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12.4 Source Selection

Introduction

Source Selection involves the receipt of bids or proposals and the application of the evaluation criteria to select a provider. This process is seldom straightforward:
  • Price may be the primary determinant for an off-the-shelf item.
  • The lowest price may not be the lowest cost if the seller fails to deliver in a timely manner.
  • Technical and commercial sections are often evaluated separately.
  • Multiple sources may be required for critical products.

12.4.1 Inputs

  1. Proposals
  2. Evaluation criteria
  3. Organizational policies

12.4.2 Tools & Techniques

  1. Contract negotiation
  2. Weighting system
  3. Screening system
  4. Independent estimates

12.4.3 Outputs

  1. Contract

 

 

 

 

 


12.4.1 Source Selection - Inputs

12.4.1.1 Proposals

Refer to proposals.

 

12.4.1.2 Evaluation criteria

Refer to evaluation criteria.

 

12.4.1.3 Organizational policies

Refer to organizational policies.

 

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12.4.2 Source Selection - Tools and techniques

12.4.2.1 Contract negotiation

Contract negotiation involves clarification and mutual agreement on the structure and requirements of the contract prior to the signing of the contract. To the extent possible, final contract language should reflect all agreements reached. Subjects covered generally include, but are not limited to, responsibilities and authorities, applicable terms and law, technical and business management approaches, contract financing, and price.

Negotiation meeting

A negotiation meeting is a dynamic situation which brings buyer and seller together. The period covered by the negotiation meetins can be divided into five stages:

  1. protocol
  2. probing
  3. scratch bargaining
  4. closure
  5. agreement

Some of the more prominent tactics used during negotiation are:

 

12.4.2.2 Weighting system

A weighting system is a method for quantifying qualitative data in order to minimise the effect of personal prejudice on source selection. This usually involves:

 

12.4.2.3 Screening system

This involves establishing minimum requirements of performance for one or more of the evaluation criteria. For example, a prospective seller might be required to propose a project manager who is a Project Management Professional.

 

12.4.2.4 Independent estimates

For many procurement items, the procuring organization may prepare its own estimates as a check on proposed pricing. Significant differences may indicate that the SOW was not adequate or that the prospective seller either misunderstood or failed to respond fully to the SOW. Independent estimates are often referred to as "should cost" estimates.

 

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12.4.3 Source Selection - Outputs

12.4.3.1 Contract

A contract is a mutually binding agreement which obligates the seller to provide the specified product and obligates the buyer to pay for it. A contract is a legal relationship subject to remedy in the courts. The agreement may be simple or complex, usually (but not always) reflecting the simplicity or complexity of the product. It may be called, among other names, a contract, an agreement, a subcontract, a purchase order, or a memorandum of understanding.

The primary focus of the contract review process should be to ensure that the contract language describes a product or service that will satisfy the need identified.

A contract is comprised of a number of clauses between the buyer and seller. So representative clauses are:

Once the contract is signed by both parties a negotiation critique should be conducted. This critique provides feedback to the project manager as to how well the negotiation was planned and managed.

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