I know what you’re thinking.
I have a million other things I could be working on right now instead of worrying about the formal procurement process.
I feel you. Trudging through paragraphs of complex contract terms and navigating a long bid process seems like a waste of time when you have more pressing needs in front of you.
But a well-planned formal procurement process can do wonders for your pricing, quality of service, protection against litigation and disputes, pricing, accuracy of bids received, and did I mention pricing?
Yes, it’s that important.
In this article, I’ll define the formal procurement process methods and summarize each step. Be sure to check out my accompanying articles on Creating a Timeline for a Formal Procurement.
Basics of the Formal Procurement Process
Let’s start with the basics.
What is the formal procurement method?
Well, there are two options: invitation for bid (IFB) or request for proposal (RFP). The document you write is referred to as the IFB or RFP, while the document you get back from the vendor is called the bid (for an IFB) or proposal (for an RFP). You’re inviting bids or requesting proposals. Makes sense, right?
Both require the awardee be responsive and responsible. Once the vendor meets that threshold, the difference between an IFB and RFP is that a bid is chosen based on price alone and a proposal can be chosen based on price and other factors, like service, experience, and features.
What makes formal purchase processes different from small purchases is that 1) they have to be advertised and 2) the bids or proposals must remain sealed until the official “bid opening”. It also often includes a lot more language due to the higher value and complexity of the contract.
Steps to the IFB/RFP Formal Procurement Process
I’ll be detailing 11 steps in the formal procurement process:
- Plan it out.
- Write the solicitation.
- Release the solicitation and advertise it.
- Work with vendors through the process.
- Receive responses.
- Conduct the bid opening.
- Evaluate the responses.
- Notify vendors of preliminary award.
- Receive school board approval.
- Provide official award.
- Prepare for contract start date.
Step 1: Plan It Out
In this step, you’ll be planning your formal procurement process to ensure you execute it well. This includes planning menus, conducting a cost analysis, researching your options, and developing a timeline.
Menu Planning
Those that teach procurement for school foodservice programs instruct that you need your menus completed before you do your IFB/RFP. The idea is that you don’t know what you need or how much if you haven’t done your menus yet. For non-food purchases, you’ll need to think through what your purchases for that item or service will look like for the next year to know how much you’ll need.
And I know what you’re thinking. Ok great in theory, but I’ll never be able to do that. Been there.
The reasons most districts don’t do this are:
1) We have so much going on that it feels low priority to plan out a menu or service that won’t be needed for 6+ months, and
2) We feel like if we do it too early, there is a high probability things will change over the course of the next 6+ months because of changing preferences or lessons learned.
If this sounds familiar as a school district, I might have a solution for you that I write in detail about in my article How to Fit Menu Planning Into Your Procurement Process. I call it the simplified menu planning process.
To sum it up, we essentially put together a rough list of the entrees and vegetables we think we want to menu the next year, rather than write an entire menu plan. It’s faster, more flexible, and we are open to changing it later, but it works as a great starting point for estimating our needs for a bid.
If the idea of writing full menus is too overwhelming, try the simplified process instead!
Cost Analysis
This is required for federal procurements anytime you are going to exceed your small purchase threshold.
You’re essentially just estimating how much you’ll spend over the course of the contract. I discuss this process in my article on How to Do a Cost Analysis, but I’ll give you a summary.
If it’s something you already purchase:
1) Look at what you typically spend.
2) Think about any changes that will be happening next year that will impact the purchase. Adjust your forecast based on this.
3) Factor in inflation. A CPI I like to use for food is the 12-month percentage change for food away from home. Keep in mind this is a suggestion for estimating inflation of food, not what you should use for calculating price changes during contract renewal.
If it’s something you don’t already purchase, you’ll need to do some research to give you an idea what it will cost.
A cost analysis benefits you by making sure you use the correct procurement method, award to the right vendor, as well as helps you budget.
Research Your Options
In the planning stage, you also want to be researching your options.
Most people immediately think of researching the products, which you certainly need to do, but you also want to think about the service side of the contract too.
It’s perfectly fine to reach out to vendors in this stage to figure out what your options are and pick their brain, as long as you’re not letting them write your specifications. I’ll reach out to as many vendors that will talk to me and ask them questions like:
- Here’s what I’m thinking we want. Is that something you could provide? If not, why?
- Are there other items/services I should be considering instead?
- What makes your company different?
- How much time do you normally need to fill out an IFB/RFP?
- Are there any terms or language you see in IFBs/contracts that are deal breakers for you?
- Here’s how we normally handle ordering/delivery/invoices. Would you do something similar? If not, how would you handle it?
What I’m doing here is trying to narrow down what I am asking for in my specifications and my contract terms. Sometimes we don’t know what we don’t know.
For example, the contract I inherited stated that deliveries must be made to 40 specific schools on Tuesdays and 30 specific schools on Thursdays. I knew this was too restrictive, but I wasn’t quite sure how much more I needed to open it up.
When I asked one company, they explained that the more days they could deliver, the less drivers he had to assign to our contract. So instead of needing 4 drivers for Tuesday and 3 drivers for Thursday, he might only need 2 drivers each day Monday-Thursday.
This was more efficient for them, and in turn, that would be reflected in our pricing. Better pricing?! Ding ding ding! I had never thought of it that way, and I probably would have never known if I hadn’t had an open discussion with the vendor.
Some districts even do a formal Request for Information (RFI) process, where they put together a list of questions for vendors about their products and services and have them submit responses by a certain deadline. This information then helps you narrow down what to ask for in your solicitation.
Just be sure you’re being fair in the process. You don’t want to gather this information to intentionally restrict competition. Your goal is to find out what your options are and make decisions that will make the process most competitive, while still getting what you need.
Develop a Timeline
Most directors underestimate the amount of time they need to really do their formal procurement process justice. This leads to rushed, poorly written IFBs/RFPs.
To plan your timeline, you really need to understand all of the steps in the formal procurement process, so I suggest checking out my article Creating a Timeline for a Formal Procurement.
Step 2: Write the Solicitation
I write more about the details of this process in my article titled What to Include in an IFB or RFP Solicitation.
In summary, you’ll need to outline:
- Scope
- Instructions for the vendors.
- Contract terms.
There are some templates out there you can use to get you started. If you use one, it is very important that you read the entire document and make changes where needed.
Step 3: Release the Solicitation and Advertise It
Now that you’ve finished writing your solicitation, you need to let vendors know you want responses! These processes might differ from district-to-district, but a few options are:
- Directly sending it to vendors you know might supply what you’re asking for.
This could mean email or snail mail. I prefer email, so I have an easy and free paper trail, it’s quicker, and they can complete the documents electronically, so they’re more legible.
If you do this option, just be sure to be fair, and don’t cherry pick who you send it to. Maintain a list of vendors and send it to all vendors who might be able to supply the item or service.
Note: districts are required to be compliant with a federal regulation that encourages participation of small and minority businesses, women’s business enterprises, and labor surplus area firms.
One great way show you are meeting this requirement is to look for businesses that meet one of these criteria and send your solicitation to them directly.
Essentially, large corporations can pay people or software companies to find business for them, but smaller businesses don’t have those same resources. Sending it to them directly will help them know you are looking for business, which is the intent of the federal reg!
Many state-owned websites have directories you can search for businesses that meet these criteria. Just Google your state name + minority, small, women business, and you should be able to find it.
- Posting it to a website. This could mean your district website or a website whose sole purpose is posting bids. Some states require you post it to specific sites, so check with your state and local procurement office.
- Advertising in the newspaper. The specific procedures for this vary from state-to-state, but it’s usually required for the formal procurement process.
What to put in the advertisement:
1) Description of what you are purchasing (milk, bread, serving line, etc.)
2) Any relevant dates, such as pre-bid conferences or deadlines for questions, pre-approvals, bid submissions, etc.
3) How to obtain the solicitation documents. It’s common for states to require you give them an address they can be obtained from. That’s probably outdated in this digital world, so I would include an email address too.
Step 4: Work with Vendors Through the Formal Procurement Process
- Responding to vendors. As vendors contact you, you want to be timely with your response. This will allow them maximum time to complete the bid and prevent them from complaining about you.
You should have a process in place for how they can ask questions and when you will provide responses.
If they are asking for clarification on instructions, specifications, or contract terms, you should provide your response to all vendors. It’s best practice to collect the questions over a period of time and issue the Q&A as an addendum to the bid, so you can capture all prospective bidders.
- Identifying errors. Similarly, if you or vendors find errors in your contract, such as discontinued product codes or outdated language, you must issue the correction with a bid addendum.
- Pre-approved equals. You also should have a process in place for how vendors can request pre-approved equals, if applicable. You have the option of letting them submit equals with the bid, but it gets sticky when you tell them “no” on an item, so I prefer to do it while they’re still completing their solicitation.
Any pre-approved equal you allow should also be issued in a bid addendum. That way, if you tell distributor ABC you consider Kristen’s French Toast (which is cheaper) a pre-approved equal to Lauren’s French Toast, distributor XYZ has the opportunity to also bid Kristen’s French Toast. If XYZ ends up winning the bid, you have the most affordable option on the bid.
Step 5: Receive Responses
As responses start rolling in DO NOT OPEN THEM. They must remain sealed until the official bid opening. It’s like Christmas for procurement nerds!
Many districts use a “bid register” as they receive responses. This is a document that someone from the district uses to record every bid that they receive and the date they received it. Some people wait to fill this out at the bid opening and just date stamp every envelop so they can fill it out then. Either way is acceptable.
Step 6: Conduct the Bid Opening
The “Bid Opening” is an official event where you open the responses you received. It’s usually called a bid opening for both IFBs and RFPs.
The event is public. If vendors, or anyone else from the public, wants to come watch you open them, they must be permitted to do so. I see less vendors attending these lately, but they like the option because it increases the transparency of the process – they see exactly what you’re doing.
Have a sign-in sheet ready for anyone in attendance to sign. Include on the attendance sheet the date, time, and location. This helps prove that it was public and opened as you said you would in the solicitation.
Again, each district might do it a little differently, but here’s an example of how the bid opening might go:
For Bids (from an IFB):
1) Open the envelope and take everything out.
2) Using a blank check sheet of items needed to be submitted (that you should have also included with the solicitation), read off each item. Find the related document, ensure it is filled out correctly, and check off that item.
3) Work your way through the whole check sheet.
4) When you get to the pricing, you usually only read off the price of every item if it’s a line item bid (unless it’s a very long line item bid, in which case, bless you). If it’s a group bid, read out the price for each group. For a bottom line bid, (you guessed it) you would only read off the bottom line price.
5) Reiterate to vendors present that the prices are only preliminary until you can review each submission. There are often changes due to items the vendor chose not to bid, items you don’t accept as equal, recalculations due to pack size changes, etc.
6) Repeat the process until all the responses are opened and checked.
7) Explain to vendors next steps and when and how they should hear from you.
8) Thank the vendors for participating!
For Proposals (from an RFP)
1) Proposals usually have two parts: the technical proposal and the cost proposal. The best practice is to have the cost proposal sealed separately so you can evaluate the technical proposals without price influencing this part.
2) If that’s the case, open the outer envelope and pull out the technical proposal and the cost proposal. If other forms are loose in there, pull out those too.
3) Using a blank check sheet of items needed to be submitted (that you should have also included with the solicitation), read off each item. Find the related document, ensure it is filled out correctly, and check off that item.
4) If you need to open the technical proposal to find the forms, that is permissible, but you would avoid opening the cost proposal if possible.
5) Work your way through the whole check sheet.
6) Repeat the process until all the responses are opened and checked.
7) At this time, you’ve covered everything you need to cover with the public. Actually reading and evaluating the technical proposal (and later the cost proposal), is not done in public.
8) Explain to vendors next steps and when and how they should hear from you.
9) Thank the vendors for participating!
Step 7: Evaluate the Responses
At the bid opening, you were determining whether or not the vendor met some of the most basic requirements to be considered “responsive“, but it was only part of this requirement.
Now, you have to dig deeper to make sure that they responded how you instructed them to, aka, they’re fully “responsive”.
In general, if you told a vendor they must do something and they do not, they are non-responsive.
You must also make sure they are responsible, meaning they can carry out the contract. An example where a vendor is not responsible would be if they are on the federal government’s debarment list.
If the vendor is so far responsive and responsible, you can start digging into the meat of their response.
For a bid, this would be the products they submitted and their pricing.
Handling Special Circumstances
Your solicitation document should have outlined how you would handle these situations:
- If an item they submitted was not on your approved list or submitted for pre-approved equal.
- If they submit the same item for two different line items.
- If they chose not to bid an item.
- If they bid an item with a different pack size.
Do whatever your solicitation says for these situations. How you handle these situations will affect your extended prices and bottom line prices, so be updating those along the way.
Totaling Prices
You’ll probably want some sort of summary or tab sheet that lists each company and the total bottom line price for each. Whoever has the lowest price gets the contract.
Evaluating an RFP
For an RFP, you’ll start with the technical proposal, and you should have a team of people reviewing and scoring it as well. Each will:
- Open the technical proposal envelope, if you have not yet done so.
- Read through the proposal and determine whether you have any follow up questions.
- Gather all your questions and send them to the prospective vendors. Remind them their responses will become part of their official proposal.
- When you receive the responses back, ensure all the evaluators on your team get a copy.
- If your solicitation stated that negotiations were permissible, you can reach back out to the companies to negotiate at this point. If they are willing to include anything they didn’t already include, get it in writing and include this with their response as well.
- Score the technical proposals according to your predetermined matrix.
- Your solicitation should have outlined whether all cost proposals would be considered or only a certain number of vendors (usually about 3) that scored highest on the technical proposal.
- Now you would open the cost proposals.
- If you did negotiation in the technical proposal, vendors may wish to update their cost proposal. Again, you should have clarified what this process would look like in your solicitation. You may also have written that you can negotiate on the cost proposal as well.
- Once you have your final numbers, the cost proposal is easy to score. To do this, each company receives a proportion of the maximum points. The calculation is:
Lowest Cost Proposal x Maximum Cost Points
Company’s Cost Proposal
Let’s say a company can earn a maximum of 30 points for their cost proposal, based on your pre-determined scoring matrix.
Company A’s Cost: $1,300,000
Company B’s Cost: $1,100,000
Company C’s Cost: $2,200,000
The lowest cost proposal in this example is $1,100,000, so that is what is used in the numerator for all companies:
Company A: $1,100,000/$1,300,000 = 0.8462 x 30 points = 25 points
Company B: $1,100,000/$1,100,000 = 1 x 30 points = 30 points
Company C: $1,100,000/$2,200,000 = 0.5 x 30 points = 15 points
- Add all the points together that each company earned from the technical and costs proposals. You’ll probably want some sort of summary or tab sheet that lists each company and their points.
- Whoever gets the most points gets the contract. In our example above, Company C could still win the contract if their technical proposal was outstanding – the idea is you get what you pay for, so you might be willing to pay a higher cost if you are getting a better service.
Step 8: Notify Vendors of Preliminary Award
Most districts have to get School Board Approval to enter into contracts. However, you want to informally notify the vendors which company you are recommending the Board approve for award.
I know some districts wait to say anything until the official award, but since school board meetings and agendas are public and often readily available online, the information is probably going to come out prior to the meeting anyway, so it’s just sort of awkward to wait.
I recommend making it clear to the vendors that you’re making the recommendation for award, but it is not official until the School Board approves it.
Step 9: Receive School Board Approval
Most school boards have to approve all contracts, so you’ll probably have to send it on to them to review. What specific information they want (copies of the whole contract, just the tab sheet, etc.) will vary by school board.
There’s often a deadline to get the information to the Board so that they have time to review it, so keep that in mind.
Step 10: Provide Official Award
This is the official letter notifying the vendor they were awarded the contract. You also want to notify the vendors who did not win who won the contract.
Our purchasing department used to do two different letters for the winners and losers, but we now do one letter that essentially just says who won. Either option is usually fine, unless your state requires something specific.
Step 11: Prepare for Contract Start Date
If this is a pre-existing vendor, there may not be too much work to do – usually updating pricing sheets or shopping lists, creating POs, giving them usage estimates for new items, etc.
If it is a new vendor, there will be a lot of details to sort through, so you’ll need to stay in communication with them. You’ll need to:
- Set up ordering capabilities (are you sending emails, entering on a website, etc.)
- Establish delivery or servicing schedules
- Set up invoicing
- Complete their credit application, if applicable
- Work with purchasing to set them up as a vendor in your system
- Create/overhaul shopping lists, including updating vendor codes
- Create POs
Summary of the Formal Procurement Process
It may seem overwhelming the first time you complete all the steps in the formal procurement process (or any time you complete one), but if you follow each step carefully, you can successfully accomplish it!
