This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide.

By Paul Emanuelli

When bids are evaluated on the basis of price alone for a single price category, the assessment of the low bid is typically a straightforward exercise. However, this process becomes more complex when there are multiple pricing categories and where anticipated volumes need to be added to the equation to calculate the total cost for each bid.

The evaluation process becomes even more complex when proposals are evaluated on the basis of best overall value and qualitative non-price criteria are factored into the supplier ranking. In these situations, evaluators must combine their price evaluation with their evaluation of other qualitative factors to arrive at a total score for the particular proposal. This requires the conversion of pricing information into a score that can be added to the other scored categories. In order to score proposals in a transparent and defensible fashion, a purchasing institution should establish a formula for converting a proponent’s pricing information into a score that can be tallied with the other scored categories.

The Jamaican Handbook of Public Sector Procurement Procedures provides a clear method for this scoring process. The Handbook recommends a three-step process where qualitative factors are evaluated first. Only those proposals that meet a minimum threshold on quality proceed to the price evaluation. The other proposals are returned with the pricing envelope sealed. Pricing information for the remaining proponents is scored in accordance with a predetermined mathematical formula. In the third step, the scores for the qualitative and cost categories are added together to arrive at a final score for the proposal. Highlights from the Handbook’s recommendations, which include the prescribed price-scoring formula and an illustrative example, are set out following.

Government of Jamaica
Handbook of Public Sector Procurement Procedures
5.1.2.10 Evaluation of Financial Proposals: Cost Considerations
After the evaluation of quality is completed, the procuring entity shall notify those consultants whose proposals did not meet the minimum qualifying mark or were considered to be non-responsive to the RFP and TOR, indicating that their unopened financial proposals should be collected.
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The total score shall be obtained by weighting the quality and cost scores and adding them. The weight for the “cost” shall be chosen, taking into account the complexity of the assignment and the relative importance of quality. The weighting shall also depend on the degree of innovation sought by the procuring entity. Where, however, unusual approaches are sought, for instance to provide designs for a building of a type that is seldom required or where a wide variety of design solutions may exist, then the technical quality of the proposals should be accorded more importance. The greater the intellectual input required the more the evaluation should be weighted towards technical excellence. As a general rule, the weighting for cost should normally not exceed 30 points out of a total score of 100. The proposed weightings for quality and cost shall be specified in the RFP. The consultant obtaining the highest total score shall be invited for negotiations.
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For those firms that have passed the technical evaluation, the National Contracts Commission recommends the use of the following methodology to determine the proposal with the highest total score:

Legend:
TS – Total marks (out of 100) for technical (quality) criteria
q – Quality Weighting (%)
c – Cost Weighting (%)
LT – Lowest Tender
XT – Other Tenders

Step 1 — Technical (quality) Weighting
Quality Score (Q) =  TS / 100  x q

Step 2 — Cost Score Weighting
Cost Score (C) =  LT / XT  x c

Step 3 — Total Score
Total Score = Q + C

A Typical Example Is:
The Weighting for Quality is : 75%
The Weighting for Cost is : 25%

Step 1 – Technical (quality) Weighting

Proposal     Score     Weighted Quality Score

A                    96             96/100 x 75 = 72

B                    93             93.5/100 x 75 = 70

C                   100           100/100 x 75 = 75

Step 2 – Cost Score Weighting

Proposal      Adjusted Financial Offer     Weighted Financial Score

A                   $ 8,288,108.00                       7,956,584.00/8,288,108.00 x 25 = 24

B                   $ 7,956,584.00                        7,956,584.00/7,956,584.00  x 25 = 25

C                   $ 8,999,562.00                        7,956,584.00/8,999,562.00 x 25 = 22

Step 3 – Total Score

Proposal      Total Score

A                     72 + 24 = 96

B                     70 + 25 = 95

C                     75 + 22 = 97