Vetting the Viability of Vendors

A supplier that doesn’t deliver can be as dangerous as a customer that can’t pay

Entrepreneur magazine published a very good article on the importance of “vetting” suppliers and what some companies are doing to decrease the probability that they will be left holding the bag when some supplier doesn’t come through. As the Downtown Hotel is once again having to consider a passing of the baton to yet a third developer, the “vetting” process is of importance to the governance of the City of Evansville as they endeavor to finish off the MLK Entertainment Complex. Here are some excerpts from the article:

“Really smart business owners are just as careful about vetting their suppliers. A vendor who fails to deliver the goods or services you need to satisfy your own clients can be just as detrimental to your business as a customer who fails to pay you.”

“Yet during its first several years of operation, Englewood suffered through as many as a half-dozen instances annually in which subcontractors failed to perform. In one case, Taylor recalls, an electrical subcontractor went out of business mid-project, forcing Englewood to pay $25,000 to the subcontractor’s supply house for materials Englewood had already purchased from the electrician. It also had to spend an extra $20,000 to bring in the next-lowest-bidding electrician to finish the work.”

“before issuing a contract to a subcontractor, Englewood typically asks it for a recent bank statement showing, among other things, the size of the subcontractor’s credit line. It asks for references from other general contractors for whom the subcontractor has done work, and for documentation of its bonding capacity. It asks about the subcontractor’s “experience modification rate”–a metric that measures its annual insurance claims relative to its insurance premiums”

“If you’ve been lax in vetting your vendors, take time soon to figure out which are most critical to your organization and how you’d recover if they were suddenly unable to meet your needs.”

The City County Observer is very interested in the process used by the City of Evansville to qualify all vendors buy particularly we are interested in the downtown convention hotel project. Have an members of the ERC, the City Council, or other advisors ever brought up the subject of “vetting”? Assuming they have what were the recommendations?

IS IT TRUE that if the City of Evansville enters into another agreement that is not vetted and bonded that it will be the third strike?…that the citizens of this city deserve and pay for much more competence than we are getting?

Link to full story:

http://www.entrepreneur.com/management/operations/article205782.html