Strategic Procurement in
SCM
MBA(36-D)-Open (A)
Course Code: BA 5266
Lecture-6
Seller/Bidder Pre-qualification
Supplier appraisal or pre-qualification is to ensure that a potential
supplier will be able to perform any contract or tender that is awarded,
to the required standard.
Why Supplier Pre-qualification is Important?
Avoid the wasted costs, time, effort and embarrassment of awarding a contract
(on the basis of the lowest price) to a vendor who subsequently turns out to:
• Lack of capacity or technical capability to handle the work,
• Have systems and values that are incompatible with the buying organization,
• Be financially unstable and unable to complete the work because of cash flow
problems or business failure,
Procurement Documents
Procurement documents are essential for the efficient, structured,
transparent, and legally compliant acquisition of goods and services.
• Documents vary by industry, Public-Private, project size, Complexity
of Sourcing product/ Service and regulatory environment.
➢Digital procurement platforms use these documents in electronic
formats.
➢Proper documentation ensures transparency, reduces disputes,
and supports audit trails.
Why is procurement documentation necessary?
1. Legal protection.
Procurement documentation is legal documentation and can have your back
if things ever get sticky.
2. Clarity and transparency
Representing your negotiations and requests in these formal documents can
prevent confusion and keep business flowing smoothly.
3. Accountability
Having everything on paper (or electronically documented) helps businesses
hold each other to their promises.
4. Account keeping
It’s much easier to access and reference formal documentation when it
comes time for accounting.
Types of Procurement Documents
Procurement documents are essential for the structured, transparent,
and legally compliant acquisition of goods/services.
• Request for information (RFI)
• Request for quotation (RFQ)
• Request for proposal (RFP)
• Invitation for Tender (IFT)
• Letter of intent (LOI)
• Service Level Agreement (SLA)
• Contract /Agreement
• Purchase Order (PO)
Request for information (RFI)
Gathers general information from potential suppliers early in the
process to assess capabilities and market options, particularly for a
new product or service.
Purpose of RFI:
1. Market Research:
• Assess supplier capabilities, products, services, and innovations.
• Identify new or emerging vendors in the industry.
2. Clarify Requirements:
• Refine project scope or specifications based on vendor feedback.
• Validate assumptions about feasibility, timelines, or costs.
3. Supplier Shortlisting: Narrow down potential vendors for future RFPs, RFQs, or
tenders.
4. Risk Mitigation: Identify potential challenges or gaps in the market.
Request for information (RFI)
When to Use an RFI?
• When requirements are not fully defined and need vendor input.
• For complex projects requiring innovative solutions.
• To explore new suppliers or technologies.
• Before issuing an RFP or RFQ to ensure alignment with market realities.
Why RFIs Matter?
• Reduces risk by ensuring requirements align with market capabilities.
• Builds relationships with suppliers early in the process.
• Saves time and resources by avoiding unsuitable vendors in later stages.
Key Components of an RFI Document
1. Background and Objectives:
Brief about your organization and the purpose of the RFI.
2. Scope of Inquiry:
Questions about the vendor’s experience, capabilities, products, or services.
3. Response Requirements:
Format, deadline, and contact details for submissions.
4. Confidentiality:
Non-disclosure agreements (NDAs) may be attached.
5. Next Steps:
Explain how the RFI will inform future procurement phases.
Request for Proposal (RFP)
A formal document used in procurement to solicit detailed solutions
and pricing from vendors for complex projects or services.
Purpose of RFP:
Solution Exploration:
• Seek tailored approaches to meet project needs (e.g., software development,
consulting, construction, Transportation, Outsourcing, Equipment Installation).
Comparative Evaluation:
• Assess vendors on criteria like expertise, methodology, cost, and timelines.
Risk Mitigation:
• Ensure vendors understand project complexity and can deliver results.
Transparency:
• Create a fair, competitive process with clear evaluation metrics.
Request for Proposal (RFP)
When to Use an RFP?
• For complex projects requiring customized solutions (e.g., IT systems,
infrastructure, event planning, Change Management, Outsourcing, 3PL).
• When multiple factors (quality, innovation, cost, timelines, Management
Team, Complex Markets) influence vendor selection.
• After issuing an RFI to shortlist qualified vendors.
Why RFPs Matter?
• Drives innovation by inviting creative detailed solutions.
• Ensures alignment between vendor capabilities and project needs.
• Builds accountability through clear deliverables and contractual terms.
Key Components of an RFP Document
1. Background and Objectives:
• Overview of your organization, project goals, and challenges.
2. Scope of Work (SOW):
• Detailed requirements, deliverables, timelines, and success criteria.
• Specifications: Performance-Focused or Conformance-Focused
3. Submission Requirements:
• Format, structure, and content expectations for proposals (e.g., technical approach, pricing, references).
4. Management Structure:
• Organization size, Accountable managers, Customer services and team profiles.
5. Evaluation Criteria:
• Weighted metrics (e.g., 40% technical approach, 30% cost, 20% experience, 10% timeline).
6. Contract Terms:
• Payment terms, intellectual property rights, penalties, and termination clauses.
7. Timeline:
• Deadlines for questions, submissions, and decision dates.
8. Confidentiality:
• NDA requirements or data protection clauses.
Request for Tender (RFT)
A formal procurement document used to invite suppliers to submit
competitive bids for large-scale projects, and infrastructure,
particularly in government contracts.
Purpose of RFT:
Competitive Bidding:
• Solicit sealed bids in a structured, standardized format to ensure fairness.
Legal Compliance:
• Meet regulatory or public procurement requirements (e.g., government projects).
Transparency:
• Provide clear guidelines to all bidders, minimizing favouritism or disputes.
Best Value Selection:
• Evaluate bids based on price, quality, and compliance with specifications.
Request for Tender (RFT)
When to Use an RFT?
• For large-scale projects (e.g., construction, infrastructure, IT systems).
• In government procurement or public-sector contracts.
• When procurement laws mandate open, competitive bidding processes.
• For projects requiring strict adherence to technical and legal
specifications.
Why RFTs Matter?
• Ensures public accountability in government spending.
• Reduces corruption risks through standardized processes.
• Attracts qualified bidders for complex, high-value projects.
Key Components of an RFT Document
1. Invitation to Tender:
• Formal notice outlining the project, submission deadlines, and eligibility criteria.
2. Tender Conditions:
• Legal terms, eligibility requirements, and penalties for non-compliance.
3. Specifications/Scope of Work (SOW):
• Detailed technical requirements, drawings, standards, and deliverables.
4. Pricing Schedule:
• Template for bidders to itemize costs (e.g., labor, materials, overhead).
5. Evaluation Criteria:
• Weighted metrics (e.g., 70% price, 20% technical compliance, 10% experience).
6. Submission Guidelines:
• Format, deadlines, and submission method (often sealed bids).
7. Contractual Terms:
• Payment terms, timelines, warranties, and dispute resolution mechanisms.
Request for Quotation (RFQ)
A procurement document used to solicit detailed price quotes from
suppliers for clearly defined Specifications for goods or services.
Purpose of RFQ:
Price Comparison:
Obtain competitive pricing for standardized products or services.
Clarity on Costs:
Request itemized breakdowns (e.g., unit costs, shipping, taxes).
Supplier Validation:
Confirm vendors can meet technical specifications and delivery timelines.
Streamlined Procurement:
Simplify decision-making for repeat or low-complexity purchases.
Request for Quotation (RFQ)
When to Use an RFQ?
• For standardized purchases with clear specifications (e.g., office supplies,
raw materials, IT hardware, Furniture).
• When price/Cost is the primary selection criterion.
• For repeat orders or catalog-based buying.
• After finalizing requirements (post-RFI or RFP, if needed).
Why RFQs Matter?
• Cost Efficiency: Ensures competitive pricing for budget control.
• Speed: Faster than RFPs, ideal for repetitive or low-risk purchases.
• Compliance: Reduces risk of disputes with clear specifications.
Key Components of an RFQ Document
1. Background and Purpose:
• Brief description of your organization and the reason for the RFQ.
2. Scope of Work (SOW)/Specifications:
• Detailed technical requirements, quantities, quality standards, and delivery terms.
3. Submission Requirements:
• Format for quotes (e.g., Excel template, PDF), deadlines, and contact details.
4. Evaluation Criteria:
• Typically focused on the lowest compliant bid, but may include delivery time or payment terms.
5. Contract Terms:
• Payment terms, warranties, penalties for delays, and compliance requirements.
6. Timeline:
• Key dates (quote submission, award decision, delivery).
7. Confidentiality:
• Non-disclosure agreements (NDAs) if sharing sensitive data.
RFP, RFT, RFI, RFQ: Process Flow
Document RFI RFP RFT RFQ
1St Step Define Needs Define Requirements Pre-Tender Phase Define Specifications
2nd Step Draft RFI Issue RFP Tender Issuance Identify Suppliers
3rd Step Distribute Vendor Q&A Bidder Clarifications Issue RFQ
4th Step Evaluate Responses Proposal Submission Bid Submission Clarifications
5th Step Shortlist Vendors Evaluation Bid Opening Receive Quotes
6th Step Negotiation Evaluation Evaluate and Compare
7th Step Award Contract Award Contract Award Contract
RFP, RFI, RFQ: What’s the difference
Document RFI RFP RFT RFQ
Market Research + Solutions + value/ Price + Compliance / Price + specifications /
Focus
Information/ Educate Compares Compares Quantifies
General Information Specific Requirements, Projects requiring strict Cost information for
Purpose about the needs and Objective and Criteria, for adherence to technical solution from each
potential solution buyers Problem and legal specifications supplier
Building Vendor Narrowing down potential public-sector procurement
Fast process, Selection
Relationships and vendors on technical processes where
Advantage of vendors based on
gathering initial capabilities, Suitability and transparency, compliance,
cost and Compliance
Information cost of solution and fairness are critical
Typical Use Gathering general Complex, undefined Government projects, Standardized, well-
Case vendor information projects large-scale bids defined purchases
Formal and Serious, Structured formally, Explanation of Buyer’s
Document
General, Simple demanding actionable clearly, and requirement for
Style
Information comprehensively accurate Quotations
Other Procurement Documents
Letter of intent (LOI)
An LOI is issued by the buyer to the seller, indicating that they intend to proceed with the purchase
subject to completion of some requirements/ Process.
Purchase Order (PO)
A formal offer to purchase goods/services under specified terms, triggering the fulfilment process.
Service Level Agreement (SLA)
Part of the contract defining service expectations, performance metrics, and remedies for non-
compliance.
Contract /Agreement
A legally binding document outlining terms, deliverables, payment, and responsibilities between
buyer and supplier.
Quize-1: Case Study
• Case Study: THE PROTECTIVE EQUIPMENT COMPANY
