The content of the requisition should not be altered without discussing the alteration with the
customer placing the requisition. Generally, the corporate level executives are authorized
signatories for requisitions. The reference of the approval is made on requisition and a copy
of the requisition is sent to the secretary for the purpose of overall planning and budgeting.
The low value sundries and items of common use are purchased for stock while costlier and
special items are purchased according the production programmes.
2. Specification of need
To be able to purchase goods or services we need to have a clear description of what the
customer is wanting. The specification can then be used to tell a supplier what it is we want
to purchase and what we want them to supply, it is therefore important to have correct,
accurate specifications. Organizations will usually have specifications already written for a
large number of the goods that they procure. These specifications will have been developed
from experience of using the goods on previous aid operations, and may have been developed
with other organizations and with suppliers.
As a consequence of the size of the aid market there are suppliers who are interested and keen
to work with organizations to develop goods with specific specifications for this market. To
meet their needs customers may therefore have to use specifications that are already
developed and written and the people in procurement will be required to procure goods using
this specification. It is important though to keep reviewing any specifications to ensure they
are still the most appropriate specifications.
Where there is not a specification for the goods and services they need, a specification will
need to be produced. The specification may be very precise and very simple, such as a part
number in a catalogue or a proprietary/branded product. It may be quite complex such as a
specification for a service to be provided by a transport company.
Different types of specifications described in the previous session will be used based on the
specific requirements
3. Sourcing/Source location
Sourcing prior to receiving requisitions is an ideal situation and in a stable environment
where, for example, an organization is running a development programme or it is purchasing
to replenish stocks where the needs for goods are already known, this can take place. In other
situations it is not possible to source before requisitions are received and sourcing becomes a
stage in the procurement process. For example, in emergency relief operations in countries
where an organization has not worked before, there will be no information available on the
supply market or on local suppliers.

The need to respond quickly to the emergency will mean there is no time to gather sourcing
information and approve suppliers before customers start to place requisitions. Sourcing at
this stage in the procurement process will therefore depend on the situation and on the time
available to carry out sourcing. The situation and the time available may mean it is possible
to carry out comprehensive sourcing even after requisitions have been received. If there is no
time to analyze the market and identify different sources of supply, it may be necessary to
resort to single sourcing.
4. Supplier selection and evaluating tenders
Supplier is selected using procurement methods which includes direct procurement, RFP,
RFQ, Competitive bidding/open tender, restricted tendering, two-stage tendering, design
competition, low value procurement, force account, electronic reverse auction and framework
agreement.
The process for inviting and evaluating tenders/ quotations will vary depending upon an
organization's own procedures but the following is regarded as `best practice': Potential
suppliers need to be informed of the procedure they need to follow to submit a tender, this
will include :
i. The time frame for the tender process.
 ii. The closing date and time of tender acceptance.
iii. The method by which tenders are to be submitted, for example, sealed envelopes hand
delivered, sealed fax
iv. The format in which the tender should be submitted.
v. Action that will be taken on late tenders, for example, no late tenders will be
considered.
Detailed information on the goods and services need to be specified. These will include :
i. The specifications of the goods or services required.
ii. The purpose and final destination of the goods.
iii. The quantities of goods required.
iv. Delivery location and dates.
v. Packaging and marking requirements.
vi. Quality and inspection requirements-this is particularly important for food and
medicines.
vii. Documentation required. This can include a certificate of origin, or a certificate of
fumigation and in the case of equipment, it should include technical manuals/
instructions and maintenance requirements.
viii. Payment including currency, terms of payment and any specific penalty clauses.
Tenders or quotation received from potential suppliers should be recorded and registered on
receipt. Some suppliers may ask for a confirmation of receipt so that they know their
tender/quotation has been received. The tenders should be treated as confidential and should
not be opened until the final closing date and time has passed. Each organization will have its
own rules and procedures for receiving and opening tenders/ quotations. A common
procedure in organizations is that tenders should be opened at the same time on the appointed
day, witnessed by two members of staff, one of whom should be independent of the
procurement decision process. In some organizations this process will be overseen by a
Tender opening Committee of which the technical team will be represented. Whatever the
actual procedure is, it needs to be consistent and fair to all suppliers.
The evaluation of tenders and the awarding of contracts to suppliers is the most important
phase of the process. It has a direct impact on the customer who requested the goods or
services and therefore on the aid operation that is underway, as it is the evaluation and
awarding of a contract that will determine the quality, reliability, delivery, etc. of the goods
and services. It will also have a financial impact, particularly where there are significant
differences between the prices quoted by the different suppliers. It is just as important at the
evaluation/awarding phase that the person responsible for the purchase follows the procedure
to avoid any potential accusations of price fixing or undue influence or favoritism.
Transparency of this phase is therefore essential.

The first step in the evaluation is to define the criteria against which the tenders will be
evaluated. Each criterion should be defined and its importance and ranking agreed, for
example, is delivery time more important than reliability?
The main types of criteria will include:
i. Conformity to the specifications.
ii. Quality of goods or service.
iii. Service and reliability.
iv. Price, costs and payment term.
v. Delivery time.
vi. Conformance to legal requirements
vii. Financial stability
Following the completion of any quotation or tender evaluation, all suppliers who have
submitted tenders should be informed of the decision, as to whether they have been
successful or not. The details of the supplier who has been successful and the price, terms,
etc., that they submitted should be kept confidential and not discussed with other suppliers.
Suppliers who were not successful with their bid may ask for feedback on why their bid was
not successful. It is good practice to provide this feedback particularly where suppliers have
spent significant time and work in producing the bid and where it is important to keep a good
relationship with a supplier. The feedback should be given using facts and information that
will help the supplier should they want to bid for future business.
NB. It should be noted that it is not necessary to go for this process for all types of purchases.
For the repetitive orders and for the purchases of low-value, small lot items, generally the
previous suppliers with good records are preferred.
5. Contract negotiations
This involves comparing bids then negotiating the best price and terms and delivery.
Negotiation is defined as a process of "communication with the objective of reaching an
agreement by means, where appropriate, of compromise". A successful negotiation is one that
accomplishes this goal and that secures supplies, materials and services of the right quality, in
the right quantity, at the right time, from the right source and at the right cost.
Contract negotiation is the process of give and take the parties go through to reach an
agreement. Negotiation is about reaching agreement on the essential terms of the contract and
the deliverables under the contract. It can be a form of trading where both parties are seeking
something from the other, there is an exchange of offers, concessions and bargaining.

The buyer should ensure all bids are an accurate reflection of the work to be performed or
service provided and include all applicable taxes and shipping charges. This way, the total
landed cost is known before the purchase order is placed.
 Understand the lead time and expected quantity to be delivered.
 Based on the actual need date, any accepted quote should meet the required date. If
the supplier cannot meet the date needed by the business, expedite premiums may be
incurred.
 The expected quantity should also be supported by the quote received. The buyer
must make sure the quantity to be shipped is not less than requested because the
shortage may result in loss revenue.
 The buyer must also make sure the quantity to be shipped is not more than needed
because the excess may result in liability for the business if the product is never used.
Ultimately, the buyer is responsible for ensuring the procurement process is executed
to meet the needs of the business while maintaining the profits.
6. Contract awarding and placing of an order
Contract awarding is the method used during a procurement in order to evaluate the proposals
(tender offers) taking part and award the relevant contract. If both parties, the buyer and the
supplier, agree on all terms (pricing, delivery, quality, etc.) you can make it official by
signing a contract. Usually at this stage the eligibility of the proposals has been concluded. A
contract should be signed by both the supplier and an authorized employee of the
organization.
Acceptance of the contract is important as it means that the supplier accepts the terms and
conditions and that these override their own terms and conditions of sale.
The purchase of any goods and services (except for most cash purchases) should be supported
by a contractual document.
In most cases this document will be a form of Purchase Order. The purchase order will either
contain a standard set of terms of contract or there will be a separate contract document sent
with the purchase order.
Most organizations will have a contract with a standard set of terms and conditions that can
be used for the majority of goods and services that are purchased. Purchase order is a letter
sent to the supplier asking to supply the said material. At least six copies of purchase order
are prepared by the purchase section and each copy is separately signed by the purchase
officer. Out these copies, one copy each is sent to store keeper, supplier, accounts section,
inspection department and to the department placing the requisition and one copy is retained
by the purchase department for record. Suppliers should confirm that they have received a
purchase order.
A typical Purchase Order will contain:
i. Order number.
ii. Date the order is placed.
iii. Name and address of supplier.
iv. Name and address of purchaser.
v. Quantity of goods required.
vi. Description of goods or services.
vii. Delivery requirements.
viii. Authorized signature of purchaser.
ix. Consignee address
7. Contract monitoring and management (follow-up and expediting of the order)
During this phase, the company evaluates the performance of the P/S and any accompanying
service support, as they are consumed. Supplier scorecard is a popular tool for this purpose.
When the P/S has been consumed or disposed of, the contract expires, or the product or
service is to be re-ordered, company experience with the P/S is reviewed. If the P/S is to be
re-ordered, the company determines whether to consider other suppliers or to continue with
the same supplier.ˆ
Expediting is the monitoring and following up an order to make sure the supplier supplies
goods in line with the order and the organization's contract. In particular, expediting is
ensuring goods are delivered on time in the right quantities to the right place.
Expediting is not just following up orders that have not been delivered or have not been
delivered in line with the requirements of the order, as by then it may be too late to respond
or manage the problems this causes.
Expediting orders will involve monitoring the progress of certain orders to ensure they are
met or if they are not going to be met, we can take appropriate actions
Not all orders will need expediting and different orders will need expediting in di#erent ways.
When orders are placed with suppliers a decision should be made as to whether the order will
be expedited and the way it will be expedited.
This decision will be influenced by:
i. The importance of the goods and services.
ii. The previous performance of the supplier
Follow up procedure should be employed wherever the costs and risks resulting from the
delayed deliveries of materials are greater than the cost of follow up procedure, the follow up
procedure tries to see that the purchase order is confirmed by the supplier and the delivery is
promised.
It is also necessary to review the outstanding orders at regular intervals and to communicate
with the supplier in case of need. Generally, a routine urge is made to the supplier by sending
a printed post card or a circular letter asking him to confirm that the delivery is on the way or
will be made as per agreement. In absence of any reply or unsatisfactory reply, the supplier
may be contact through personal letter, phone, telegram and/or even personal visit.
 Ways of expediting
When orders are placed they can be categorized and the way they are categorized will
determine how they are expedited. For exampleˆ
 Category A-orders that will not be monitored and will only be chased up if the order
is not delivered on time.
 Category B- orders that will be monitored Y weeks/days before delivery is due.
 Category C-orders that will be constantly monitored.
Orders may be placed in a category when they are placed, but circumstances may change and
they may need to be re-categorized. An order that is being constantly monitored may change
to one that now only needs monitoring nearer to the delivery date.
8. Logistics Management
Supplier preparation, shipment, delivery and receiving, and payment for the P/S are
completed, based on contract terms. Installation and training may also be included.
• Receiving and inspection of the materials:
The receiving department receives the materials supplied by the vendor. The quantity are
verified and tallied with the purchase order. The receipt of the materials is recorded on the
specially designed receiving slips or forms which also specify the name of the vendor and the
purchase order number.ˆ
It also records any discrepancy, damaged condition of the consignment or inferiority of the
materials. The purchase department is informed immediately about the receipt of the
materials. Usually a copy of the receiving slip is sent to the purchase department.ˆ
If the delivery conforms to the order, then a record of goods received should be sent to the
person responsible for procurement. The role of procurement is then to check and match all
the documents relating to that delivery so that payment can be made to the supplier.ˆ
The documents will be:
1. The Purchase Order.
2. Goods Received Note/Entry Form from the Warehouse.
3. Suppliers Invoice.
In case the consignment is rejected there are a number of possible actions that procurement
can take with suppliers.
Agreeing to accept the goods the goods may not conform exactly to requirements but it is
decided that they can still be accepted. The customer who requested the goods supplier still
needs to be made aware that the goods did not conform even though they have been
accepted.. The Arranging for the supplier to take the goods back the goods may not be
acceptable, i.e. quality problems, so the supplier will need to take them back and not re-
deliver them or replace them.
Arranging for the supplier to re-pack goods and re-deliver the goods themselves may be
acceptable but there are problems with the way they are packed. The supplier will be required
to re-pack and re-deliver the goods.ˆ
Arranging for the supplier to replace the goods the sup plier may have goods in stock that are
acceptable so replacement goods can be supplied.
-Any corrections will need to be made to the supplier's invoice including the charging of any
penalty clauses, contained in the contract, that come into force
 Payment of the invoice:
1. When goods or services are received and accepted the next stage in the procurement
process is to pay the supplier. To make the payment the accounting department need to
receive the following documents:
i. The Purchase Order.
ii. Goods Received Note
iii. The Suppliers Invoice.
iv. A Packing List/ delivery note
These documents should have been checked and matched as part of the Delivery stage of the
process, they can now be sent tothe accounting department for them to arrange payment. The
sending of these documents is authorizing the payment to be made
9. Maintenance of the records/ review and contract management
Maintenance of the records is an important part and parcel of the efficient purchase function.
In the industrial firms, most of the purchases are repeat orders and hence the past records
serve as a good guide for the future action. They are very useful for deciding the timings of
the purchases and in selecting the best source of the supply.
The quantum and frequency of the transactions with the same key suppliers provide a
platform for the purchase department to establish and maintain good relations with them.
Good relations develop mutual trust and confidence in the course of the time which is
beneficial to both the parties. The efficiency of the purchase department can be measured by
the amount of the goodwill it has with its suppliers.
10. Contract review or result analysis
Once the project is complete, it is essential to analyze the process and evaluate its success as
well as record observations for future projects. You may need to present the outcomes to
company management or relevant stakeholders. The results can be used the next time you
need to make a similar purchase.
Review should be undertaken to evaluate whether the purchase objective has been achieved.
The review stage has got three main objectives.
 A review with the original customer on whether the original needs they had have been
met.ˆ
 A review of the performance of procurement in carryingout the procurement process.ˆ
 A review of the supplier performance.

4.5 Procurement methods

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. In Open Tender anyone can participate. The
participant has to ensure that they fulfill the minimum pre-qualification criteria specified in
the tender document to qualify. If they do not meet the pre-qualification criteria, their bid will
be rejected & they will lose the document fees they have paid. Open tendering requirements
call for the company to:
 Advertise locally
 Have unbiased and coherent technical specifications
 Have objective evaluation measures
 Be open to all qualified bidders
 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
procedure based method a lot of procurement experts feels 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.
2. Restricted Tendering
Unlike open tendering restricted tendering only places a limit on the amount of request for
tender 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.
Restricted tendering procuring entity may use restricted tendering if the following conditions
are satisfied;
 Where the procurement is complex and there is a need to restrict bidding to
prequalified candidates.
 Where the expected bidders are very many and there is a need to restrict bidding to a
manageable number
 Where there are only a few known bidders and there is no advantage seen in
advertising an open tender.
3. Request for proposal
A procuring entity may use a request for proposals for a procurement if;
i. the procurement is of services or a combination of goods and services
 ii. The services to be procured are advisory or otherwise of a predominately intellectual
nature.
RFP is a method used when suppliers or service providers are proposing their good or service
to a procurement team for review. The procuring entity shall prepare a notice inviting
interested persons to submit expressions of interest. If you’re a supplier, understanding the
in’s and out’s of quality service management is key to winning your bid. 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.
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. Direct procurement
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 i.e. the urgency the other available methods of procurement are
impractical and the circumstances that gave rise to the urgency were not foreseeable
and were not the result of dilatory conduct on the part of the procuring en
 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.
6. Request for quotation
A procuring entity may use a request for quotations from the register of suppliers for a
procurement if—
i. the estimated value of the goods, works or non-consultancy services being procured is
less than or equal to the prescribed maximum value for using requests for quotations
as prescribed in procurement Regulations;
ii. the procurement is for goods, works or non-consultancy services that are readily
available in the market; and
 iii. The procurement is for goods, works or services for which there is an established
market.
A procuring entity shall prepare a request for quotations that sets out the following
i. the name and address of the procuring entity;
ii. the specific requirements prepared under section 67 of PPADA 2015 relating to the
goods, works or services being procured;
iii. an explanation of where and when quotations shall be submitted; and
iv. Anything else required under this Act or the Regulations to be set out in the request
for quotations.
The request for quotations is given to as many persons as necessary to ensure effective
competition but in any case not less than three persons. A comparison of quotes is analyzed
and the best selection determined by requirement compliance is chosen.
7. Framework Agreements
A framework is an agreement with suppliers to establish terms governing contracts that may
be awarded during the life of the agreement. In other words, it is a general term for
agreements that set out terms and conditions for making specific purchases (call-offs). A
framework agreement is an ‘umbrella agreement’ that sets out the terms (particularly relating
to price, quality and quantity) under which individual contracts (call-offs) can be made
throughout the period of the agreement (normally a maximum of 4 years).

Note that a framework covers the provision of a generic group of goods, works or services (or
a combination), for example:
o Goods – office furniture
o Services – design consultancy
o Works – construction of schools.
What are the advantages of framework agreements?
 The main advantage to a purchasing authority of using a framework agreement is that
they do not have to go through the full procurement process every time the requirements
arise.
 Reduce tendering costs.
 There are also further potential savings to the purchasing body because of economies of
scale, which may prompt suppliers to offer more competitive prices.
Disadvantages
A purchasing authority is that they are relatively unresponsive to change – there may be new
suppliers and/or new solutions within the market that were not included when the framework
agreement was initially set up.
8. Design competition
Design competition a procurement procedure for obtaining competitive bids for services
which are creative in nature architecture, landscaping, engineering, urban design projects,
urban and regional planning and fine arts.
In design competitions, a procuring entity shall—
a) invite design proposals through a public advertisement;
b) ensure the preparation of an invitation sets out the following—
i. the name and address of the procuring entity;
ii. the tender number assigned to the procurement proceedings by the procuring entity;
iii. description of technical and functional needs;
iv. an explanation of where and when tenders shall be submitted and where and when the
tenders will be opened;
v. a statement that those submitting tenders or their representatives may attend the
opening of the design proposals;
vi. a statement that a copyright or other intellectual property of the top three shall vest in
the State.
9. Electronic Reverse Auction
The Authority may in exceptional circumstances approve a system of electronic reverse
auction method of procurement for goods, works or non-consultancy services by a procuring
entity. For an accounting officer of a procuring entity to be qualified to use the reverse
auction method it shall possess.
Conditions for use of Reverse Auctions
a) a procurement portal;
b) an appropriate secure software with electronic procurement capabilities and
functionalities approved by the Authority;
Procedure for Reverse Auction
a) a procuring entity shall
i. invite all registered suppliers in the specific category to compete;
ii. advertise its requirements on its website including the period of time and goods
specifications;
 b) the prices of bidders within the prescribed time shall be visible to other bidders
without revealing the bidder’s identity; and
c) a pre-qualified supplier shall not revise its bid upwards within the prescribed time.

Subject to the reserve price set by the procuring entity, the successful bid shall be the bid with
lowest price at the bid submission deadline.
10. Force Account
a) A procuring entity may use force account by making recourse to the state or public
officers and using public assets, equipment and labour.
b) A procuring entity may use force account by making recourse to the state or public
officers and using public assets, equipment and labour which are competitive and
where—
i. quantities of work involved are small and scattered or in remote locations for which
qualified construction firms are unlikely to tender at reasonable price and the
quantities of works cannot be defined in advance;
ii. unforeseen and urgent work is required to be carried out without disrupting on-going
operations;
iii. the procuring entity is to complete works delayed by the contractor after the written
warnings did not yield any tangible results.
c) This method shall only be applied—
i. with the prior approval of the accounting officer;
ii. within the limit prescribed in Regulations;
iii. where the total cost of procuring the goods, works and non-consultancy services are,
at most, set at the prevailing market rate.
d) The procedure to use force account shall be as prescribed in the Regulations.
11. Low - Value Procurement
A procuring entity may use a low-value procurement procedure if
a) the entity is procuring low value items which are not procured on a regular or frequent
basis and are not covered in framework agreement;
b) the estimated value of the goods, works or nonconsultancy services being procured
are less than or equal to the maximum value per financial year for that low-value
procurement procedure as may be prescribed.