The document discusses the importance of the pre-qualification process in procurement, highlighting its four main purposes: identifying potential suppliers, gathering supplier information, assessing supplier capability and risk, and selecting suppliers to tender. It emphasizes the significance of avoiding unsuitable suppliers, ensuring the process is efficient and proportionate to risk, and considering the costs involved. The role of third-party providers in enhancing the pre-qualification process is also noted, along with the importance of making the process fair and transparent for suppliers.

1. The Pre-Qualification Process –
competitive advantage or disadvantage?
Peter Smith
Spend Matters UK/Europe
July 11th 2012

2. Peter Smith
• 25 years in procurement (how did that happen)?
• Started with the Mars Group, buying raw materials, then CPO for the DSS,
Dun & Bradstreet Europe and the NatWest Group. CIPS President in 2002
• 10 years of consulting, speaking, writing... Much of it public sector related
• “Buying Professional Services” (Czerniawska and Smith) published in 2010
by the Economist Books
• Music fanatic, vegetable grower, SAFC fan, wine collector and food lover
• Launched Spend Matters UK / Europe in 2010 in conjunction with Jason
Busch, editor of Spend Matters US. Metal Miner and Healthcare Matters
also part of family
• Probably the best-read family of procurement websites in the world! (100s
of thousands of views a month). Independent, insightful, irreverent....
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3. Pre-Qualification
• Who cares about PQQs? It’s not a glamourous or exciting
element of the overall procurement process...
• But – how did that supplier who turned out to be killing baby
tigers or employing six-year olds get into your supply base?
• Or the firm run by convicted drug dealers? Or the one who
simply couldn’t do the work properly when it came to the
crunch?
• And why did some great firms refuse to bid or get eliminated
because they didn’t have ISO9001 / their revenues were a few
grand short of your notional qualification threshold?
And how much time and energy do you spend on the process?
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4. Pre-Qualification
How good our suppliers are largely
determines the success or failure of the
procurement function (and quite possibly
the whole organisation)
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5. Why do we use Pre-Qualification?
The Pre-Qualification process has four purposes:
1. Identifying potential suppliers (search)
2. Gathering supplier information (registration)
3. Supplier capability and risk assessment (qualification)
4. Choosing suppliers to tender (selection)
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6. Process
Identify Issue PQQ Qualification
Gather Verify Selection of Communicate
potential to interested and Risk
information information tender list to suppliers
suppliers suppliers Analysis
Information gathering and verification
Avoid double-entry of data where possible – if the supplier can submit
information directly and electronically into your systems, or in a manner such
that it can be imported easily, then that improves efficiency.
Make sure the information you ask for is relevant to your needs, particularly
your qualification and selection process.
Verification should be proportionate to the overall risk in the contract and the
significance of the area being verified.
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7. •Make sure the information you ask for is relevant to your the contract and theyour qualification and selection verified.
•Verification should be proportionate to the overall risk in needs, particularly significance of the area being process.
Process
Identify Issue PQQ Qualification
Gather Verify Selection of Communicate
potential to interested and Risk
information information tender list to suppliers
suppliers suppliers Analysis
Qualification and selection
When using a “yes / no” process, don’t exclude suppliers too readily.
Make sure you are using appropriate criteria based on the specific contract -
take a risk-based approach to the qualification process and focus on those
areas that are critical to delivery of the contract.
Use a small number of well-thought out questions for selection purposes.
Ensure questions address the most important issues and capabilities that will
determine ultimate supplier success - don’t ask questions that simply reward
size or current market share.
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8. Cost of Pre-Qualification
• Often not known or considered, but considerable in most cases
• The more open your process is for attracting potential suppliers, the
more costly the PQQ process may be
• Third-party providers are an interesting option
• Sharing the costs of pre-qualification has genuine economies of scale
• Third parties can often provide more detailed verification of
suppliers (including on a global basis)
• May not be suitable for all spend categories – and need to consider
costs and benefits for the supply base also
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9. Conclusions
• The pre-qualification process is important – ruling out “bad” suppliers,
keeping “good” suppliers in play, and being proportionate in terms of
time and cost .
• Pre-qualification has four key purposes - identifying suppliers,
registration, qualification and selection.
• At all times, bear in mind the risk element of the process.
• The cost of the process, including the time taken and resource
required, should also be considered and again should be proportionate
to the risk.
• Third party providers, who can take advantage of economies of scale
and expertise to offer a collaborative service to multiple buying
organisations, are increasingly important in this field.
• Finally, remember the supplier’s viewpoint in this. Processes that are
proportionate, well-structured, fair and transparent help them too.
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10. THANK YOU!
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Join our array of interesting, rude, informative, and smart
commentators like “Bitter and Twisted”, “Vegas Child” and
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Or email me at psmith@spendmatters.com , call me on 07717
734601
Peter Smith
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