Reminder
» The main objective of the tendering process is to
ensure the “best fit” supplier is selected to supply
goods and/or services to the customer which
offers best value for money.
» Such a supplier should be sound commercially,
technically competent, financially sound and
perceived as best for the task.
Lara Tookey
CONS6811
Tendering
S13 - Tender Evaluation
[Plan and Process]
» The purpose of a tender evaluation is
to identify which bid offers the most economically
advantageous proposal based on
the criteria specified in the invitation to tender.
» Initial planning of a tendering process is essential
to achieving the desired outcome.
» This should consider how process fairness &
probity will be ensured
˃ And whether there is a need for a probity plan and/or
probity auditor.
Tender Evaluation Plan (provided by Client)
1. Select procurement method
2. Prepare tender documentation
3a. Invite / call for tenderers
3b. Develop a tender list
4. Receive & open tenders
5. Evaluate tenders
6. Accept & award tender
Before anything can happen for the MC…
Tendering Process
• This section provides details of the various
steps through the tendering process from
the release of the RFT documents,
meetings with Tenderers before and after
the close of tenders and actions to be
taken under certain circumstances.
Tender Evaluation Process
• This section details the methodology in
assessing both the Non-Price and Price
criteria of the tenders and the process in
identifying the Preferred Tenderer.
The Q’s you ask should help identify …..
» The factors that will guide which evaluation
methods to use,
» How you weight the categories in which you are
seeking information, and ultimately,
» What questions you should ask to get the
information you want.
Tender Evaluation Process
Which evaluation
model to use?
Lowest Price
Conforming
• Simple or small projects
which are relatively
straightforward to deliver
Price Quality
• Projects which are more
complex & need more
information to decide
which bidder has the best
capabilities in relation to
the project’s challenges.
Tender Evaluation Techniques
Lowest Price conforming
Weighted Attribute method
Brook’s Law method
Target Price method
Quality-Price trade off method
» A brief overview of each from the
The usual….. But flawed
Lowest Price Conforming Tender (LPCT)
» The lowest-price conforming model is the most
basic model, and has the strongest emphasis on
price. With this model, the lowest-priced tender or
proposal is selected once a prerequisite level of
quality is met.
» It is applicable where additional quality over and
above a minimum threshold is not important (that
is, it does not offer greater value for money).
» LPCT is the most basic procedure and the one with
the strongest emphasis on price.
» There should be no procedure which awards
purely on the basis of price with no regard to
quality
˃ Only on extensive repeat business
+ ie Cell C Towers
+ Water mains
» The attitude of LPCT to quality is that of a
minimum standard
˃ So long as minimum standards of capability, experience
and track record are met, the contract is awarded to the
lowest priced tender.
LPCT – what could be hidden?
» The fact that the pass level is relatively low and
that the lowest price is being favoured often
means the Contractor may be only marginally
qualified to the do the job and may also have
underpriced.
» Therefore, at the very least, there should be
additional contract management costs to
˃ Ensure quality workmanship,
˃ Overcome poor management or
˃ Prevent attempts to cut corners
» There is also an increased risk of ‘claimsmanship’
as the underpriced Contractor attempts to make
up margins on claims for extras.
LPCT Dangers
» The reality is often that the lowest price is
submitted by the one who has
˃ Misunderstood the documents
˃ Failed to appreciate the difficulty of the work
˃ Has deliberately priced low with the intention of making
up on claims.
The PARADIGM SHIFT…..
» The weighted attributes (WA) process seeks to
balance the trade-off between price and quality in
a manner that is transparent….
“justice must not only be done,
it must be seen to be done”
R v Sussex Justices, Ex parte McCarthy (1924)
» The two-envelope system, where the evaluation of
non-price attributes is undertaken without
knowledge of the prices, contributes to the
transparency of this method.
Purpose of criteria
» In order to assess tenders, a system of criteria
intended to encapsulate the competence of the
tendering organisations ability to undertake a
particular project is used to rate tenderers’ bids.
Number of criteria
» Generally no more than five criteria would be
used.
» The criteria must be:
˃ Relevant to the project;
˃ They must be able to be evaluated in a meaningful way;
and
˃ They must be able to be used to allocate a score to the
tender submissions.
The criteria are usually
selected from the following:
Price
Appreciation
of the task
Management
and technical
skills
Management
systems
Relevant
experience
Past
performance
Resources
Methodology
There may be
others
Relevant Experience
» Previous experience needs to be assessed in
relation to the fields of expertise required to
achieve the intended outcomes of the project.
» Recent experience is more valuable than historic
experience.
» The tenderer’s previous experience in:
˃ technical areas comparable to the tendered project;
˃ the scale of past projects; and
˃ the role undertaken within those projects should be
considered.
» Information required should include a list of
relevant projects undertaken and for each project
you would provide:
˃ Description and relevance to the tendered project;
˃ Role of the tenderer;
˃ Project cost; and
˃ Duration of project.
Past Performance
» You are assessing the tendering organisation’s
performance in completing past projects to;
˃ the quality standards required,
˃ time performance,
˃ within budget,
˃ claims history,
˃ project management, and
˃ product value.
» Extension to the contact completion date and
claims for variations also give an indication of
performance capability.
» Satisfaction of previous client regarding the
management of the project and project outcome
provide useful subjective information on the
performance of the tenderer.
» The information required should include the
following information on each project:
˃ Project name;
˃ Client’s project manager (+ contact details);
˃ Quality standards, target performance levels;
˃ Tender price, variations and final cost;
˃ Completion date and extension of time granted; and
˃ Details of OHS records.
Technical Skills
» The competence of key management, professional
and technical personnel that the tenderer
proposes to employ on the project needs to be
assessed with particular emphasis on the skills and
experience in technical areas comparable to the
project.
» The information required should include the
following details of the proposed project team:
˃ Names
˃ Function
˃ Technical expertise
˃ CV’s to be provided
Management Skills & systems
» The availability within the tenderer’s organisation
of personnel with appropriate management skills
together with effective management systems and
methods appropriate to the successful
management of the project.
» The information required should include the
following:
˃ Quality systems
˃ Project management tools
˃ Programme software
˃ Environmental management systems
˃ OHS management systems
Resources
» The equipment, including facilities and intellectual
property, which the tenderer proposes to use on
the project need to be assessed.
» Competency vs capacity
˃ Know how vs can do!
˃ I know how to build a road, but all I have is a shovel!
Methodology
» The procedures or innovative methods the
tenderer proposed to use to achieve the specified
end results, or the special processes detailed in
tender documents.
» The tenderer should be able to demonstrate
capability to bring the contract to a satisfactory
conclusion by describing the methodology of
approach to accomplish the project’s required
outcomes
» The information required should include the
following:
˃ Program of works
˃ Key performance indicators
˃ Division of works into subcontracts
˃ Innovative procedures to be used
˃ Reporting and recording systems
˃ Quality plan
Price
» Normally 60%, but has been known to change.
˃ Lowest for tenders requiring innovative input and
methodology.
Waitakere City Council
» Award of Contract No. EW10003C - Stormwater
Renewal at Swanson Road, Stage 4.
Price Quality
Quality Price Trade Off
(QPTO)
Price Quality Method
(PQM)
Alternative Tender
Premium
(ATP)
Includes Supplier
Quality Premium
(SQP)
» The QPTO process recognises that if Tenderer A is
better than Tenderer B, it is worth paying extra for
Tenderer A.
» Becomes a ‘value’ trade off.
˃ You could apply an average to the price & then assess
what has been done to ‘add value’.
+ Ie gold plated taps – is this really adding value?
» However, not the best method…..
˃ Looks at averages against an estimate – what if your
estimate is incorrect
Price Quality
Quality Price Trade Off
(QPTO)
Price Quality Method
(PQM)
Alternative Tender
Premium
(ATP)
Includes Supplier
Quality Premium
(SQP)
Designed to evaluate tenders when the quality of the supplier is very
important, and you are prepared to pay more for that quality.
Price Quality method
» Is a combination of WA with QPTO.
» PQM virtually identical to WA method but includes
for “Supplier Quality Premium” or SQP
˃ Introduces weighting for better workmanship
Supplier Quality Premium review
» Allows for the weighting of workmanship.
˃ Principal is prepared to pay that amount extra for the
premium supplier
˃ Eliminates the issues faced with ‘what if’ the price is
cheaper but the quality is worse?
» Designed to make the evaluation of alternative
tenders simpler and, hopefully, thereby encourage
innovation.
» The ATP is the extra amount the Principal is
prepared to pay for a higher quality product
offered, compared to the minimum standard
product specified in the RFT.
ATP – under PQM
» NB – ATP applies to an alternative tender offering a
higher quality or lover of output than that
requested by the RFT
˃ Added value
» Confusion arises as most tender evaluators are
more familiar with alternative designs that offer
the same outcome for a lower price.
» When ATP is used, it must be calculated in a way
that is rational.
˃ Should be discussed and highlighted in TEP.
» This means essentially that any incremental cost
benefit rules must be applied.
˃ The benefit applied by the alternative tender must be 3
times the ATP (0r whatever the current incremental B/C
ratio is).
Final stage in PQM
» The final stage of the evaluation is the opening of
the price envelopes.
» For each tender, the tenderer’s SQP and ATP (if
applicable) are deducted from the tender price.
» The resulting lowest price is the preferred tender.
Remember (using PQM)
» To avoid double counting the benefits and paying a
premium twice:
˃ The non-price attribute evaluation and SQP focuses on
the qualities of the supplier.
˃ The ATP focuses on the product offered by a supplier.
Non-Price
Score
Tender 1
Tender 2
Tender 3
9
9
8
9
9
8
9
8
8
$3,182,540
$2,762,590
$3,071,440
Total Criterion A, Weighted score
weight 40
Score
Total Criterion B, Weighted score
weight 25
Score
Total Criterion C, Weighted score
weight 15
Total non-price criteria
Normalised total Non-Price score
Weighted non-price (80%)
Tender submitted
Normalised Price
Weighted Price (20%)
Totals
Tender Awarded to:
Non-Price
Tender 1
Tender 2
Tender 3
9
9
8
3.6
3.6
3.2
9
9
8
2.25
2.25
2.0
9
8
8
Total Criterion C, Weighted score
weight 15
1.35
1.2
1.2
Total non-price criteria
7.20
7.05
6.40
Score
Total Criterion A, Weighted score
weight 40
Score
Total Criterion B, Weighted score
weight 25
Score
Normalised total Non-Price score
Weighted non-price (80%)
Tender submitted
[Weighting x Score]
/ 100
Normalised Price
Weighted Price (20%)
Totals
Tender Awarded to:
Tender 2
Non-Price
Tender 1
Tender 2
Tender 3
9
9
8
3.6
3.6
3.2
9
9
8
2.25
2.25
2.0
9
8
8
Total Criterion C, Weighted score
weight 15
1.35
1.2
1.2
Total non-price criteria
7.20
7.05
6.40
7.20 x 10 / 7.20
7.05 x 10 / 7.20
6.40 x 10 / 7.20
Normalised total Non-Price score
10
9.79
8.88
Weighted non-price (80%)
8
7.83
7.10
Tender submitted
$3,182,540
$2,762,590
$3,071,440
Normalised Price
8.60
10
8.99
Weighted Price (20%)
1.72
2
1.79
Totals
9.72
9.83
8.89
Score
Total Criterion A, Weighted score
weight 40
Score
Total Criterion B, Weighted score
weight 25
Score
Tender Awarded to:
Tender 2