Local Government Procurement

Methods of Evaluating Price in Tenders – Part 2

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Methods of Evaluating Price in Tenders – Part 2

This month we will continue explanation of the many methods to evaluate and compare offers. You will recall we listed the following methods in our February article:

• Qualitative narrative

In this edition, we cover three more options:
• Matrix comparison (Comparative assessment & ranking)
• Inverse cost
• Brookes Law

Matrix comparison (Comparative assessment & ranking)

This is likely the most common approach used in local government. Each offer is ranked against each criterion.

Non-price criterion are first scored e.g. 1 to 10 with panel comments to justify the score. Similarly, price
is then assessed. Ideally individual evaluators determine opinions prior to a group discussion and final
agreement as to each tenderer’s score. (as compared to a set of scoring tables with pre-set commentary).
The initial score is based purely the assessor’s opinion.

Inverse cost

This is a very common scoring method, but anecdotal feedback tells me it results in more Court cases
than any other. This method is more analytical and compares the lowest tendered price with the price of
each bid.

The lowest tendered price is divided by each tender price then multiplied by the maximum score. The
lowest tendered price will be awarded maximum score. Higher prices will be scored proportionately
lower. Scores are often converted to a percentage and then considered in relation to the non-pricing
rankings.

Evaluators need to be on the lookout for particularly low-ball or collusive pricing as it can undermine the
process.

Brookes Law

This method is used for more complex or high $ value tenderers. It is used where quality is most important and relies on the two envelope bid system i.e. tenderers submit price in one envelope and the non-price details in a separate envelope.

Evaluators assess non-price details first. (Any bid scoring less than 35% on a criterion is eliminated.) Once non-price scoring is completed, only the pricing envelope for the highest rating tender is opened. Clarifications if necessary are undertaken, references checked and negotiations commenced with that tenderer only.

If you decide to accept that tender, then all other tenders are rejected and the envelopes containing their prices remain unopened.

You can look forward to further pricing assessment methodology next month!

by Phill Scott, Chief Procurement Officer, Local Government Procurement

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