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If you are a business that provides products or services to your clients, then you have probably come across the term "vendor of record" more than once. It is usually used on the context of being authorized to offer a certain client products or services. There is a large number of clients in the business world that only operate with vendors of record. The key to growing your business could be to get on as many lists as you can and become the vendor of record.
A vendor of record is a supplier that is authorized to offer products or services to a particular client. It is a concept that is commonly used by government agencies and larger corporations. For example, the Ontario Ministry of Government Services in Canada has a comprehensive Vendor of Record program that it requires of all of its vendors. In order to be able to do business with the province of Ontario, you need to be on its preferred vendors list.
There is often confusion between being a vendor of record and winning a competitive bid. A competitive bid situation usually arises when a company or municipality needs to spend a significant amount of money on a project. Some municipalities have specific financial guidelines on when a vendor of record can be used to purchase a product or service, and when the purchase needs to go out for bid.
When your company is a vendor of record for an entity, then that entity can purchase products or services from you without needing to go through a bidding process. In most cases, the application process to be a vendor of record requires the vendor to submit a price list each year for the products and services that will be offered. When the client decides that it needs to purchase a product or service, it just generates a purchase order based on the pricing from a vendor of record.
If you are not a vendor of record, then you will have to win competitive bids in order to do business with a corporate client or a municipality. Municipalities tend to have much more stringent rules about procurement which are governed, in large part, by local, state or federal laws. That means that a municipality must either buy from a vendor of record or the winning bid in a competitive bid situation.
Corporations have guidelines they use which involve a vendor of record system, but it can be much easier for individual departments to bypass the system and use the vendor they want. Even when a corporation puts out a competitive bid, it has the ability to throw out all bids and use the vendor that it wants.
If you want to do business with a municipality, then you will need to become a vendor of record. The process is usually very long and it can take months before you get approved or declined. The effort to become a vendor of record is well worth it because that gets you one step closer to being able to sell products and services to a large municipality or corporation, which can lead to lucrative financial results.