Procurement Basics (Part 1)
Last week’s post wrapped up the discussion about strategy one pagers. This post will focus on procurement basics, i.e, what is procurement and how is it different from purchasing? what methods of procurement are there? And what is the difference between each method?
What is Procurement?
Procurement is the strategic acquisition of goods and services. And while purchasing focuses on short term/immediate business needs and goals, procurement focuses on the long term goals and business needs.
What are the Different Methods?
There are a few different methods of procurement, such as, Request for Proposals (RFPs), Request for Qualifications (RFQs), Invitation to Bid (ITB), and Requests for Information.
What’s the Difference Between the Methods?
RFPs: Are a formal solicitation issued to a targeted audience but can be issued to the general public as well. Are used for complex purchases, such as software. The RFP should tell a tory laying out the company background, what the company needs, and detail the specifications/features/requirements of the good or service to be acquired. The Solicitation lays out the criteria by which the proposals will be evaluated. The criteria should be technical and focus on the proposer’s ability to fulfill the need. Pricing as an evaluation criteria is optional but not recommended.
RFQs: Are a formal solicitation issued to a targeted audience but can be issued to the general public as well. These are used for purchasing professional services such as architecture, consultancy, or engineering services. The solicitation again tells a story. Your company background, detailed of the services needed, a brief description of the project the consultant will be working on. Th evaluation criteria should be based on the proposer’s experience working on likewise projects, the consultants specialized expertise, past performance of likewise projects, and the ability of the proposer to complete the work within a stated timeline. Pricing is not to be considered at all.
ITBs: Are a formal solicitation issued to a targeted audience but can be issued to the general public as well. The solicitations are most typically associated with construction projects or very simple purchases. The solicitation provides the company background, a brief description of the purchase, and state award is to the lowest bidder.
RFIs: Are an informal solicitation issued to a targeted audience but can be issued to the general public as well. The purpose of these is not to actually procure goods or services. RFIs only ask questions and seek information from the general market. These are used for research and information gathering purposes only. The solicitation should describe why the company seeks this information and provide a list of questions for vendors to answer. And finally, the solicitation should explicitly state, no award will be made.
Conclusion:
This post just provides a general overview of the different methods of procurement. Depending on the nature of the purchase, each solicitation may require more items be included. And each method should be considered carefully.
Finally, for any procurement/consultancy needs always feel free to set up your consultation session with us.
