--- title: "Selecting Vendors: A 7-Step Process for Small Teams" description: "Selecting vendors comes down to seven steps: write the requirement, set knock-out criteria, request quotes from at least three suppliers on the…" canonical: "https://www.auravms.com/blogs/how-to-select-vendors-supplier-selection-process" author: "Dhrumil Barot" author_bio: "Dhrumil is a procurement veteran. Dhrumil built AuraVMS to take the manual chasing out of RFQs, supplier quotes and purchase orders." published: 2026-11-02 updated: 2026-11-02 image: "https://www.auravms.com/og.png" --- # Selecting Vendors: A 7-Step Process for Small Teams *By [Dhrumil Barot](https://www.auravms.com/about#founder) | Published November 2, 2026* > **TL;DR:** Selecting vendors comes down to seven steps: write the requirement, set knock-out criteria, request quotes from at least three suppliers on the same **TL;DR:** Selecting vendors comes down to seven steps: write the requirement, set knock-out criteria, request quotes from at least three suppliers on the same terms, normalise every quote to landed cost, score with weights fixed in advance, check the winner, then award and document. The lowest unit price is rarely the best supplier; the worked example below shows why. Selecting vendors is the process of choosing which external supplier will provide a good or service, based on criteria you set before the quotes arrive. For a small business the practical version is short: define what you need and what disqualifies a supplier, send one identical request for quotation (RFQ) to three to five suppliers, convert every response to total landed cost, score price, quality, delivery and terms with fixed weights, verify the top scorer, and record why you picked it. That supplier selection process takes days, not months, and it holds up when an owner, auditor or new hire asks "why this vendor?" ## What you need before you start - A written description of the item or service: specification, quantity, delivery location and required date. - A budget range, so you can spot quotes that are far off. - A list of five to ten possible suppliers from referrals, trade directories, past purchases and marketplaces. - One person who owns the decision, plus anyone who will use what you buy. - A spreadsheet or RFQ tool to collect quotes in one format. ## What are the steps to select a vendor? The vendor selection process below follows the same logic public buyers use under the US Federal Acquisition Regulation (FAR), scaled down for a team of one to ten people. ### Step 1: Write the requirement as a spec, not a wish Write down exactly what you are buying: part drawing or service scope, quantity, unit of measure, delivery address, required-by date, and any standard it must meet. A vague request gets quotes you cannot compare. Our [RFQ template quality checklist](https://www.auravms.com/blogs/rfq-template-quality-checklist-before-sending-suppliers) lists the fields suppliers most often ask about. ### Step 2: Set knock-out criteria and weights before you see prices Split your criteria into two groups: - **Knock-outs (pass or fail):** for example, can deliver by the required date, holds a required certification, accepts your payment terms, is not on a sanctions or exclusion list. - **Scored criteria (weighted):** price, quality, delivery and terms. A common small-team split is price 40%, quality 25%, delivery 20%, payment terms and service 15%. Fix the weights now. Setting them after you see the quotes is how personal preference sneaks back in. FAR 15.304 makes the same point for government buyers: evaluation factors must "support meaningful comparison and discrimination between and among competing proposals", and price must be evaluated in every source selection ([FAR 15.304](https://www.acquisition.gov/far/15.304)). ### Step 3: Build a shortlist and check basic eligibility Cut your long list to the suppliers that plausibly pass the knock-outs. FAR 9.104-1 gives a useful checklist of what a "responsible" supplier looks like: adequate financial resources, the ability to meet the delivery schedule, a satisfactory performance record, a record of integrity and business ethics, the necessary organisation and technical skills, and the right equipment and facilities ([FAR 9.104-1](https://www.acquisition.gov/far/9.104-1)). The same rule notes that a lack of performance history alone should not disqualify a new supplier, which keeps the door open for smaller vendors. Free checks worth running on any new supplier: 1. Collect IRS Form W-9, the "Request for Taxpayer Identification Number and Certification", from US suppliers ([IRS](https://www.irs.gov/forms-pubs/about-form-w-9)). 2. Search the supplier on the OFAC [Sanctions List Search](https://sanctionssearch.ofac.treas.gov/). 3. If you sell to government, check exclusion records on [SAM.gov](https://sam.gov/). 4. Ask for certificates you require (for example ISO 9001) and confirm them with the issuing body. ### Step 4: Send one identical RFQ to at least three suppliers Send the same RFQ, with the same quantity, delivery terms and deadline, to every shortlisted supplier. Ask them to break the price into unit price, tooling or setup, freight, and any surcharges, and to state lead time, payment terms and quote validity. If you rotate suppliers, invite at least one or two you did not ask last time. ### Step 5: Normalise every quote to landed cost Convert each response to the total cost of getting the order to your door: unit price times quantity, plus tooling, freight, duties and fees. Unit price alone is misleading, because suppliers move cost between lines. See our [cost breakdown analysis guide](https://www.auravms.com/blogs/cost-breakdown-analysis-supplier-pricing-procurement-guide) for how to ask for and read the lines. ### Step 6: Score with the weights you fixed Remove any supplier that fails a knock-out, then score the rest from 1 to 5 on each criterion and multiply by the weights. For price, a fair method is: lowest landed cost gets 5, every other supplier gets 5 x (lowest landed cost / their landed cost). ### Step 7: Verify the winner, award and document Before you issue the purchase order, call one reference, confirm lead time in writing and check that the quote is still valid. Then record the scores, the knock-out results and the reason for the award. Plan a review after the first deliveries; our [90-day post-award scorecard](https://www.auravms.com/blogs/vendor-evaluation-scorecard-90-day-post-award-review-template) is built for that. ## How do you score and compare vendor quotes fairly? Compare quotes fairly by scoring them on landed cost and the same weighted criteria, never on unit price alone. Here is a worked example: a small manufacturer needs 500 machined brackets delivered within 30 days. **The three quotes:** - **Supplier A:** $8.40 per unit, $350 freight, no tooling, 21-day lead time, net 30, ISO 9001 certified. Landed cost: $4,200 + $350 = **$4,550**. - **Supplier B:** $7.90 per unit, $600 freight, $800 tooling, 35-day lead time, net 30. Landed cost: $3,950 + $600 + $800 = **$5,350**. - **Supplier C:** $8.10 per unit, freight included, 14-day lead time, net 15, no certification, sample passed with one minor deviation. Landed cost: **$4,050**. Supplier B has the lowest unit price, the L1 quote if you rank on unit price. It also has the highest landed cost and misses the 30-day knock-out, so it is out before scoring. **Scoring A and C** (weights: price 40%, quality 25%, delivery 20%, terms 15%): - **Supplier A:** price 5 x 4,050 / 4,550 = 4.45; quality 5; delivery 4; terms 5. Weighted: 1.78 + 1.25 + 0.80 + 0.75 = **4.58**. - **Supplier C:** price 5; quality 3; delivery 5; terms 3. Weighted: 2.00 + 0.75 + 1.00 + 0.45 = **4.20**. Supplier A wins even though it is $500 more expensive than C on landed cost, because the certification and payment terms are worth more to this buyer than the price gap. If price mattered more (say 60%), C would win. That is the point of fixing the weights first: the decision follows from what you said mattered, not from which number looked best on the day. This is also the trap with automatic L1/L2/L3 price ranking. It is a useful first sort, but only when every quote is normalised to the same landed basis and knock-outs have already been applied. ## What criteria should you use to select suppliers? Use four scored criteria plus a short list of knock-outs. The FAR requires government buyers to evaluate price in every selection and to address quality through factors such as past performance, compliance with requirements, technical excellence and prior experience ([FAR 15.304](https://www.acquisition.gov/far/15.304)). For a small business that translates to: - **Price:** landed cost, including tooling, freight and surcharges. - **Quality:** certifications (ISO 9001 clause 8.4 requires certified companies to define criteria for selecting and monitoring external providers), sample results, defect history, references. - **Delivery:** quoted lead time against your required date, capacity, location. - **Terms and service:** payment terms, quote validity, warranty, responsiveness during the RFQ. - **Knock-outs:** sanctions screening, required licences or certifications, insurance, ability to meet the date. For strategic or hard-to-replace items, add financial stability and dependency risk. Peter Kraljic's 1983 Harvard Business Review article "Purchasing Must Become Supply Management" introduced the idea of matching effort to profit impact and supply risk ([HBR](https://hbr.org/1983/09/purchasing-must-become-supply-management)): a bottleneck part deserves a deeper check than office paper. ## How many vendors should you get quotes from? Get quotes from at least three suppliers. The FAR tells US contracting officers to "consider solicitation of at least three sources" for simplified acquisitions and, whenever practicable, to invite two sources not included in the previous solicitation ([FAR 13.104](https://www.acquisition.gov/far/13.104)). The same section bars soliciting quotes based on personal preference or only from well-known brands. Three is a floor that gives real price tension; five is plenty for most small-business purchases. More than that adds comparison work and rarely changes the outcome. ## How to verify the selection worked - Every quote in your comparison has the same quantity, delivery terms and validity date. - The winner passed every knock-out, and the record shows the check (W-9 on file, sanctions search date). - Someone else can rerun your scoring and get the same result. - After the first two or three deliveries, actual lead time, defects and invoiced price match the quote. ## Common mistakes and how to fix them - **Ranking on unit price:** fix by normalising every quote to landed cost before ranking. - **Changing weights after quotes arrive:** fix by writing weights into the RFQ file before sending it. - **Different specs to different suppliers:** fix by sending one RFQ document to all of them. - **Only asking suppliers you already know:** invite at least one new supplier each cycle. - **No record of why:** save the scores and the award reason with the purchase order. Collecting quotes by email and retyping them into a spreadsheet is where most small teams lose time and make errors. AuraVMS sends one RFQ to every supplier, lets suppliers respond without creating an account, lines up quotes side by side with automatic L1/L2/L3 ranking, and turns the award into a purchase order. AuraVMS starts at $4.99/month, billed annually. [See how quote comparison works](https://www.auravms.com/blogs/best-quotation-comparison-software-smb-2026-8-tools) or [try AuraVMS](https://www.auravms.com). ## FAQ ### What are the 5 key criteria for selecting a supplier? The five most used are price (landed cost), quality, delivery reliability, payment and contract terms, and supplier stability or risk. Weight them for each purchase rather than reusing one fixed formula. ### What is the difference between vendor selection and vendor evaluation? Vendor selection happens before the award and compares candidates on their quotes and credentials. Vendor evaluation happens after, and measures how a chosen supplier actually performs on delivery, quality and cost. ### Should you always choose the lowest bid? No. Choose the lowest bid only when price carries most of the weight and every bidder passes your knock-outs. In the example above, the lowest unit price came from the supplier with the highest landed cost and a late delivery date. ### How long should a vendor selection process take? For routine purchases a small team can run it in one to two weeks: a few days for the RFQ to be answered, a day to normalise and score, and a day to verify and award. Strategic suppliers justify site visits and a longer timeline. ### Can a new supplier with no track record be selected? Yes. FAR 9.104-1 says a lack of relevant performance history alone does not make a supplier non-responsible. Reduce the risk with samples, references from other customers and a smaller first order. ## About the author Written by [Dhrumil Barot](https://www.auravms.com/about#founder). Dhrumil is a procurement veteran. Dhrumil built AuraVMS to take the manual chasing out of RFQs, supplier quotes and purchase orders. [LinkedIn](https://www.linkedin.com/in/bdhrumil) | [X](https://x.com/fyidhrumil) ## Continue this topic - [Supplier quotation collection workflow](https://www.auravms.com/supplier-quotation-collection-software) - [Anonymous bidding explained](https://www.auravms.com/terms/anonymous-bidding) - [Supplier quotation evaluation](https://www.auravms.com/terms/supplier-quotation-evaluation) Source: https://www.auravms.com/blogs/how-to-select-vendors-supplier-selection-process