The selection process that is used to choose preferred suppliers or contractors is a fairly easy process as long as the tender documents, request for proposal, and other documents clearly outline the criteria and project requirements. In this topic, we will examine different processes and evaluations that are used to select suppliers or contractors. We will also examine the different components of contractual documentation.
By the end of this topic, you will understand:
- How to evaluate potential suppliers against project requirements and make recommendations.
- How to develop contractual documentation once agreed terms and conditions have been established with preferred suppliers.
- How to establish and check relevant stakeholders’ roles and agreed terms.
Determining the potential suppliers of goods, services, and materials is usually a process that is developed and aligned with the project goals and objectives, and against the specific requirements of the project. It may also include other selection evaluation criteria such as:
- Price
- Financial stability
- Relevant and proven experience
- Knowledge of the task, service or good requirements
- Quality of goods, materials or services
- Results from past performance
- Management
- Technical skills and ability
- Resources
- Management systems
- Methodology
- Quality systems or quality accreditation
- Previous relationships with clients.
To be considered as a potential supplier or contractor, there may be a set of pre-conditions or mandatory set criteria to which the supplier must adhere. These may include:
- GST registered.
- An Australian company (not a sole trader)
- Public and professional indemnity insurance (with a specified minimum value)
- In business for over five years.
Once any pre-conditions or any mandatory set criteria have been met, the other evaluation criteria and project requirements can then be used to evaluate the supplier.
Evaluation Process of Potential Suppliers
A suggested process for the evaluation of potential suppliers against project requirements and criteria is outlined in the diagram below:
There are a number of different processes that can be used to evaluate and assess the competence of the supplier or tendering organisation needed to supply and or deliver the various project outcomes. Some organisations may use a weighting or rating system to evaluate each of the suppliers using the pre-defined criteria. This can be demonstrated in the example below:
| Criterion | Weighting | Supplier weighting |
|---|---|---|
| PRICE | 40% | |
| Total cost over project | ||
| Fixed pricing prior and during project | ||
| Progression payments (if applicable) | ||
| FINANCIAL STABILITY | 30% | |
| Time in business | ||
| Annual turnover | ||
| Proven operational and financial systems to manage delivery of goods or services | ||
| Proven past projects | ||
| In business over 5 years | ||
| RELEVANT AND PROVEN EXPERIENCE | 30% | |
| The provision of reliable and quality goods or services | ||
| Successful previous projects in the same area | ||
| Previous client recommendations | ||
| Ability to provide goods/services as per project schedule | ||
| TOTAL WEIGHTING | 100% |
Rating Scale
The following rating scale can be used to evaluate suppliers’ bids against the criteria and project requirements.
| Description | Excellent | Very Good | Satisfactory | Not Acceptable |
|---|---|---|---|---|
| Definition | Exceeds requirement and has a thorough understanding of project requirements. Has excellent and proven experience and ability to provide the required goods and services. Has high quality delivery, experience, skills and resources to provide the required goods or services. The supplier has provided additional information including high quality referees. | Satisfies the criteria and above average demonstration by the supplier of the relevant ability. Has good proven experience and ability to provide the required goods and services. Has very good quality of delivery, experience, skills and resources to provide the goods or services. | Satisfies the criteria requirement and has some experience. Has the ability to provide the required goods and services. Has demonstrated some quality of delivery, skills and minimum resources to provide the goods or services. | Does not meet the project requirements. Did not meet or comply with the criteria and did not provide any information to demonstrate that the supplier has the ability to provide goods or services. Did not provide any supporting evidence. |
| Rating | 9-10 | 7-8 | 4-6 | 0 |
The evidence of previous experience can be a high priority and an important criterion for some organisations. This criterion is often used to assess the supplier’s ability to demonstrate that it can achieve the intended outcomes and objectives of the project. This may include:
- Recent experience that relates to the project
- Previous experience in any of the supply of specific goods or specialised services
- The size and complexity of past projects
- Meeting recent project timeframes
- Minimising or eliminating any supply or service project risks.
Once the evaluation selection has been decided, developed and used to evaluate the suppliers, a recommendation can be made. The recommendation may be communicated in the form of a report, briefing note or email and should include the criteria that were used to assess the suppliers.
Further Reading
Read the following article by Chris Feldsine for Thomas.net to learn more about evaluating suppliers: ‘5 Key Factors to Consider When Conducting a Supplier Evaluation’
Once the supplier of the goods, materials or services has been chosen, the terms and conditions, or goods or services contract, must be developed and agreed upon with the supplier, and the relevant contractual documentation must be developed.
The contractual documentation may include:
- Different components of the contractual documentation, including the type of supply contract (cost plus; fixed price contract; goods and services quotation; time and material)
- Legal obligations of all parties. The terms that regulate each party’s legal obligations must be specified clearly in the contractual agreement. If one of the parties involved fails to fulfil the obligations as specified, it is considered a breach of contract and may result in legal action.
Components of contractual documentation may include:
- Project name
- Program of works, supplies or materials to be provided
- Key performance indicators
- Quality standards
- Target performance measures
- Timeframes, including a completion date and any extensions of time
- Tender price, any potential price variations and final and fixed cost
- Health and safety management system, health and safety records and requirements
- Quality system to be used
- Project management tools to be used, including program software
- Environmental management system
- The materials, equipment, human resources, facilities and intellectual property which the supplier or tenderer will use on the project
- Details of any part of the project supplier that will use subcontractors
- Reporting and recording systems
- Any guarantees, returns policy from the supplier or tenderer
- Complaints and resolution process.
Example
An example of a goods and services contract from CBSA can be found on the CBSA website: ‘Goods and Services Contract.’
The contractual documentation must be developed and agreed upon with the supplier. It should outline clear expectations of the supplier, including any extension of contract completion dates and any agreed variations and expectations of performance.
The documentation will outline the expectations of the supplier so they can deliver the project objectives to accomplish the project’s required objectives.
Further Reading
- Refer to the following website for an example of supplier terms and conditions from Cleanaway: ‘Supplier Terms and Conditions’
Watch
Watch the following YouTube video from Latrobe City Council that outlines information for suppliers: ‘Doing Business with Latrobe City Council’
Every aspect of a project, including the project procurement procedures, should outline the roles and responsibilities of the various stakeholders. This should also describe the roles with the associated tasks such as testing and accepting, monitoring and receiving supplies.
The following table, from Sonoma State University, is a general example of project roles and responsibilities of project stakeholders:
| Project role | Responsibilities | Comments |
|---|---|---|
| Executive sponsor | A person or group who provide resources and support for the project and is accountable for enabling success. | Helps eliminate barriers Approves final plan |
| Project lead | Main person accountable for the success of the project. Work plan, resources allocation, risk amangement, scope change control, milestones monitoring and communicates project status to all stakeholders. | Authority to manage people, conflict, risks and issues. If not an MPP, seek authority from supervisor |
| Project coordinator | Coordinates project effort from start to finish. Applies project management methodologies and tools to ensure projects deliver the expected results within scope, time and budget. | Limited authority over resources. Escalates risks, issues and people management to the Project Lead. |
| Functional/technical lead | SME responsible for leading the effort of a functional or technical area (e.g. CMS, CO, networking etc) | Authority to assign work and resources. |
| Team member (Subject matter expert) | Staff members who exhibit high level of expertise in a specialised job, task or skill. SMEs are responsible for performing specific tasks of the project to achieve its objectives. | They report progress of their work and related issues or risks to the Project Lead and Project Coordinator |
Procurement Project - Roles and Responsibilities Matrix
Using the Customer Service Management Software project from the previous topic, the roles and responsibilities of project stakeholders can be demonstrated in the following example:
Further Reading
- Read the following article by Kevin Johnston on the roles and responsibilities of project stakeholders: ‘How to Define the Roles & Responsibilities of Project Stakeholders’
- Further information on project procurement can be found in this article by Cynthia Low: ‘Procurement and the Project Manager’
Quiz
