Ask an RFP Pro: What Is Procurement?
RFPs and bidding processes are lucrative options for small business owners seeking stability. But first, what is procurement, and how can these processes help small businesses?
Dear OUanRFP,
As a small business owner, I hear the word “procurement” thrown around a lot. Google searches bring up very literal dictionary definitions. However, I’d like to know what procurement means for me and my business.
Signed,
Befuddled Businessman.
Dear Befuddled,
Procurement is the process that buyers (i.e., businesses and government agencies) go through to fairly assess options for products or services. In particular, procurement processes allow buyers to analyze pricing, experience, and capacity efficiently.
As citizens, when we need something, we head to the store. However, it’s not so easy for large companies or government agencies. For example, a government agency needing lightbulbs can’t walk into a Home Depot and purchase 11,000 lightbulbs. So, due to non-collusion laws, the agency must put the request to bid.
In other words, the buyer outlines the lightbulb specs and quantity in an RFx document. Additionally, the agency lists bidder requirements such as small-business set-asides, location, teaming restrictions, past performance, or budget limits. These criteria show the fair bidding process and illustrate the bidder’s ability to fulfill the contract.
Think of it this way: before buying a new laptop or phone, most people look up ratings and reviews.
We might check out cnet.com to read product breakdowns and compare various brands. Further, as consumers, we know that the lowest price isn’t always the best choice. We look at features and specs versus cost and choose based on budget, wants, and needs. This is how procurement processes work too.
The agency or business looks for the best bang for its buck by comparing its wants, needs, and budget. Does the bidder offer the correct product? Is the bidder capable of delivering the product or service on time and in total? Has the bidder completed similar projects or orders? Is the bidder offering the product or service at a fair market rate?
These criteria help the buyer form a complete picture of the bidder. However, failing to meet the criteria will fatally harm the bidder’s chance of winning the contract. This is non-compliance. To learn more about the importance of compliance in bidding, click here.
You may still be wondering, how does all of this factor into my business? As a small business owner, you may qualify for small business set-asides. This eliminates the fear of competing against huge, established companies. Check out our blog “Why Should Small Businesses Respond to Public Sector RFPs” to discover more benefits.
We hope this answers the question “what is procurement” and offers insight into the bidding process. Learn more about RFPs and RFP processes through the RFPs 101 series.
Photo by Vadim Bogulov on Unsplash