Correctly dividing a procurement object into lots directly determines the level of competition, price and quality of the final outcome. What are qualitative, quantitative and geographical lots? The experts at Etenders.ge explain.
Introduction
At the procurement planning stage, one of the most important decisions is how to divide the procurement object into lots. Correctly selected lots directly determine the level of competition, price and quality of the final outcome.
Did you know that the correct selection of lots is one of the important prerequisites for a successful commercial procurement?
What is Lot Division?
Lot division means dividing the procurement object into several independent parts (lots), for each of which bidders can submit proposals separately.
This makes it possible to:
— increase competition
— allow different types of companies to participate
— optimally distribute risks
Three Main Directions of Lot Division
1. Qualitative Lotting
"Qualitative" lot division involves dividing non-homogeneous procurement objects into different lots. For example:
— IT hardware and software
— construction and engineering services
The main principle: supplier specialisation. If different components are supplied by different types of companies, combining them into a single lot reduces competition.
2. Quantitative Lotting
"Quantitative" lots involve dividing a large-volume procurement into several medium-volume parts. It is important to bear in mind that every market has an "optimal volume" — neither too small nor too large.
A correctly selected volume:
— increases the number of participants
— reduces prices
This can be determined through analysis of past tenders and the use of statistical data.
3. Geographical Lotting
"Geographical" lots involve dividing the procurement object according to the place of delivery. For example:
— provision of services in different regions
— logistics-dependent procurement
This approach is particularly effective when transportation costs are significant and local suppliers exist.
Why is Lot Division Important?
The correct structure ensures:
— increased competition
— involvement of small and medium-sized businesses
— price optimisation
— risk diversification
International Practice
Lot division is widely used in various countries. For example, different strategies were used in the centralized procurement of office paper:
— Austria — 3 geographical lots
— Italy — 12 geographical lots
— Ireland — 2 quantitative lots
— Finland — 12 qualitative lots
— Portugal — 4 combined (geographical + qualitative) lots
These examples show that there is no "single correct model" — everything depends on the market and the specifics of the procurement.
(Source: Dimitri N., Piga G., Spagnolo G. (2006). Handbook of Procurement)
How to Choose the Right Lots? — A Practical Approach
1. Market analysis — how many potential suppliers are there? what is their specialization?
2. Volume assessment — what is the optimal contract size?
3. Logistics considerations — does geography matter?
4. Past experience — what were the results of similar tenders?
5. Market communication — prior consultations and "open door days".
Risks of Incorrect Division
— lots that are too large → small and medium-sized businesses cannot participate in the tender → competition decreases
— lots that are too small → the attractiveness of the procurement decreases → competition decreases
— incorrect grouping → exclusion of specialized companies
Conclusion
Lot division is one of the most powerful strategic instruments in commercial procurement. Its correct application enables the purchasing organization to:
— increase competition
— obtain better prices
— ensure high quality
The optimal result is achieved when the lot structure is based on the real capabilities of the market, data analysis and thoughtful planning. Ultimately, lot division is not merely a technical decision — it is a strategic choice that determines the success of the tender.
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Author: Aleksander Chkhikvishvili
