Buyers: Case 3. Evaluation of Price Reasonableness for a Potential Supplier’s Specific Bid
Firstly, it’s critical to understand that the identification of inflated pricing from a supplier is not a basis for terminating a procurement process. In other words, even if you believe that the winning bid’s price is not reasonable, you have no authority to influence the outcome of the procurement procedure.
Understanding price reasonableness can be useful for procurement planning. For instance, you can identify key suppliers for the required products or services and form an understanding of the price range for successful bids.
Before we move to the actual implementation of this case study, let’s outline the primary questions:
- What price range has been applied within the sales of specific items coded under the Uniform Nomenclature Directory for Goods, Services, and Work (equivalent to NAICS/NIGP codes in the U.S.) by a particular supplier?
- What other suppliers participated in procurements of the same coded items with proposals close to the designated price range?
Initially, let’s start with the “Uniform Nomenclature Code Profile” where we can select our commodity market of interest and gather insights on primary suppliers within that market.
The “Uniform Nomenclature Code Profile” allows for market analysis based on this directory. You will gain core insights into the procurements related to your interested codes.
Suppose you’re interested in the procurement of dombras (a type of musical instrument).
You can select your supplier of interest either via the chart or through the dropdown menu in the “Supplier” field.
Let’s take a look at the proposal from the Sole Proprietorship “Sagyn,” a leading supplier for this item. The company specializes in dombra supplies and can serve as a benchmark for forming market understanding.
Further action involves using the “Lot Table” sheet. To get information on unit prices from winning bids, you will sequentially have to select a solicitation and then choose the specific lot within that solicitation.
Sort the solicitations by total value in descending order and select the largest one by value. Lock in your selection and pay attention to the Lot Table’s content.
I recommend focusing on the variance between the estimated and final costs, noting that there’s nearly a twofold difference. Such information will be essential for minimizing underutilization of budgetary resources.
We cannot ignore the fact that the item’s price significantly depends on its characteristics. Through the procurement portal, we can review the item’s technical documentation.
I recommend going through several solicitations from different suppliers to establish a current price range for the commodity sector.
Within the scope of this current case study, we confirmed that you could use this module to comprehend the commodity market, identify leading suppliers, and form an understanding of the current price range.