What's new (and perennially important) in supplier prequalification
Far from being a hurdle or formality, effective supplier pre-qualification can mean the difference between the success or failure of a contract.
Seasoned procurement professionals know that business vetting can be the most important step to protecting finances, minimising the risk of accidents and optimising results.
Here’s a look at what’s new – and what’s perennially important – in supplier pre-qualification:
In public sector procurement, a new Selection Questionnaire replaced the standard PQQ in September 2016, with Crown Commercial Service (CCS) changing the form to align with the European Single Procurement Document (ESPD).
Removing some questions from the previous version, the new one includes questions on supply chain management, Modern Slavery Act compliance, skills development and apprenticeship initiatives and previous contract performance.
Among other things, this means that suppliers have to describe how they manage performance across the supply chain and if they pay suppliers within 30 days of an invoice being presented, in line with the UK Prompt Payment Code.
Corporate procurement teams should have a standardised form that ensures suppliers are determined on the same criteria as each other. Areas usually included are safety history, company culture, financial stability and insurance requirements.
By understanding suppliers’ last three years of safety statistics for example, buyers can help teams across the business to agree expectations and measure performance over the life of the contract.
What lies beyond?
Digging deeper than PQQ required paperwork and certifications will help procurement professionals see more. More subjective areas like work history, staff retention and past performance will help to establish the bigger picture.
Working with organisations such as SSIP (Safety Schemes in Procurement) can help to ensure the right safety standards are in place, simplify the process and encourage mutual recognition of member schemes, but the Health and Safety Executive stresses that procurement teams should go on to scrutinise skills, track record and organisational capabilities.
Part of reducing risk can often involve visiting suppliers’ premises, inspecting equipment, premises and operations and getting a true understanding of how it functions day to day. If the procurement team and relevant departments from the contracting business have made separate visits, this can provide reassurance that suppliers have been objectively assessed on the ground from all perspectives, providing an additional layer of security to the vetting process.
Consider quality of engagement
Think about the level of engagement needed to secure the best possible outcome. There is a case for pre-qualification to be minimal in a number of circumstances, but businesses need to consider the potential impact on relationships with suppliers.
There has been recent disquiet about a growing use of open tenders, which allow any company to submit a bid for a project without going through an initial prequalification process. This can see too many would-be suppliers involved in the same bid.
The Civil Engineering Contractors Association has also highlighted problems such as poor engagement with bidders, poor tender documents and disproportionate quality bid requirements. Although this can cut the time and cost of PQ, it can mean poorer quality supplier engagement.
Get past cost
Going beyond cost can be immeasurably helpful in ensuring the right supplier is chosen. More effective, safer suppliers are likely to be sourced when procurement helps to invest in and support their safety procedures and future work opportunities.