How to Implement Prequalification of Suppliers and its Benefits
In a tender process, prequalification of suppliers is the initial stage. Its purpose is to choose prequalified suppliers where possible. Therefore, prequalification helps to approach such tender options which are not accessible to non-prequalified suppliers. Often prequalification is confused with a tender, but these two are completely different terminologies. Prequalification is neither a part nor a form of tender, in fact it precedes the tender for the contract. It actually recognizes which suppliers or contractors are allowed to take part in tender for a certain contract.
Aim of Prequalification of Suppliers
The sole purpose of the prequalification process is to assure that all the suppliers taking part in bidding process have demonstrated capabilities, expertise, financing and revenues to complete the project proficiently. Prequalification is not necessary for all sorts of contracts. But some contracts require prequalification as a basic requirement such as high risk contracts, contracts that require specialized equipment and materials, or if products need to some defined standard.
Implementation of prequalification of suppliers
Prequalification of suppliers is actually a step in which suppliers abilities are analysed through certain parameters. It does not describe the supplier’s future performance beforehand but it helps to figure out the supplier’s capabilities before hiring. It also helps the buyers to compare different suppliers in the required category and then chose the one who is compliant to their requirements.
Prequalification of suppliers is usually implemented by organisations in such a way that they reach out to the suppliers with the promises of potential business opportunities. The suppliers then provide information to the organisation about their capabilities, services and products. The organisation then shortlist the suppliers that they likely to work with and prequalify them on basis of the information they provided earlier. This is basically how prequalification of suppliers is done and implemented. But this is not as simple as it looks.
The basic step in prequalification implementation is the evaluation of supplier’s capabilities. It can be done in two ways, desktop evaluation or competency evaluation.
In this type of prequalification evaluation, the procurement professionals use already available information from the suppliers to assess their qualities and abilities. As its name shows it is a document based supplier’s evaluation which is done by the appraisers without leaving their desk. The appraiser then compares the supplier’s capabilities with other suppliers in the market place to determine the supplier’s eligibility for the contract. To obtain more accurate prequalification results vendor credentials can be cross-checked.
A rrequalification process is incomplete without this step. In this type of evaluation the suppliers are precariously assessed through technical evaluation. It is based on suppliers past checks such as staff qualifications, site visits, past projects, customer reviews, certifications and samples etc. This information is then compared with the information gathered for the desktop evaluation and if the information is aligned, the supplier is approved for prequalification.
Benefits of Prequalification of Suppliers
Some of the advantages of prequalifying suppliers are:
- Prequalification of suppliers decreases the procurement process duration by fetching and evaluating bids form only prequalified suppliers who have preconditioned capabilities, experience, resources and finances to manufacture a product that meet the set standards.
- Supplier prequalification is a significant process that elevates the chances of suppliers to be selected by the buyers and organisations for future projects as well.
- A prequalification process enables the civil sector buyers to recognize the most appropriate suppliers to invite for bidding.
- Prequalified suppliers bring the best value to the organisation on basis of expense, delivering abilities, preceding achievements, quality, training and revenues.
- It is relatively easier to order from prequalified suppliers because their performance is already analysed.
With that being said, having a strong prequalification process has become an important consideration for companies that are ISO 9001 certified or those undergoing certification.
If you are interested in setting up a robust prequalification process or need support auditing your suppliers capabilities, then you can contact us for a free consultation.