Step Four of the Vendor Selection Process: Proposal Evaluation and Vendor Selection

The main goal of this step is to reach a decision that's in the best interests of the company while minimizing politics and personal preferences that are not based on the facts.

1. Preliminary Review of all Vendor Proposals All proposals should be reviewed for clarity and completeness, and any ambiguities or gaps resolved by the vendor before analysis begins.
 
2. Record Business Requirements and Vendor Requirements The business and vendor requirements of the project should be listed in a spreadsheet.
 
3. Assign Importance Value for Each Requirement Each requirement should be assigned an importance value on a scale of one to ten.  The average of individual team members ratings can be used, or if the team is small, an agreed upon value can be used.
 
4. Assign a Performance Value for Each Requirement This is the equivalent of assigning a grade to vendors for each of the requirements defined in step 2.  Average team members ratings can be used, or the team can agree on a value.  In some cases, vendors will have failed to meet a requirement, and they can be eliminated from consideration.
 
5. Calculate a Total Performance Score This is done by multiplying each Performance Value by the associated Importance Value, and summing these to get the Total Performance Score.
 
6. Select the Winning Vendor The Total Performance Scores should be used as a a starting point for discussion of the top vendors, but not as an absolute decision maker, especially if the top scores are clustered.  Vendors whose scores are very low should be able to be eliminated without much further discussion and analysis. 

Adapted from Proposal Evaluation and Vendor Selection Step #4 in the Vendor Selection Process, about.com: http://bit.ly/atoDH5