There are several procurement strategies that organizations can use to source goods and services. Here are some commonly used procurement strategies, along with details on how to use them:
- Competitive Bidding: Competitive bidding is a procurement strategy in which the organization invites multiple suppliers to submit bids for a particular project or requirement. The organization selects the supplier who offers the best price, quality, and delivery time. To use competitive bidding, the organization should:
- Identify the goods or services required
- Determine the selection criteria
- Invite suppliers to submit bids
- Evaluate the bids based on the selection criteria
- Award the contract to the supplier who offers the best value.
- Request for Proposal (RFP): An RFP is a procurement strategy in which the organization invites potential suppliers to submit proposals for a project or requirement. The RFP outlines the scope of work, timelines, and evaluation criteria. To use an RFP, the organization should:
- Develop a detailed RFP document
- Identify potential suppliers
- Distribute the RFP to potential suppliers
- Evaluate the proposals based on the evaluation criteria
- Select the supplier who offers the best value.
- Reverse Auction: A reverse auction is a procurement strategy in which the organization invites suppliers to bid on a project or requirement. The suppliers submit bids, and the price decreases as the auction progresses. To use a reverse auction, the organization should:
- Identify the goods or services required
- Determine the selection criteria
- Set up the auction platform
- Invite suppliers to participate in the auction
- Evaluate the bids based on the selection criteria
- Award the contract to the supplier who offers the best value.
- Framework Agreements: A framework agreement is a procurement strategy in which the organization establishes a long-term agreement with a supplier or suppliers for a range of goods or services. To use a framework agreement, the organization should:
- Identify the goods or services required
- Determine the selection criteria
- Invite suppliers to submit proposals for the framework agreement
- Evaluate the proposals based on the selection criteria
- Establish the framework agreement with the selected suppliers
- Issue purchase orders or contracts under the framework agreement as needed.
- Direct Negotiation: Direct negotiation is a procurement strategy in which the organization negotiates directly with a supplier for a project or requirement. To use direct negotiation, the organization should:
- Identify the goods or services required
- Identify potential suppliers
- Initiate negotiations with the selected supplier
- Agree on the terms and conditions of the contract.
These are some of the common procurement strategies used in organizations, and the approach chosen will depend on factors like the complexity of the requirement, urgency, budget, supplier market, etc.
