27.2 Selecting Sellers

	Selecting sellers is the process of choosing one or more sellers –who are both qualified- and negotiating viable contracts.
	This process relies on the Request Seller Responses process, which obtains necessary information so that appropriate sellers can be chosen.
	It involves evaluating proposals or bids, choosing the best one, negotiating the contracting and awarding the contract.
	Sellers are often chosen based on a list of weighted requirements separated into technical and commercial sections with each evaluated separately.
	Sometimes management sections are required as part of the proposal and also have to be evaluated.
	Figure 27.1 provides a sample proposal evaluation sheet that the project team might use to create a short list of the best proposals.

27.2 Selecting Sellers

27.2 Selecting Sellers

Figure 27.1 Sample proposal evaluation sheet

Inputs

		Organizational Process Assets
		Procurement Management Plan
		Evaluation Criteria.
		Procurement Document Package
		Proposals

27.2 Selecting Sellers

		Qualified Sellers List
		Project Management Plan
		Risk register
		Risk-related contractual agreements

Tools and Techniques

Weighting systems: this method is used to quantify qualitative data to minimize the effect of personal prejudice on the seller selection.

Developing a weighting system often follows the following procedure:

		Identifying of all the non-monetary factors that are relevant to the project,
		Allocating numerical weights to each of these factors to reflect their relative importance,
		Scoring the prospective sellers on each factor (criterion),
		Multiplying the weight by the scoring and totaling the resultant sellers to compute an overall score.

27.2 Selecting Sellers

The result is a single weighted score for each option, which may be used to indicate and compare the overall performance of the options in non-monetary terms. Figure 27.2 illustrates a sample weighting matrix.

Figure 27.2 Sample Weighting Matrix

27.2 Selecting Sellers

Independent estimates: also referred to as a "should-cost" estimate which the procuring organization can either prepare on its own or have an independent estimate of the costs as a check on proposed pricing.

It should be noted that significant differences from these cost estimates can be a sign of:

				Inadequate contract statement of work that the prospective seller either failed to respond to it fully or,
				Changed marketplace.

Screening system: this is a system establishing minimum requirements of performance for the project used basically to create a ranking for sellers from best to worst.

The screening system that can employ a weighting system and independent estimates.

Contract negotiation: this tool is used to clarify the structure and the requirements of the contract on order to reach a mutual agreement prior to signing the contract.

Objectives of Negotiation:

				Obtain a fair and reasonable price
				Develop a good relationship with the seller (a win-win situation)
				Subjects covered within the negotiations include the following:

27.2 Selecting Sellers

				Responsibilities and authorities
				Applicable terms and law
				Technical and business management approaches
				Proprietary rights
				Contract financing
				Technical solution,
				Overall schedule payments and price.

For complex procurement items contract negotiation can be independent process with inputs (e.g. an issues or open items list) and outputs (e.g. documented decisions) of its own;

Whereas For simple procurement items, the terms and conditions of the contract can be non-negotiable and only need to be accepted by the seller.

		Seller Rating System: Seller rating systems are developed by many organizations and use information such as the seller's past performance, quality ratings, delivery performance and contractual compliance in order to evaluate sellers.
		Typically this tool is used with the screening system to select sellers.

27.2 Selecting Sellers

Proposal evaluation techniques: these are an already established techniques developed form expert judgment and some form of evaluation criteria;

by other words the criteria for selecting the seller should be defined beforehand, and these criteria may already be an organizational process asset.

		It involves an evaluation committee comparing seller proposals against pre-defined criteria.
		Many different techniques can be used to rate and score proposals and can involve both objective and subjective components.
		Proposal evaluation techniques also can employ a screening system and use data from a seller rating system.
		Expert Judgment

Outputs

		Selected sellers: those are sellers who have been judged to be in a competitive range based upon the outcome of the proposal or bid evaluation, and who have negotiated a draft contract, which will be the actual contract when an award is made.
		Contract: this is the document connecting the buyer to the seller and is awarded to each selected seller.

27.2 Selecting Sellers

		A contract is a mutually binding legal agreement that obligates the seller to provide the specified products or services and obligates the buyer to pay the seller.
		Contract management plan: this is a document describing by whom and how the contract will be administered with respect to changes and confirmations.
		The plan covers the contract administration activities throughout the life of the contact.
		Each contract management plan is a subset of the project management plan.
		Resource availability: with respect to quantity and availability.
		Procurement management plan updates
		Requested changes

27.2 Selecting Sellers

27.2 Selecting Sellers

27.2 Selecting Sellers

27.2 Selecting Sellers

27.2 Selecting Sellers

27.2 Selecting Sellers

27.2 Selecting Sellers