Pre-Qualified Supplier/Service Provider Lists consist of companies which have undergone prior assessment and are consequently deemed suitable to work with organization. Prospective suppliers / service providers to organization should undergo a prior assessment to ascertain their suitability to engage in commercial relationships with the organisation.
Establishing a list of pre-qualified suppliers can add significant benefit to the procurement function from a number of perspectives such as cost optimisation, improved service levels, relationship building, timely procurement and risk mitigation.
In terms of risk mitigation in the procurement process, pre-qualifying suppliers has the potential to significantly reduce risk by ensuring that companies with which organization engages are reputable and trustworthy. The role of the Purchase Committee, (PC) should include the evaluation of applications from companies to become listed as a pre-qualified supplier to organization. Purchase Committees should be established specifically for the purpose of establishing a supplier / service provider pre-qualified list.
When establishing a pre-qualified supplier list, a similar process to that of an Invitation to Tender should be followed. A dossier should be complied whereby potential pre-qualified suppliers are asked for details of relevant experience. Applicants must sign a declaration and provide documentation such as bank account details, certificates of incorporation, trading licence etc. In certain contexts the inclusion of a ‘price list’ element to the pre-qualification process may be appropriate.
Where a price list has been included as an element of the process, such lists should be provided to all budget holders to assist in the completion of Supplies Request’s and to the Finance department for ‘double-checking’ purposes.
When applications are received, all short listed companies should be visited by the PC where appropriate. This will ensure that every company on the pre-qualified list has been evaluated independently from the logistics and procurement function thereby reducing the level of risk in the system. When a list of pre-qualified suppliers or service providers is finalised, this list of companies can act as the providers of quotations under a Request for Quotation Procedure process.
The following section suggests step-by-step guidelines on how to establish and manage a prequalified supplier list while ensuring accountability and maximising transparency in the process.
- Step 1: Categorise all regularly purchased materials into appropriate areas such as by programme and support function i.e. Nutrition, Education, Administration, Transport, Office Maintenance etc.
- Step 2: Establish supplier lists under each category using existing organization & inter-organisational contacts.
- Step 3: Place advertisements in the newspapers to maximise the level of exposure of the process.
- Step 4: Supplier should be asked to formally apply for the Pre-Qualification along with profiles and references.
- Step 5: A Purchase Committee (PC) should be established under each category. The committee should comprise of a minimum of 3 members, 1 x Logistics, 1 x Finance and 1 x relevant expert, i.e. head of transport for spare parts, engineer for construction materials etc. The PC should evaluate each applicant by physically visiting their office/ factory/Warehouse and fill in the supplier assessment sheet
- Step 6: All companies deemed suitable to supply materials or services to organization should be listed per category and their details entered into a spread sheet.
- Step 7: All companies which participated in the process should be contacted to advise them whether they have been successful or otherwise. Unsuccessful companies should be thanked for their engagement in the process by either letter on organization headed paper or email (copied to all PC members).
Once a pre-qualified list is compiled, whenever 3 quotations are required to satisfy a Request for Quotation Procedure, the short listed companies on the list should be contacted to provide quotations. The process outlined above should be completed on annual basis to ensure that the list is current, up to date and reflective of the marketplace. For the purposes of ensuring total transparency in the process, it is vitally important that each and every step of the process is documented and filed accordingly.
Once established, the list should be provided to the Finance department so that it can be checked prior to payment. If payment requests are generated for companies not included on the prequalified list, particular vigilance should be shown to these requests and the Finance department should enquire as to why pre-qualified suppliers were not used. Although this stage of the procurement process will require that payment must be made as materials or services will generally have already been supplied, it nevertheless serves as a useful check in the process.
In such cases, although these companies may be offering a more competitive rate than those on the pre-qualified list, they will not have been subjected to a detailed evaluation and therefore represent an elevated level of risk to organization.