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.

S13 - Tender Evaluation [Plan and Process]

Lara Tookey

CONS6811

Tendering

» 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…

• 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.

Tendering 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.

Tender Evaluation Process

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.

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.

Tend

er E

valu

ation

Pro

cess

Tend

er E

valu

ation

Tec

hniq

ues

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

LOWEST PRICE VS LOWEST PRICE CONFORMING

The usual….. But flawed

» 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).

Lowest Price Conforming Tender (LPCT)

» 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.

WEIGHTED ATTRIBUTES

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

Relevant experience

Appreciation of the task

Past performance

Management and technical

skills

Resources

Management systems

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.

Pric

e Q

ualit

yQuality Price Trade Off

(QPTO)

Price Quality Method(PQM)

Includes Supplier Quality Premium

(SQP)

Alternative Tender Premium

(ATP)

QUALITY PRICE TRADE OFF (QPTO)

» 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

Pric

e Q

ualit

yQuality Price Trade Off

(QPTO)

Price Quality Method(PQM)

Includes Supplier Quality Premium

(SQP)

Alternative Tender Premium

(ATP)

PRICE QUALITY METHOD(PQM)

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?

ALTERNATIVE TENDER PREMIUM (ATP)

» 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 Tender 1 Tender 2 Tender 3

Total Criterion A, weight 40

Score 9 9 8

Weighted score

Total Criterion B, weight 25

Score 9 9 8

Weighted score

Total Criterion C, weight 15

Score 9 8 8

Weighted score

Total non-price criteria

Normalised total Non-Price score

Weighted non-price (80%)

Tender submitted $3,182,540 $2,762,590 $3,071,440

Normalised Price

Weighted Price (20%)

Totals

Tender Awarded to:

Non-Price Tender 1 Tender 2 Tender 3

Total Criterion A, weight 40

Score 9 9 8

Weighted score 3.6 3.6 3.2

Total Criterion B, weight 25

Score 9 9 8

Weighted score 2.25 2.25 2.0

Total Criterion C, weight 15

Score 9 8 8

Weighted score 1.35 1.2 1.2

Total non-price criteria 7.20 7.05 6.40

Normalised total Non-Price score

Weighted non-price (80%)

Tender submitted

Normalised Price

Weighted Price (20%)

Totals

Tender Awarded to: Tender 2

[Weighting x Score] / 100

Non-Price Tender 1 Tender 2 Tender 3

Total Criterion A, weight 40

Score 9 9 8

Weighted score 3.6 3.6 3.2

Total Criterion B, weight 25

Score 9 9 8

Weighted score 2.25 2.25 2.0

Total Criterion C, weight 15

Score 9 8 8

Weighted score 1.35 1.2 1.2

Total non-price criteria 7.20 7.05 6.40

Normalised total Non-Price score

7.20 x 10 / 7.20 7.05 x 10 / 7.20 6.40 x 10 / 7.20

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

Tender Awarded to: Tender 2