Many businesses and individuals in the real estate sector often rely on outside services. Building a network of local vendors creates stronger connections to the community and generates support among local business owners. It also allows you to access experts in areas that your business doesn’t have the time or resources to focus on.
The vendor selection process should ensure that the people you hire have all the required protections, including necessary licenses and certifications, and a strong, positive track record with previous clients. This guide will walk you through what vendor selection is, why it is important to have a selection process in place, and five steps to selecting a vendor.
What Is Vendor Selection?
Vendor selection is the process of reviewing and vetting a third-party service before hiring them. The process may vary from business to business, but it generally involves reviewing requests for proposals, ensuring vendors are legitimate and have all the legal necessities in place, and choosing the right vendor based on budget and additional research.
Why Is It Important to Vet Vendors?
Failing to properly vet vendors can put you and your business at risk of possible legal action. Here are a few situations that you want to avoid during the selection process.
Lack of Liability Protection
You are putting your business at risk if you hire a vendor who doesn’t have all the necessary insurance protection. A common scenario is when a vendor is on your property and incurs an injury: Without their own workers’ compensation insurance policy, you may be liable for the incident. This can lead to expensive and time-consuming legal battles.
Project Completion Issues
You always want your vendors to perform high-quality work in a timely manner. But your projects may not be completed within a reasonable time frame or to the quality you require if you don’t have a contract in place with a clearly outlined schedule and firm expectations of services.
Damage to Your Reputation
You and your business look bad when a project is completed poorly, or something goes wrong with a vendor. This could get in the way of attracting customers in the future or maintaining a positive reputation in your community.
These are just a few examples of what can go wrong when you don’t prioritize the vendor selection process. Here’s how to select vendors more effectively.
How to Select the Right Vendor (5 Steps)
What do all these considerations look like in action? These are the five basic steps to vendor selection with the right vetting approach.
1. Outline Goals and Expectations
You need to know exactly what you are looking for before you review vendors. Ask yourself what your goals are, what the final outcome should be, and what your budget is for this work.
Define the precise service that is needed and all your business requirements. You should also outline exactly what credentials your vendors need to have to be eligible to work with you (i.e., insurance, licenses, certifications, etc.).
2. Post a Request for Proposal
You may want to post a formal request for proposal (RFP) so qualified candidates can approach you to bid for the contract. Make sure that your RFP is clear and concise, outlines what you need and what you are looking for, and how vendors can respond.
3. Review Proposals and Credentials
Use the requirements you outlined. Any proposal that does not meet the basic requirements can be eliminated for faster review. Then evaluate the remaining proposals and weigh their pricing against the vendor’s qualifications and experience — the cheapest proposal is not always the best vendor to go with.
4. Conduct Additional Research
Make your shortlist of final proposals and do additional research to find customer reviews, testimonials, or other information that will help you decide. Contact any references provided to speak to people who have worked with them in the past.
5. Finalize the Vendor Agreement
The last step is to select the vendor you want to work with and put a formal working agreement in place. This contract should outline fees and payment terms, services to be provided, schedule and timeline, what will happen in the event of a problem or contract breach, and any other issues that are important to you around this project.
These steps will help you create your own process for vendor selection and vetting. Creating the right process, however, means also being aware of the common challenges facing individuals and businesses when hiring vendors. An effective commercial real estate broker can help with this as well. Next, we will walk through a few common mistakes.
Challenges of Vendor Selection
Vendor vetting is often complicated, and certain steps are easy to overlook. Here are a few common mistakes to watch out for:
- Expired certifications: Make sure vendor credentials are up to date. This may require calling an insurance company for confirmation that a policy is active, for example.
- Extremely low cost: Do not hire based on price alone. An extremely low proposal could mean that the vendor has little experience or isn’t aware of how much the project will actually cost.
- Rushed selection process: If you skip a step because you are in a hurry, you risk working with a poorly qualified vendor or failing to include all necessary terms in the contract.
- Unclear expectations: Vendors may not be able to respond effectively and you won’t have all the information you need to make a selection if you are not clear in your RFP or have failed to outline the requirements. It will then be a challenge to understand what each party expects of the other during the project.
These scenarios are exactly what you avoid when you create a good vendor selection process. Include checklists and timelines that make sure you create a repeatable process that protects against these mistakes.
Get Help with Vendor Selection in Washington DC
The Genau Group has a range of expertise in the commercial real estate realm, and we are specialized in the Greater D.C. area. We can help you understand issues around lease and sale brokerage services, purchases and sales, project management assistance, lease and audit recovery services, interior design services, investment sales and acquisition, lease renewal, residential relocation services, and much more.
Contact The Genau Group for more information on the vendor selection process in the world of real estate.