Traditional ways to approach the market
- Traditional methods of approaching the market are usually well-known and can be low risk.
- These range from tendering, requests for quotes (RFQs) and requests for tender (RFT) to expressions of interest (EOI) and best and final offers.
- Approaching the market may involve a multi-stage process and include more than one method.
- What works best will come down to the nature of the market, the nature of the goods or services and what you’re trying to achieve.
- Using traditional methods as matter-of-course may mean you miss out on more innovative solutions, so you should also consider non-traditional approaches.
When to consider a traditional method
Traditional methods of approaching the market are well-known and well-established. For this reason, they’re also often viewed as low risk.
Traditional methods include:
- request for quote (RFQ)
- request for tender (RFT)
- expression of interest (EOI)
- request for proposal (RFP)
- best and final offers.
Traditional market approaches can often also lead to a good result. For example, an RFQ might be a simple and efficient way to procure goods and services that you understand well and use frequently.
That said, simply choosing a traditional approach without considering other possibilities may mean you miss out on some innovative solution. You should consider non-traditional approaches and complex market engagements when it’s appropriate to do so.
Sometimes, you may even find you can use these in tandem with a traditional approach. For instance, you might choose to follow the traditional approach of seeking an EOI with a non-traditional managed services contract (MSC).
Open request for tender (RFT)
In an open RFT, anybody can submit a tender. Each tenderer must show they satisfy the evaluation criteria and meet any specific requirements.
Benefits of an open RFT
An open RFT encourages competition and can be an effective way to ensure value for money. This can make it an attractive method when you’re unsure of pricing or don’t know who can supply what you need.
When to use an open RFT
You may find an RFT works best when:
- there’s a broad and competitive market for goods or services
- that market is dynamic and subject to change
- your procurement is high value
- there’s likely to be a lot of interest from suppliers.
Multi-stage request for tender (RFT)
A multi-stage RFT is sometimes known as a selective RFT. It usually involves 2 stages:
- Stage 1. You identify suitable prospective suppliers. These may already be prequalified or you can ask new suppliers to apply via an expression of interest (EOI).
- Stage 2. You shortlist applicants who’ve demonstrated they can fulfil the procurement criteria. You then invite the best applicants to tender for a contract or several contracts in an ongoing work program.
Choosing suppliers to tender
To work out whether you should invite a potential supplier to tender under a multi-stage RFT, consider:
- how they’ve performed under similar contracts, whether with the NSW Government or other organisations
- their capacity to deliver and their relative skill or ability
- their current commitments
- their location and the areas in which they already work
- the special requirements of the work, product or service.
Benefits of a multi-stage RFT
A multi-stage RFT can be an effective way to reduce the cost of tendering both for you and for potential suppliers. It can also help you quickly identify the best suppliers, especially in a mature marketplace.
When to use a multi-stage RFT
You’re likely to find a multi-stage RFT works best when you want to:
- establish a panel of providers for ongoing work
- identify several potential providers for a single contract
- identify the provider with the best solution to a complex or unusual procurement.
Request for quote (RFQ)
In an RFQ, you invite potential suppliers to provide a quote for specific goods or services.
Benefits of an RFQ
An RFQ can be an efficient way to get quotes from a pool of registered NSW Government suppliers.
When to use an RFQ
You may find an RFQ most effective when you’re procuring low risk, low-to-medium-value contracts. This usually means you’re buying well-defined goods or services using a contract with standard terms and conditions.
Expression of interest (EOI)
You use an EOI to find out whether suppliers are both capable of performing and interested in undertaking specific work.
In an EOI, you don’t include price information or award a contract. Instead, once you’ve completed the process, you usually shortlist potential suppliers and invite them to tender.
Benefits of an EOI
An EOI can:
- let you test the market to find out whether a good or service exists
- help you keep suppliers’ costs down - you only choose suppliers to go through the tender process if they can realistically perform the contract
- help you keep your costs down - there are fewer tenders to evaluate
- give several suppliers the opportunity to compete for your business and encourage competition.
When to use an EOI
You may find an EOI works best when you’re uncertain about the goods or services you’re procuring, or the best way to supply them.
Request for proposal (RFP)
An RFP can help you draw out a detailed response to a specific need, idea or business solution. You should include criteria to evaluate suppliers’ expertise, experience and capacity to deliver.
As with an EOI, an RFP is often the first step in a multi-stage procurement process. Once you’ve received proposals, you can shortlist suitable suppliers and invite them to tender. Alternatively, you may want to negotiate directly with the supplier you believe is most appropriate.
Benefits of an RFP
An RFP may help you tap into new and potentially innovative approaches and solutions. It can also help you explore multiple solutions to one problem.
When to use an RFP
An RFP can work well when:
- you have a well-defined outcome but there are different ways to achieve it
- you want an innovative solution, or
- you’d like to explore different ways of delivering a service or product.
In a limited tender, you only issue an RFT to suppliers you’ve assessed to be most capable of delivering the work, product or service. This might include:
- suppliers you’ve prequalified
- suppliers prequalified by other agencies, or
- suppliers you can contract on a standing-offer basis.
While a limited tender is similar to an RFQ, it can let you go even narrower. For instance, you can invite just one supplier to tender.
You may find this helpful when you’ve already held an open or limited tender but:
- no one submitted a tender
- no tender submitted complied with the RFT’s requirements, or
- no tender submitted satisfied the conditions for participation but you don’t want to modify them.
Benefits of a limited tender
A limited tender can help you secure goods or services quickly and efficiently.
When to use a limited tender
You may find a limited tender is an effective option:
- in emergencies
- for specialised work
- when the agency knows few suppliers are capable of undertaking the work, or
- for low-value, off-the-shelf procurements.
Best and final offer
As the second or subsequent stage of your approach to market, you can invite potential suppliers to make a “best and final” offer.
If you’re considering this approach, make sure you tell potential suppliers in your approach to market documents.