SMI Supplier Diversity Playbook

Introduction

Supplier diversity in the RFP process, including sample contract language

A key strategy to achieve diverse spending goals is to embed the goals into purchasing practices and policies, from soliciting diverse suppliers in bids to evaluating contract performance. Including diversity goals, commitments, and questions in RFPs provides organizations with a formal framework for considering supplier diversity as a factor in decision making. Identifying and embedding contracting language that includes organizational priorities for supplier diversity further amplifies the message that it’s an important part of how supply chain conducts business.

Three Key Steps to Success

If you’re just beginning the journey of integrating supplier diversity within the contracting process, the top three priorities include:

 

Step one — Require inclusion of diverse suppliers in the bidding process.

 

One initial step to ensure that diverse suppliers are included in the bid process is to make it a requirement. Inclusion as a priority and measurement of the effort over time ensures that all supply chain team members engage with the supplier diversity work group to meet this requirement.

 

Step two — Add language around diverse procurement to RFPs and contracts.

 

By including language that indicates supplier diversity is a priority in the bid process, suppliers can include information aligned with the goal in their bid response. The purchasing decision makers can evaluate bids including reference to whether suppliers have met supplier diversity requirements.

 

When collaborating with non-diverse suppliers, set an expectation through the RFP that non-diverse suppliers may be required to report on their supplier diversity performance. Include goals in the RFP template for achieving tier two diversity goals

and a plan for implementing those goals. Require documentation in RFPs of the suppliers’ plan for diversity purchasing. If awarded the bid, build the plan and reporting process into the contract. Add the organization’s supplier diversity goals into the contract. Leverage the supplier results to evaluate how well a business delivers diverse vendor goals.

 

One method to measure the success of your supplier diversity program is through counting the inclusion rate of diverse suppliers in the RFP process and the number of contracts awarded to diverse suppliers. Follow up with diverse suppliers to let them know why they did not receive the bid, if interested in the feedback. Require purchasing staff to track and report on their efforts with diverse suppliers.

 

Step three — Communicate supplier diversity goals and priorities to supply chain partners and collaborate with them to align strategies

 

Writing diverse goals into RFP and contracting documents establishes that supplier diversity is a priority to your organization. Communicating supplier diversity goals to existing supply chain partners

acknowledges supplier diversity as an important business strategy to partner. Examples of methods to build awareness with supply chain partners can be found here.

Revisit Chapter 5 and 6 for more details on building partnerships with diverse businesses and supplier chain partners respectively.

Embed Supplier Diversity into Contracting Documents

Integration of diverse businesses into the sourcing process may require additional flexibility in business processes. Many diverse suppliers have not been afforded the opportunity to bid on contracts and aren’t familiar with the process. Similarly, a small business may not have the legal resources or the bandwidth for lengthy master service agreement (MSA) language. In both circumstances, a commitment to being flexible and communicative while a diverse supplier is navigating the process will set them up for success.

 

Supply chain integrators, GPOs, distributors, dining service contractors, and other industry partners can help to meet diverse procurement goals, especially when embedded in contracts and discussed during business reviews. This visual outlines tactics to integrate supplier diversity throughout the contracting process.

Examples of strategies to achieve supplier diversity goals in the contracting process include:

• Unbundle contracts and carve out opportunities for new diverse vendors.
  

• Leverage long-term contracts with distributors, aggregators, and construction general contractors to achieve procurement goals.
  

• Leverage upcoming capital projects, large projects, and contract opportunities.
  

• Engage the expertise and purchasing power of existing industry partners.
  

• Explore majority-minority contracts and subcontracting to diverse suppliers. Additional considerations for industry partners can be found here.
  

Learn more about additional benefits of a majority-minority partnerships for diverse businesses here.

For industry partners, when provider hospitals communicate supplier diversity as a priority, answer that call with concrete strategies to sub-contract with diverse businesses. Learn more about additional considerations for industry partners here.

Reinforce Supplier Diversity Through the Bid Process

The following categories are key to evaluating how well your procurement practices integrate supplier diversity into the bid process: diverse supplier development, net payment terms and invoicing system, and procurement targets. To determine key areas of focus when creating specific policies and practices for your organization leverage Questionnaire 1. Internal evaluation of your procurement policies and practices (Link to Table). Key barriers to diverse suppliers can be found throughout the bid process. Below are examples of what to explore within your own organization.

The bid process provides an opportunity to evaluate the purchasing practices of your institution by asking pointed questions on how supply chain measures and award business and any flexibility in contracting terms.

• Explore if diverse supplier development includes the organization’s current efforts to engage with diverse suppliers.
• Confirm if net payment terms and invoicing systems provide more clarity on the payment process, timetable, and types of payment opportunities available.
• Evaluate if procurement targets include supplier diversity goals established by the department and the method of accountability and reporting.
• Identify the employees working within the community and any organizational incentives aligned with achieving supplier diversity goals.
• Determine which third-party certifications are prioritized and accepted. This offers more clarity for diverse suppliers to identify and prioritize certifications if, for example, they qualify for multiple such as MBE and WBE.

Understanding your organization’s current bid participation can help identify where to focus supplier diversity program goals. Utilize Table 1. Evaluate your Bid Process

to gain a deeper understating. For example, are diverse vendors already bidding on contracts? Are diverse vendors submitting bids, but aren’t being awarded a contract? If there is a high bid participation in the bidding process and a low number of contracts awarded to diverse businesses, it’s worth further exploration.

 

Understanding current and future contracting opportunities will provide a bid calendar to leverage when identifying potential diverse suppliers to engage. Table 2. Evaluate upcoming contracting opportunities

provides a template to document upcoming contracting needs. Key contract attributes to capture include contract end dates, bid timeline, and noting what contracts will be expiring soon and when to start planning for the next contract. The goal of capturing this information is to either:

 

1) Identify opportunities for new diverse supplier in that space or,

 

2) Work with an existing supplier on subcontracting with diverse businesses

 

Adding supplier diversity questions into the RFP process supports the supply chain team in evaluating bids based on their supplier diversity programs. Suppliers self-report on their performance, making the process viable to implement consistently throughout your organization. Leveraging RFP questions is one aspect of evaluating how well a business aligns with your diverse vendor goals. This evaluation is considered when businesses apply for future contracts. Supporting resources in this chapter include a questionnaire for suppliers and a Likert scale of answers which aligns with the weighted scorecard. Questionnaire 4. RFP Questionnaire for Suppliers Utilize this template within your bid process to create consistent questions of all suppliers. Leverage responses to measure alignment with organizational supplier diversity goals.

 

Criteria to evaluate suppliers’ efforts towards supplier diversity

 

To evaluate supplier diversity performance and efforts, it’s important to have a clear scoring process. Creating consistent RFP criteria with clear alignment towards organizational supplier diversity goals creates a strong message. This questionnaire demonstrates to the potential suppliers that supplier diversity is a priority and outlines key measures required to be successful at implementation. See Table 1. Supplier RFP Response Scoring Criteria and Questionnaire Four. RFP Questionnaire.

Decision Making Tools to Support RFP Criteria and Scoring

Including supplier diversity in your decision-making process through consistent evaluation of suppliers during the contracting process is best practice. A weighted scorecard can be leveraged by purchasing decision makers to categorize suppliers’ efforts and compare supplier diversity programs. While a template is provided

, it’s encouraged to review with your supplier diversity workgroup to determine what areas are of the largest priority to your organization’s supplier diversity goals. For example, if you’re prioritizing diverse supplier development, you might add more points to those questions.

 

The recommended process below allows the purchasing or supplier diversity professional to evaluate various supplier programs and supplier diversity initiatives.

1. To begin, during the bid process, request all vendors complete Questionnaire 4. RFP Questionnaire for Suppliers.
2. Use supplier responses and compare each to Table 1. Supplier RFP Response Scoring Criteria to determine their vendor score.
3. Add up responses for each question in the RFP response as shown in Table 2. Supplier Diversity RFP Response Scoring Criteria and Examples
4. Input the Supplier Diversity score into the Weighted Scorecard as outlined in “Example of a weighted Scorecard.

The weighted scorecard criteria are outlined in Table 2. Weighted Scoring Criteria. Table 2 is a tool to evaluate the supplier diversity program of vendors by purchasing decision-makers. Below is an example of a weighted scorecard, including evaluation categories and highlighted Supplier Diversity.

 

Evaluation Category	Weight	Score Supplier A	Supplier A Weight	Score Supplier B	Supplier B Weight
Safety and Quality	5	20	100	15	75
Cost	4	22	88	20	80
Service	3	9	27	9	27
Supplier Diversity	2	12.5	25	11	22
Innovation	1	1	1	2	2
Total		64.5	241	59.6	206

 

Example of weighted scorecard

 

Creating standard language to evaluate the performance of an industry partner’s supplier diversity program provides a consistent method to implement your program. Included within this section are tools to support the RFP process, evaluation of bid process and scoring criteria.

 

A successful supplier diversity program includes engagement throughout the purchasing process, collaboration within the diverse business ecosystem, and clear goals for supplier diversity as a priority. The three primary methods to integrate supplier diversity into the contracting process include.

• Require participation of diverse firms in the bidding process.
• Add language around supplier diversity procurement practices into RFPs and contracts.
• Communicate priorities to supply chain integrators to communicate supplier diversity as a priority and collaborate.