Eskom Procurement Book 2015

THE PROCUREMENT PROCESS

2.3.2 IDENTIFY AND EVALUATE POTENTIAL SUPPLIERS

Once a user’s or users’ need has been identified it then becomes necessary to identify a qualified supplier or suppliers. Approved suppliers for a product or service may already exist as could, for example, be the case for a repetitive purchase. For items where a supplier does not currently exist, or where the organisation wishes to re-evaluate the supply base, this activity involves the identification of all possible suppliers that might be able to satisfy the user’s needs. It is important at this stage to include, where appropriate, possible suppliers that have not previously been used. Identifying all possible suppliers, especially in today’s global business and supply environment, can be a challenge and often requires extensive research. Once potential suppliers have been identified (and these could include current suppliers to fulfil a current contract or a new user requirement from these suppliers) it is then necessary to evaluate them. An important step here is to pre- screen possible sources of supply to identify those suppliers that meet a minimum set of criteria. Pre-screening reduces the number of potential suppliers to those that can satisfy the user’s demands. In some instances, and for some goods or services, pre-screening can be a relatively simple task. In other instances, items of a complex nature will require more time and effort. With the potential pool of suppliers reduced to those that can meet the user’s requirements, the next step is to determine which supplier or suppliers can best meet the user’s requirements. This could be accomplished through the use of competitive bidding if the procurement item or items are fairly simple or standard and there are a sufficient number of potential vendors. If these conditions do not exist, a more elaborate evaluation may be necessary, using for example, engineering tests. Procurement professionals, when evaluating potential suppliers, use various performance criteria. These criteria would include suppliers’ past performance, quality performance or capabilities, technical performance or capabilities, cost and price, delivery performance or capability and other key metrics [1]. Supplier selection starts once a shortlist of qualified suppliers has been developed. Identifying qualified suppliers is different from reaching a contract agreement with a supplier or suppliers. Two methods for making a supplier selection decision are competitive bidding and negotiation (covered in more detail in Chapter 6). Competitive bidding involves requesting bids from suppliers with whom the buyer is prepared to do business. The process typically begins with the buyer sending a request for quotation to a supplier or suppliers.

2.3.3 BIDDING, NEGOTIATION AND SUPPLIER SELECTION

33 CHAPTER 2