Traditional market approaches
- Traditional market approaches are usually well-understood by buyers and suppliers, and can be lower risk.
- Traditional approaches include requests for quotes (RFQs), requests for tender (RFTs), expressions of interest (EOIs), limited tenders, and a process called best and final offers.
- What works best will come down to the nature of the market, the nature of the goods or services and what you’re trying to achieve.
- Using traditional market approaches may mean you miss out on more innovative solutions, so you should also consider non-traditional approaches.
Understand traditional market approaches
Traditional market approaches include:
- a request for quote (RFQ)
- an open request for tender (open RFT)
- a selective request for tender (selective RFT)
- an expression of interest (EOI)
- a request for proposal (RFP)
- a limited tender
- a best and final offer.
Traditional methods of approaching the market are well-known and well-established. For this reason, they’re also often considered low risk.
For example, the most reliable and simplest way to procure goods and services that are well-known and frequently used could be via a request for quote (RFQ). In this case, the 'solution' you need is predictable: the supply of a good or service.
If you're not sure of the best solution, you might consider a non-traditional approach. These enable suppliers to propose innovative or less well-known solutions to unique problems or needs.
When to use a traditional market approach
Click the headers below to read about when to use each traditional method or click Expand all.
A request for quote (RFQ) is usually most effective when you’re procuring low-risk, low-to-medium-value contracts. You understand the goods or services well, but you're not sure what the final cost of procurement will be.
Use an RFQ when you plan to buy well-defined goods or services using a contract with standard terms and conditions.
An RFQ can be an efficient way to receive quotes from a pool of prequalified NSW Government suppliers.
In an open request for tender (open RFT), any supplier can submit a tender response. In their responses, each tenderer must demonstrate how they satisfy the evaluation criteria and meet any specific requirements.
An open RFT can work best when:
- there’s a broad and competitive market for goods or services
- that market is dynamic and subject to change
- your procurement is high value
- there’s likely to be a lot of interest from suppliers.
An open RFT encourages healthy market competition and can be an effective way to ensure value for money, which is one of our key procurement objectives in NSW Government.
An open RFP can be an attractive approach when you’re unsure of pricing or don’t know which supplier can best satisfy your agency's procurement needs.
Unlike an open RFT, a selective request for tender (selective RFT) refers to the process of selecting and inviting a limited number of suppliers to submit a response to your request.
Selective RFTs are sometimes also called multi-stage RFTs, because they usually consist of a discovery stage followed by a more selective tender process.
Use a selective RFT when you need to:
- establish a panel of providers for ongoing work
- identify several potential providers for a single contract
- identify the provider with the best solution to a complex or unusual procurement.
To work out which suppliers to invite, consider:
- how they’ve performed under similar contracts, whether with the NSW Government or other organisations
- their capacity to deliver
- their relative skill or ability
- their current commitments
- their location and the areas in which they already work
- the special requirements of the work, product, or service.
A selective or multi-stage RFT can be an effective way to reduce the cost of tendering for both you and your potential suppliers. It can also help you quickly identify the best suppliers, especially in a mature marketplace.
An expression of interest (EOI) works best when you’re unsure of the goods or services you’re procuring or you're not clear on the best way to supply them.
You use an EOI to find out whether suppliers are both capable of performing the specific work and interested in undertaking it.
Typically, an EOI only elicits responses to a broad set of criteria. It rarely includes definitive solutions or final costs. For that reason, you don’t need to include price criteria and you ultimately don't award a contract.
Instead, once you’ve completed the process, you usually shortlist potential suppliers and invite them to tender. For this reason, an EOI is considered to be one of the multi-stage procurement processes.
An EOI can:
- help you test the market to find out whether a good or service exists
- keep suppliers’ costs down, as you only invite suppliers to respond to the resulting tender if they've demonstrated they can realistically supply the goods or services (as revealed during the EOI stage)
- keep your own costs down, as there are fewer responses to evaluate during the resulting tender stage
- provide several suppliers an opportunity to compete for your business
- encourage healthy market competition.
A request for proposal (RFP) can elicit a detailed supplier response to a specific need, idea, or business solution. An RFP works well when:
- you have a well-defined outcome but there are different ways to achieve it
- you want an innovative solution but you still want to use a traditional market approach, or
- you’d like to explore different ways to deliver a service or product.
Criteria for an RFP are usually stringent, in order to arrive at a solution with indicative pricing. Make sure you include criteria to evaluate your prospective suppliers’ expertise, experience, and capacity to deliver.
An RFP can be the first step in a multi-stage procurement process. Once you’ve received responses to your RFP, you can shortlist suppliers based on their proposals. Then you can invite your shortlisted suppliers to respond to a request for tender.
Alternatively, you may decide to negotiate directly with a supplier directly, without the RFT, if you believe this is the best way to meet your procurement objectives.
An RFP may tap into new and potentially innovative approaches and solutions. You can also use an RFP to explore multiple solutions to one problem.
In a limited tender, you only issue an RFT to suppliers you’ve assessed to be the most capable of delivering the work, product, or service. This might include:
- suppliers you’ve prequalified
- suppliers prequalified by other agencies
- suppliers you can contract on a standing-offer basis.
You may find a limited tender is an effective option:
- in emergencies
- for specialised work
- when you already know that few suppliers are capable of undertaking the work
- for low-value, off-the-shelf procurements.
While a limited tender is similar to an RFQ, it can enable you to maintain an even narrower focus. For example, you may invite just one supplier to respond to a limited tender.
You may also find limited tenders helpful when you’ve already held an RFT but:
- no one submitted a tender
- none of the tenders submitted complied with the RFT requirements, or
- none of the tenders submitted satisfied the conditions for participation.
A limited tender can help you secure goods or services quickly and efficiently when you're confident of the solution (and, potentially, the supplier) that you need in order to meet your procurement objectives.
In multi-stage procurement processes, you may use a “best and final” offer to finalise your choice of supplier.
If you’re considering this approach, make sure you inform your potential suppliers upfront in your approach to market documents.