COMPETETIVE BIDDING
COMPETETIVE BIDDING
For all purchases of goods or services over $25,000, a competitive bid must be conducted and the basis for the vendor selection documented. The $25,000 amount encompasses all costs that may occur during the term of the contract (e.g. not a smaller subset of the contract).
- Background and Benefits
- Bid Types (Quotes, RFPs and Interviews)
- RFP Process
- Exceptions to the Bid Process
- Reporting and Enforcement
- Additional Resources
Background and Benefits
The University requires that for all large purchases (over $25,000) a competitive bid is conducted so that we can ensure the best possible vendor is selected. Conducting a bid has numerous benefits, including:
- Forces prospective and incumbent vendors to provide a competitive response
- Ensures incumbent vendors do not get too comfortable and allow for pricing to trend upwards
- Generally results in lower costs or additional revenue to the university
- Removes bias (real or perceived) from the selection process
- Protects the university from selecting a poor vendor or one in financial trouble
- May uncover services that weren’t previously known
Bid Types (Quotes, RFPs and Interviews)
There are several different ways a bid can be conducted depending on the type of purchase being made:
- Quotes – For simple orders (generally applicable to physical goods), quotes can be obtained from vendors. In general, three written quotes should be reviewed to ensure the pricing received is competitive in the market.
In some cases, prices can be compared by looking at websites or catalogs. However, most vendors will provide a lower price when directly contacted for a quote. Regardless of the method, the price comparisons need to be documented and kept on file.
- Request for Proposals (RFP) – An RFP should be conducted for more complex orders, where service, quality, timeliness, price, etc. all need to be taken into account. More information on the RFP process is detailed below.
- Interviews – In some rare cases, it is appropriate to conduct a review of various providers to determine the best one without necessarily conducting an RFP process. This type of bid would apply to specialty fields such legal work, lobbyists, partnerships with educational institutions, etc. Documentation as to why a particular vendor or institution was selected must be kept on file.
RFP Process
Departments anticipating making a purchase of goods or services over $25,000 must conduct a bid process or have an authorized exception (below). The department may conduct the RFP on their own, but it is recommended to contact Procurement Services for advice and assistance.
An RFP process typically includes the following steps:
- Determine a Need for the Good or Service
The department best knows their needs and should plan in advance any large purchases. Once a need is determined, the department should contact Procurement Services to discuss the options available.
- Develop the Selection Committee
Depending on the scope of the project, a selection committee may need to be established. This should include a buyer from Procurement Services, appropriate department staff and any other individuals from the university who have a stake in the process. This step can be skipped if the scope is limited enough.
It is generally a best practice to have Procurement Services serve as chair of this committee to remove any potential (real or perceived) bias from the process. The department’s role then is to act as the subject expert and is crucial in the decision process.
- Draft the RFP Document
Procurement Services has an RFP template that should be used for all bids. Additionally, Procurement is available to brainstorm and draft the areas of the document that are specific to this project.
The department will be crucial in this respect to ensure the evaluation criteria, specifications and questions included match the goals of the purchase.
- Identify Prospective Vendors
The list of vendors who the RFP will be distributed to should next be developed. The incumbent vendor (if one exists) should always be included in the distribution. Additional possibilities can be found through internet searches, yellow pages, colleagues or industry listservs. Procurement also maintains vendor relations with many companies as well as contacts with other university purchasing offices to help in developing this list.
- Distribute RFP and Coordinate Responses
The RFP document is then distributed to all prospective vendors on the list. If a question and answer period is built into the response, any question received must be sent out to all vendors so as to keep the process fair. Typically both the RFP document and questions are sent electronically.
Once responses are received, they should be distributed to the selection committee so review can begin.
Procurement Services is available to coordinate this portion of the process.
- Develop Summary Documents
If appropriate, summary sheets should be developed that compare each of the major evaluation points among the respondents. If Procurement Services is involved in the process, we typically complete this step.
- Review
The selection committee should then review all the provided materials and determine either which vendors will return for an on-campus presentation, be asked follow-up questions or be selected as the bid winner.
As part of the review, check for financial soundness and other business factors. Some resources can be found below or Procurement Services can provide support in analyzing a vendor.
- On-Campus Presentations and Follow-Up
Depending on the scope of the project, it may make sense to invite finalists to campus to give a presentation of their response as well as take questions from the selection committee. Additionally, finalists (whether they give a presentation or not) can be sent a list of follow-up questions to help aid the decision making process.
The follow-up questions are especially helpful when responses are not easy to compare. Many times vendors submit pricing information that is not an "apples-to-apples" comparison. In the follow-up you may ask for very specific format to be followed to ensure you can compare the responses.
- Selection and Contract Negotiation
Once the selection committee has selected a vendor, the winning response should be notified and contract negotiations can begin. Where needed, Procurement or the Office of the General Counsel can provide assistance in the contract phase.
Additionally, all vendors who did not win should be contacted. Procurement Services is available to make these notifications on behalf of the department if desired.
- Cleanup Items
Lastly, the department should ensure other steps are followed, including entering requisitions, completing bid documentation forms, ensuring the vendor fulfills the contract terms, etc.
Exceptions to the Bid Process
Not all large purchases require a bid take place. Bids can be exempted in the following scenarios:
- Preferred Vendors and Master Agreements
All purchases made with a preferred vendor are exempt from the bid process as Procurement Services has already conducted the review.
Additionally, purchases that fall under a master agreement are exempt so long as the agreement is bid at the expiration of its term. A signed copy of the master agreement and a bid documentation form is required to be on file with Procurement Services.
- Products or services specifically named in a grant or contract
If a pre-existing contract or grant requires a specific product or vendor, the bid process is not needed.
- Products or services necessary to be compatible with existing goods on campus
If a product or service on campus is only compatible with a specific other good or service, then it is exempt. For example, a piece of science equipment may need an upgrade and only the original manufacturer makes compatible pieces.
- Unique purchases that no other vendors offer a comparable product or service
If the product is only offered by a single vendor it is exempt. However, this requires Procurement review and approval in order to be authorized.
- The order is time-sensitive and critical to university business
In case of emergency, the bid process may be exempted to ensure university business is maintained.
- Purchases that an executive officer has approved without the need for a bid
Executive offices have the authority to exempt a bid process. Please work with their designated budget mangers to obtain approval.
- Other reasons, as approved by Procurement Services
Procurement Services staff may also exempt a bid process for any reason. Contact the appropriate buyer to request an exemption if you feel one is warranted. Typical exemptions are given for:
- Partnerships with other universities
- Purchases of data sets, research papers, etc.
- Subscriptions to journals or other academic resources
- Memberships in organizations
Reporting and Enforcement
Procurement Services is responsible for tracking bid compliance. Any purchase over $25,000 requires a bid documentation form be on file.
Summary reports of compliance, non-compliance, savings and justification for vendor selection are compiled monthly and shared with the executive offices. Repeated non-compliance will also be reported to the Institutional Compliance and/or Internal Audit.
Templates and Forms
Company Evaluation
- Better Business Bureau (BBB) – For reviewing complaints filed against companies and to see a letter grade evaluation of the organization. For any listed below a B-, it should be very carefully considered if the University should be doing business with the vendor.
- Certificate of Good Standing Search (Illinois only) – Shows companies who are incorporated and meets the filing requirements of the state of Illinois.
- EPEAT – EPEAT is a system that helps purchasers evaluate, compare and select electronic products based on their environmental attributes.
Other Resources
Related University Policies
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