dag: How do I select the right vendor for this procurement?
version: 1.0.0
image: https://images.unsplash.com/photo-1521791136064-7986c2920216?w=1200&q=80
description: Determine the correct vendor selection process for a procurement based on contract value, market competition, switching costs, and regulatory obligations. Use this tree before engaging any supplier or issuing any form of tender document to ensure the process is compliant with your procurement policy and defensible to audit. Selecting the wrong process can expose the organisation to challenge, reputational risk, and contractual disputes.
tags: operations, procurement, vendor management, sourcing
entry: Q1

Q1: Does the estimated total contract value (including all renewals) exceed £50,000?
  hint: Always use the total contract value (TCV) rather than the annual value — a three-year contract worth £20,000 per year has a TCV of £60,000 and crosses most competitive tendering thresholds. Include all expected optional extensions and any associated professional services or implementation costs in the TCV estimate. When in doubt, round up and apply the higher-scrutiny process; under-estimating to avoid process requirements is an audit risk that can result in a contract being declared void. Confirm the TCV figure with your Finance team before proceeding and record it in the procurement file.
  yes -> Q2
  no  -> Q3

Q2: Are there three or more qualified suppliers capable of delivering this contract in the market?
  hint: A "qualified supplier" is one that meets your minimum technical, financial, and compliance requirements — not simply any company that exists in the category. Conduct a brief market scan using industry directories, procurement frameworks, or a Request for Information (RFI) if needed before answering. If only one or two credible suppliers exist due to specialist expertise, geographic constraints, or proprietary technology, this is a market condition you must document carefully and may need to formally justify. Retaining evidence of the market scan is essential for audit purposes regardless of the route you take.
  yes -> [FULL_RFP]
  no  -> Q4

Q3: Are there at least two qualified suppliers you can approach for competitive quotes?
  hint: For lower-value purchases, a competitive quote process (sometimes called a "three-quote rule") requires approaching at least two to three suppliers and comparing their offers on a like-for-like basis against a common scope. Even if you have a strong preference for an existing supplier, obtaining at least one alternative quote demonstrates value for money and protects against challenge from internal audit or external stakeholders. Document all quotes received, including any suppliers that declined to quote and the reason given, and retain this evidence in the procurement file for a minimum of six years. Ensure the scope issued to all suppliers is identical to allow fair comparison.
  yes -> [COMP_QUOTE]
  no  -> [DIRECT_AWARD]

Q4: Would switching to a different supplier after this contract cause significant operational disruption or sunk-cost loss?
  hint: High switching costs include data migration effort, staff retraining requirements, bespoke system integrations, long contractual notice periods, or the loss of accumulated historical data or configuration that cannot be exported. If switching costs are high and only one or two suppliers are viable, this strengthens the case for a sole-source justification but also represents a strategic concentration risk that should be escalated to senior management. When negotiating the contract, seek to include provisions such as data portability rights, open standards compliance, and break clauses to reduce future dependency. Conduct a formal make-vs-buy analysis and record the conclusions as part of the procurement file.
  yes -> [SOLE_SOURCE]
  no  -> [SOLE_SOURCE]

[DIRECT_AWARD]: Direct Award — Single Supplier
  color: #2E7D32
  description: Where the contract value is below the competitive tendering threshold and fewer than two qualified suppliers are available, a direct award to the preferred supplier is permissible provided the decision is documented. Confirm the supplier meets your minimum due diligence requirements covering financial health, insurance, data security posture, and any regulatory compliance obligations before signing. Obtain the best available price by negotiating directly and benchmark it against any available market rate data, published framework prices, or prior contract values. Record the award decision, rationale, price benchmarking evidence, and due diligence outcomes in the procurement file, and notify your Finance team to raise a purchase order before any work commences.
  code: OPS_VS_DIRECT

[COMP_QUOTE]: Competitive Quote Process (2–3 Suppliers)
  color: #F9A825
  description: Issue a clear, identical scope of requirements to at least two to three qualified suppliers and request comparable written quotes within a defined deadline of five to ten business days. Evaluate all responses against consistent criteria covering price, quality, delivery timescales, and any relevant compliance or insurance requirements, and document your scoring rationale in a simple evaluation matrix. Notify all suppliers of the outcome promptly once a decision is made; unsuccessful suppliers should receive a brief explanation if they request one, to maintain positive market relationships. Retain all quotes, your evaluation matrix, the award rationale, and supplier due diligence evidence in the procurement file for a minimum of six years in case of audit or challenge.
  code: OPS_VS_QUOTE

[FULL_RFP]: Full RFP Process
  color: #1565C0
  description: A formal Request for Proposal (RFP) is required for high-value contracts where a competitive market exists and best value must be demonstrably achieved. Engage your procurement team or a procurement advisor to develop RFP documentation covering a detailed specification, mandatory compliance requirements, evaluation criteria, and weightings approved by relevant stakeholders before issue. Issue the RFP with a minimum four-week response window, conduct structured supplier clarification sessions to ensure all bidders are working from the same information, and evaluate all submissions using a cross-functional panel with documented scores and moderation notes. Obtain all required internal approvals before issuing a contract award letter, and offer all unsuccessful suppliers a debrief on their submission in line with best-practice procurement standards.
  code: OPS_VS_RFP

[SOLE_SOURCE]: Sole Source Justification Required
  color: #B71C1C
  description: Where market conditions, switching costs, or proprietary requirements mean only one supplier can fulfil the requirement, a formal Sole Source Justification (SSJ) document must be prepared and approved by the Finance Director or appropriate authority per the Delegated Authority Matrix before any commitment is made. The SSJ must explain why no alternative supplier is qualified, document the market scan conducted, confirm value for money through benchmarking or an independent cost review, and include a risk assessment covering the concentration risk created by single-supplier dependency. Submit the SSJ to your procurement or finance team for review and countersignature before entering any negotiations or making any representations to the supplier. Record the approved SSJ in the contract management system and schedule a market review six months prior to renewal to assess whether the sole-source condition still applies.
  code: OPS_VS_SOLE