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Key takeaways
- Sole sourcing means only one supplier can supply the item or service. Single sourcing means you choose one supplier although others exist. The two carry different risks and need different evidence.
- Valid reasons include patents, unique technical compatibility, urgent need from an unforeseen event and a follow-on to an earlier award where changing supplier would cause real harm.
- Write a justification before award. A memo written after the fact looks like an excuse.
- Test the claim. "Only one supplier" is often "only one we know". Ask the market before you accept it.
- Manage the dependence afterwards: price checks, exit options and a plan to create alternatives.
Free PDF: Sole source justification memo template. Get it below
A hospital laboratory runs a diagnostic analyzer that accepts only the manufacturer's own reagent cartridges. When the contract comes up for renewal, a manager asks why no one has ever gone to tender. The honest answer is that nobody else makes a cartridge that fits. That is a real sole source. A different manager, at a different company, buys fasteners from one factory because the founder knows the owner. That is a habit, not a sole source, and calling it one does not make it so.
Both cases are invented. Telling them apart is the first skill this guide teaches.
Sole sourcing is buying from one supplier because it is the only one able to provide the item or service. It differs from single sourcing, where one supplier is chosen from several available, and it normally requires a written justification because competition is skipped.
How do sole sourcing and single sourcing differ?
| Feature | Sole sourcing | Single sourcing |
|---|---|---|
| Why one supplier | Only one can supply | You chose one although others could |
| Competition | Not possible | Possible, but not used |
| Typical reason | Patent, proprietary technology, unique compatibility | Quality, relationship, simplicity, volume discount |
| Main risk | Weak position on price, total dependence | Supply failure, price drift |
| Key control | Written justification and price checks | A plan B and regular market testing |
Many sources use the two terms loosely. We separate them because the response differs. With a sole source you manage dependence. With a single source you can still reopen competition when you choose to.
What are valid reasons for sole sourcing?
- Patent or intellectual property. The supplier holds rights that nobody else can license.
- Technical compatibility. The item must work with equipment already installed, and only the original maker supplies parts.
- Unique expertise. One firm has the know-how, for instance a specialist who designed the system you run.
- Urgency from an unforeseen event. A breakdown or emergency leaves no time for a bid. This is a narrow case. Poor planning is not an emergency.
- Follow-on work. Changing supplier mid-project would cause unacceptable cost, delay or risk.
Public sector rules often list the permitted grounds and require notices when direct awards are used. The UK Procurement Act 2023, in effect since 24 February 2025, requires notices at each stage of a covered procurement. If you buy for a public body, check the rules that apply to you before using any of the grounds above. For private firms, the internal policy sets the standard, and our procurement policy guide covers how to write it.
How do you test the claim?
- Ask the market. Publish a short notice or send a request for information describing the need in functional terms. If another supplier responds, you did not have a sole source.
- Check the specification. Is the need written around one brand? Reword it by function and see who can meet it.
- Ask the requester why. Often the real reason is familiarity.
- Check for substitutes. A different design, a part from another maker or a changed process may remove the dependence.
- Record what you found. The record is the evidence if anyone later asks.
Our guide to how to choose a supplier covers choosing among competing suppliers. This page is for the case where the choice has already narrowed to one.
Free PDF
Sole source justification memo template
A memo template with the six sections an approver and an auditor expect, a market test checklist and a dependence management plan.
- Six section justification memo
- Market test checklist
- Price reasonableness prompts
- Dependence management plan
What goes into a justification memo?
| Section | What to write |
|---|---|
| Need | What is being bought, value, duration |
| Reason for one supplier | The specific ground, with evidence such as a patent number or technical statement |
| Market check | What you did to confirm no other supplier exists, and the result |
| Price reasonableness | How you know the price is fair: past prices, cost breakdown, comparable items, supplier cost data |
| Risk and mitigation | What happens if the supplier fails, and what you will do about it |
| Approval | Name, role and date of the approver, not the requester |
The price section is where memos are weakest. Without competition you have no market price. Ask for a cost breakdown, compare with past prices and similar items and negotiate. A sole source supplier knows it holds all the cards. Preparation is your counterweight, and our procurement negotiation guide covers it.
How do you manage the dependence afterwards?
- Cap the term and add exit rights. Avoid long lock-ins with no ability to leave.
- Index prices to something external. A formula tied to a published index is easier to defend than an annual negotiation.
- Ask for open book pricing where the contract allows it.
- Hold the right to technical data or escrow where you depend on proprietary software or designs.
- Keep a watch on the market. Review each year whether an alternative has appeared.
- Build an alternative where the risk justifies it. Qualify a second source for critical items, even at a small cost.
McKinsey's 2025 survey of 100 companies found 39 percent were pursuing dual sourcing for components or raw materials in response to disruption. Moving from one source to two is a common response when dependence is costly, and it works best when planned well before the crisis.
What mistakes do teams make?
- Accepting the requester's word. Test the claim.
- Writing the memo after the work has started.
- Treating urgency as a reason when the cause was late planning.
- Forgetting to review. A sole source in year one may not be one in year five.
- Overlooking supplier consolidation, which is a choice to reduce suppliers and is not the same thing as having only one.
For how sole sourcing fits into wider risk, see procurement risk management. For the plan, see procurement strategy.
Sources
- McKinsey, supply chain risk survey: 100 companies, December 2025. 39 percent pursuing dual sourcing.
- Brabners, Procurement Act 2023 key reminders: in effect 24 February 2025, notices at each stage.
- The valid reasons, test steps and memo layout are editorial summaries of common practice. Public sector rules differ by jurisdiction.
Frequently asked questions
What is sole sourcing?
It is buying from one supplier because it is the only one able to supply the item or service. It normally requires a written justification because competition is skipped.
What is the difference between sole sourcing and single sourcing?
In sole sourcing only one supplier can provide the item. In single sourcing you choose one supplier although others could supply. The risks and controls differ.
When is sole sourcing justified?
Common grounds are patents, unique technical compatibility, unique expertise, genuine urgency from an unforeseen event and follow-on work where changing supplier would cause real harm.
What should a sole source justification include?
Include the need, the specific reason with evidence, the market check, how you know the price is fair, the risk and mitigation, and approval by someone other than the requester.
How do you reduce the risk of sole sourcing?
Cap the contract term, add exit rights, index prices, seek open book pricing, hold rights to technical data, review the market yearly and qualify a second source for critical items.