2-20.5 Sourcing Strategy

A sourcing strategy will be devised in conjunction with the client. The category strategy provides the general direction for the drafting of the sourcing strategy.

The purchase/SCM team should consider the following questions before embarking on the solicitation process. If the answer is “no” for all of the above, a solicitation is required. If some, but not all, of the above scenarios apply, the purchase/SCM team should use its best business judgment on how to proceed.

• Can the requirement be satisfied most readily and effectively through comparison of published price lists or through a simple request for quotations (RFQ), with additional negotiation as appropriate?
• Would a solicitation exercise be unjustified? Namely, is the proposed purchase of significantly low volume? Is the possible economic advantage relative to the cost of a solicitation process too small?
• Can the requirement be added to an existing contract satisfactorily or sourced through an existing broad-range agreement?
• Is there realistically only one potential supplier (sole sourcing)?

Purchase/SCM teams may decide to use the noncompetitive purchasing method when it is deemed the most effective business practice for the given purchase. The rationale for the decision must be documented in a business case and included in the contract file. The extent and detail of the business case will depend on the particular purchase, its complexity, and its potential dollar value, but in all cases the following must be addressed:

• The business scenario justifying the decision, and why it is appropriate.
• The extent and result of market research performed to ensure that a noncompetitive purchase is the most effective business practice.
• If applicable, whether the purchase/SCM team believes that future purchases of the goods or services should be made noncompetitively, and why.
• Any other issues that should be considered in the interest of sound and effective purchasing (e.g., subcontracting plans, upcoming changes in market conditions).

If a noncompetitive purchasing method is used, the business case must be approved according to the following guidelines:

• The VP, SM, has delegated noncompetitive review and approval authority for contracts up to and including $10 million, by letter of delegation to portfolio managers, who may, consistent with those delegations, redelegate, by letter of delegation, some of that authority to subordinate managers and COs.
• If the estimated value of the noncompetitive purchase is expected to exceed $10 million, the VP, SM, must give prior review and approval of either the purchase plan or proposed contract award.

The purchase/SCM team will decide whether to solicit for the requirement among prequalified suppliers unless suppliers have not been prequalified or such suppliers have been identified as insufficient for some reason. Additionally, at this point the purchase/SCM team should decide:

• The relevant time frame.
• The need for auction (Consider Auctions topic).
• The sourcing type.

The decisions derived are documented in the sourcing strategy.