Organizations conduct vendor evaluations to determine if prospective vendors can step up to their organizational standards and meet the required obligations once given a contract. Remember, the work of vendors, in this case, is to supply the business with goods and services.
In doing this, businesses aim to determine which of the vendors can make good long-term business partners. The evaluation should be done using the right tools, which simplifies the selection process. This comes with its fair share of advantages but majorly helps in risk mitigation by lowering the regulatory, contract, and security risks posed by working with entities outside the organization.
Once the evaluation is complete, the responsible team has to report, and in this case, write a vendor evaluation report, which we will look at in this article. Here are the steps you need to adhere to if you want to develop an effective vendor evaluation report.
Even though the first part of the report will not be referred to as the introduction, the ‘introductory’ part of the document should include the project name, document ID, issue date and classification. Under classification, the report can either be public or private.
This first part aims to identify the report and put the evaluation into context. You should not jump right into the vendor evaluation report body without informing the intended audience what you are serving them.
2. Issuance of a Copyright Notice
A copyright notice must be provided in the valuation report. This should clearly state that any information captured in the report is the property of the reporting organization, and no part of the report can be produced in a retrieval system or through any means without the prior written consent of your company.
You should also clearly indicate that any information in the document can be changed at any time without the issuance of a notice, and this does not tie the company to any contractual obligation. Also, include that the company has the right to make changes to any products or services described in the document whenever they deem fit and without offering any notice.
Lastly, indicate that the company cannot be held responsible for any direct or indirect consequence resulting from using the information contained in the document.
3. Have a Revision History
Like we said in our copyright notice, the company reserves the right to change any information in the report at any time and without the issuance of a notice. The report cannot also be prepared in one sitting as several items and information may need to be adjusted. Therefore, you have to include a revision history that documents the date, version, description and the parties that have made the changes or revised the document.
This will help in keeping track of the changes and revisions. The person who reviews the document, and in this case the customer, must sign to signify the recommendation for acceptance of the document. Therefore, there should be a table where the reviewer appends his/ her signature and writes the date.
4. Have a Place Where the Report is Signed
The document must be signed to come into force and show authenticity. Therefore, under the section where the reviewer appends his signature, prepare a table with two columns. The first should indicate who prepared the document and the second one the reviewer.
Under the first column, there should be the name of the person who prepared the report, his/ her title, the company name and the date. The topmost part before these four rows is where the drafter will append his signature. The second column captures the person who reviewed the report.
Like in the first column, he/ she should provide the name, title or position in the company, the company name and the date of the review. However, this is not the only table that needs to be signed off.
The second part of the sign-off of the document takes care of acceptance. Like in the first table, there should be two columns detailing who accepted the report. These should have five rows, with the topmost one being where the signature will be appended.
The other rows cover the name, position, customer company name and the date of acceptance.
5. Write an Executive Summary
This is where the body of the report begins. All the previous steps were building towards this. What is an executive summary? It is a brief overview of the report, aimed at bringing together all the principal points of the document in one piece.
Therefore, the executive summary offers an overview of the report to help the audience understand the main points being made. They will also get to see your evidence for these points without reading your entire report in full.
It is also a good way of helping anyone who does not have time to go through the report and get an overview of what it entails.
6. Prepare a Background
The background plays an important role in reports. In this case, it provides context to the information that will be discussed throughout the project proposal. Here, ensure that you discuss your problem statement and rationale and help the intended audience understand why you are preparing the project proposal.
Remember, this evaluation report will capture several vendors, and therefore, the background should be highly convincing.
7. Have an Overview of The Proposals
This will depend on the number of vendors that submitted their proposals. Some vendors will submit proposals covering all the services requested by the company, whereas others will only submit those covering limited options.
It would help if you had a table that describes all these proposals. When drawing the table, be sure to create rows detailing the experience, technical solution, project cost and project schedule of all the vendors. Also, provide columns for all these vendors.
8. Prepare the Proposal Evaluation Matrix
Every proposer will have to be upgraded to arrive at the best one. This is captured in the proposal evaluation matrix, which will detail the score for each of the submitted proposals. Therefore, ensure that you have the proposal breakdown criteria and points for each of the vendors that submitted their proposals.
You are free to settle on any criterion you will be using in the evaluation. However, just make sure that each is graded. Some of the commons ones can be the submission of all the required schedules, forms and information, proper qualification and experience, financial ability and timeliness, team qualifications, strength and relevance of references, among many others.
To have an easy time, we advise that you break down these criteria into parts. Therefore, you can have completeness of response to RFP, proposer qualification and experience, technical proposals, project costs, implementation plan and schedule and contract terms and conditions.
You are allowed to choose any method of grading; be it points or percentage. However, we advise that you offer points for every criterion and sum up the total. Once you have graded every vendor, compare his/ her totals to the aggregate mark to determine the score. This what we call the vendor proposal evaluation matrix.
9. Recommend a Vendor
The performance matrix shows the performance of all the vendors, which should help the person preparing the draft to recommend the right candidate to the management. Remember, the whole idea behind the performance of vendor evaluation is to identify the right candidate for the business.
Therefore, based on the justifications in step 11, recommend to the management to approve the purchase of goods or services from the highest scoring vendor based on the performance evaluation criteria.
However, this is not all; there has to be a place where the person who prepared the report, recommended the vendor and approves them appends their signature. You should also include dates when all these signatures were appended.
Take Away Notes on Vendor Evaluation
Now that you have all the steps to prepare a vendor evaluation form, we find it worth covering the different methods of vendor evaluation; remember, we do not have a single method of vendor evaluation that caters to every circumstance.
Therefore, while evaluating vendors, the business needs to look out for its welfare and consider the vendor classification. The entity must also ascertain whether the vendor is under contract or a prospect has already been awarded the contract. These three instances call for different evaluations.
Here are some of the common things that should guide your vendor evaluation.
- Commercial– When looking into the commercial side of a prospect vendor, ensure that you consider the reputation, market dominance, awards, market and advertising presence, existing clients, and ability to make prompt deliveries.
- Technical- When conducting technical evaluation, the data used should be from public sources, including financial records, scientific capabilities and technical equipment.
- Records– For this vendor evaluation, one needs to collect data from public sources, including financial records, industry news items and award notices.
The other two common vendor evaluations are before and after the fact. For before the fact, the evaluator should plan and gather data from public data sources and vendor reviews early in the project. For after the fact evaluation, one needs to review the first engagement or shipment before assessing performance and process. Here, you should ask vital questions regarding the successes, failures and operations to the stakeholders and responses used to offer data for future planning, decisions and discussions once the event is complete.
It is also worth noting that continued vendor evaluation requires three main elements: a vendor rooster based on your organization’s value, a strategic ranking system, and a track performance system. Let’s shed more light on these:
- Vendor roster– You need to organize your roster, which can be done by using the description of the goods and services the vendor deals in and then incorporate variables such as colors, numbers, letters and words to place them into charts or spreadsheets. You can also think about these vendors based on their value to the organization.
- Tracking and Performance– You can pick an auditor or put up a small team to promote, demote or highlight unique evaluations regarding the vendor. You can track the vendor value regularly using metrics such as quality, state of the products and delivery time.
You can also conduct surveys that should help you get input from purchasing or any person close to the situation than the manager. Make sure that you also set guidelines for employee feedback. The survey questions can cover the performance, delivery, invoicing, customer service, and knowledge related to the vendor.
- Vendor evaluation system– You need to apply everything you know regarding the vendor performance for strategical segmenting of vendors. One of the best vendor evaluation methods used to divide goods and services is the Kraljic matrix. This will help your company define and identify the most advantageous purchasing techniques while staying clear of bottlenecks that may hinder delivery goals.
These twelve steps will help you draft the best vendor evaluation report. Remember, this does not have to be as complicated as most people make it to be. Also, capture the criteria used to evaluate everyone whose proposal was submitted.
Click here to download Vendor Evaluation Report Template.