Source Selection Criteria

Source selection criteria is a set of attributes desired by the buyer which a seller is required to meet or exceed to be selected for a contract. Under project management, source selection criteria are often included as part of the procurement documents. Selection criteria can be identified and documented to support an assessment for more complex products, services, or results. Some possible source selection criteria are:

• Understanding of need. How well does the seller’s proposal address the procurement statement of work?
• Overall or life-cycle cost. Will the selected seller produce the lowest total cost of ownership (purchase cost plus operating cost)?
• Risk.  How much risk is embedded in the statement of work, how much risk will be assigned to be selected seller and how does the seller mitigate risk?
• Management approach. Does the seller have, or can the seller be reasonably expected to develop, management processes and procedures to ensure a successful project?
• Technical approach. Do the seller’s proposed technical methodologies, techniques, solutions, and services meet the procurement documents requirements or are they likely to provide more or less than the expected results?

Key Characteristics of Source Selection Criteria:

1. Customizable: Tailored to align with the project’s goals, size, and complexity.
2. Quantifiable: Often uses a scoring or ranking system to ensure objectivity.
3. Multi-Faceted: Includes various factors such as price, technical capability, past performance, and compliance with requirements.

Common Criteria:

1. Price: Total cost, including initial price and lifecycle costs.
2. Technical Capability: Ability to meet technical specifications.
3. Experience and Past Performance: Track record of similar projects.
4. Compliance: Adherence to project requirements and regulations.
5. Schedule: Ability to meet deadlines.
6. Risk: Assessment of risks associated with the supplier or proposal.
7. Innovation: Capacity to bring innovative solutions to the project.
8. Financial Stability: Vendor’s financial health to ensure project continuity.

Advantages:

• Helps make informed, objective decisions.
• Encourages competition among vendors.
• Ensures alignment between vendor capabilities and project needs.

Disadvantages:

• May require significant time and effort to define and evaluate.
• Overly complex criteria can lead to confusion and delays.
• Rigid criteria might exclude vendors with alternative but effective approaches.

Examples of Source Selection Criteria:

1. Construction Project

• Scenario: Selecting a contractor for a new office building.
• Criteria:
  • Price: 40% weight.
  • Technical capability: 30% weight.
  • Past performance on similar projects: 20% weight.
  • Schedule adherence: 10% weight.
• Evaluation: Proposals are scored based on these criteria, and the contractor with the highest score is selected.

2. IT System Implementation

• Scenario: Hiring a vendor to install a new ERP system.
• Criteria:
  • Price: 25%.
  • Technical capability: 40%.
  • Support and maintenance plan: 15%.
  • Experience with similar industries: 10%.
  • Risk assessment: 10%.
• Evaluation: A weighted scoring matrix is used to compare vendors.

3. Government Procurement

• Scenario: Acquiring defense equipment.
• Criteria:
  • Compliance with technical specifications: 50%.
  • Price: 20%.
  • Delivery schedule: 15%.
  • Vendor’s financial stability: 10%.
  • Offset or localization benefits: 5%.
• Evaluation: The government agency evaluates proposals to balance technical requirements with cost and schedule.

4. Software Development Outsourcing

• Scenario: Contracting a team for custom application development.
• Criteria:
  • Hourly rate: 20%.
  • Quality of portfolio: 30%.
  • Availability of resources: 20%.
  • Feedback from previous clients: 20%.
  • Timeline flexibility: 10%.
• Evaluation: Vendors are assessed based on their portfolio, references, and cost proposal.

Considerations:

1. Criteria Weighting:
   • Assign appropriate weights to reflect project priorities.
   • Use a scoring model to evaluate proposals objectively.
2. Transparency:
   • Clearly communicate criteria to all bidders to ensure fair competition.
3. Risk Mitigation:
   • Include risk-based criteria to minimize potential project challenges.
4. Tailored Approach:
   • Adapt criteria to the project’s industry, size, and complexity.

When to Use Source Selection Criteria:

• When multiple vendors or contractors are competing for a contract.
• For projects where cost, quality, and performance need to be carefully balanced.
• To ensure a fair and transparent procurement process.

Source selection criteria help project teams and organizations make informed decisions by aligning vendor capabilities with project needs and goals. Properly defined criteria contribute to the success of projects by ensuring the selection of reliable and competent partners.