This clause requires that before entering into a contract for goods or services, the buyer must obtain competitive quotations (price quotes) from multiple suppliers to ensure value for money and fair pricing. The clause typically specifies how many quotations must be obtained (commonly three or more), the process for requesting them, and how they must be compared and evaluated. It may also establish thresholds—for example, requiring competitive quotations for purchases above a certain dollar amount while allowing single-source purchases below that threshold. This matters because competitive quotations protect against overpaying, reduce the risk of collusion or favoritism, and demonstrate prudent financial management. For organizations subject to audit or regulatory oversight, documented competitive quotation processes provide evidence of responsible stewardship of funds and can defend against accusations of wasteful spending.
Establish clear internal policies defining the dollar thresholds that trigger the competitive quotation requirement and document your quotation process in writing before you need it. When requesting quotes, provide identical specifications and requirements to all suppliers to ensure fair comparison; keep records showing the date requests were sent and received. Create a simple evaluation matrix comparing price, quality, delivery terms, and supplier reliability, and document your selection rationale. If you cannot obtain the required number of quotations (for example, because only one supplier offers a specialized product), document this exception and obtain written approval from management before proceeding. Be cautious about repeatedly using the same supplier without re-tendering periodically, as this can appear to circumvent the competitive quotation requirement.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause requires that before entering into a contract for goods or services, the buyer must obtain competitive quotations (price quotes) from multiple suppliers to ensure value for money and fair pricing.
Why should I care about this clause?
The clause typically specifies how many quotations must be obtained (commonly three or more), the process for requesting them, and how they must be compared and evaluated.
What are my options?
It may also establish thresholds—for example, requiring competitive quotations for purchases above a certain dollar amount while allowing single-source purchases below that threshold.
How does this affect small businesses?
This matters because competitive quotations protect against overpaying, reduce the risk of collusion or favoritism, and demonstrate prudent financial management.