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​​Decide on your evaluation methodology

​You'll need to decide a rating scale to judge your criteria against, and an evaluation model to determine how you'll weight the criteria against each other.

1. Rating scale

Your rating scale tells the evaluation panel how to score criteria.

Use a 0-5 scale in most instances with the option of a 0-10 scale where you need more differentiation, eg:

Rating

Definition

Score

Excellent

Exceeds the requirement. Exceptional demonstration by the supplier of the relevant ability, understanding, experience, skills, resource and quality measures required to provide the services. Response identifies factors that will offer potential added value, with supporting evidence.

5

Good

Satisfies the requirement with minor additional benefits. Above average demonstration by the supplier of the relevant ability, understanding, experience, skills, resource and quality measures required to provide the services. Response identifies factors that will offer potential added value, with supporting evidence.

4

Acceptable

Satisfies the requirement. Demonstration by the supplier of the relevant ability, understanding, experience, skills, resource, and quality measures required to provide the services, with supporting evidence.

3

Minor Reservations

Satisfies the requirement with minor reservations. Some minor reservations of the supplier’s relevant ability, understanding, experience, skills, resource and quality measures required to provide the services, with little or no supporting evidence.

2

Serious Reservations

Satisfies the requirement with major reservations. Considerable reservations of the supplier’s relevant ability, understanding, experience, skills, resource and quality measures required to provide the goods / services, with little or no supporting evidence.

1

Unacceptable

Does not meet the requirement. Does not comply and/or insufficient information provided to demonstrate that the supplier has the ability, understanding, experience, skills, resource and quality measures required to provide the services, with little or no supporting evidence.

0

 

There are other kinds of rating scales you can use – see the three options in the section on How to score each submission in the template below.

2. Evaluation model

The evaluation model determines how you'll weight your evaluation criteria. There are five main ways to do this:

  • lowest price – if the procurement is very simple and price is the most important factor
  • simple score – if all the criteria have roughly the same degree of importance
  • weighted-attribute – if the criteria have different levels of importance
  • target price – if the scope of work is hard to define, or the budget is the main constraint
  • Brook's Law – if quality is the most important factor and price is not a key driver.

Lowest price

  1. Determine which offers meet the requirements.
  2. Look at the total price for each eligible offer.
  3. The lowest priced eligible offer is ranked first.

Use it when:

  • you're procuring goods rather than services
  • the strongest emphasis is on price and all of the criteria have the same importance.

This method is not recommended for complex procurements as it doesn't consider the relative importance of the criteria or judge value for money.

Simple score

  1. Score each offer against the criteria according to your rating scale.
  2. Add the total scores for each offer.
  3. The highest scored offer is ranked first on the merits.

Use it when:

  • the procurement is relatively simple
  • all of the criteria have roughly the same degree of importance
  • you're evaluating Registrations of Interest to select a shortlist as the first stage of a multi-stage process.

Weighted-attribute

This is the most common methodology used in public sector procurement.

  1. Start by ranking the criteria in order of importance.
  2. Decide a weighting for each — this is usually a percentage, with the total weightings for all criteria adding to 100%.
  3. Score each offer against the criteria and rating scale to obtain raw scores.
  4. Apply the weightings to the raw scores to obtain the weighted scores.
  5. Add the total weighted scores for each offer.
  6. The offer with the highest total weighted score is ranked first.

Example:

Criteria

Weighting

Raw Score

(out of 10)

Weighted score

Criterion #1

40%

8

3.2

Criterion #2

35%

7

2.5

Criterion #3

25%

9

2.3

Total weighted score (out of 10)

 8

Use it when:

  • criteria have different levels of importance
  • procuring goods or services.

You can treat price as one of your weighted criteria, or you can evaluate price separately.

If price is a weighted criterion

If price is a weighted criterion it is important to carry out some level of sensitivity analysis to ensure that the level of weighting is appropriate. Consideration should also be given to the risk of unreasonable and unrealistically low-priced offers achieving the highest overall weighted score where it is clear that the goods/services cannot be delivered within the quoted price.

Price is often not included as a weighted criterion in the procurement of social services.

If price is not a weighted criterion

Where price is not a weighted criterion, price information is usually kept from the evaluation panel until after the evaluation on the merits and scoring is finalised. There are a few ways to evaluate price in this case.

Average price
  1. Review the weighted scores and shortlist those offers that are clearly able to fully deliver against the requirements
  2. Calculate a median price using the prices for the shortlisted offers.
  3. Negotiate with the supplier or provider who has the highest-weighted score on the non-price components. Aim to achieve agreement at the median price or within a pre-determined % of the median price.
  4. If you cannot reach agreement on price, negotiate with the second-ranked supplier.

Continue until a satisfactory agreement is negotiated. A supplier that has been rejected from the process should not be recalled for further negotiations.

Example:

Short listed supplier

Total weighted score

Price

A

9

$145,000

B

8.5

$130,000

C

8

$100,000

total

$375,000

median price

$130,000

Value for money price

A variation on the above method that is often used in the social sector is to select a supplier based on non-price criteria and then negotiate with them on price considering value for money, rather than other offers.

  1. Negotiate with the supplier or provider who has the highest weighted score on the non-price components.
  2. Aim to achieve agreement at pricing the purchasing agency considers represents value for money.
  3. If you cannot reach agreement on price, negotiate with the second-ranked supplier.

Cost-effectiveness ratio

This method is purely mathematically based.

  1. The total cost of the offer is divided by the total of the total weighted score.
  2. The offer with the lowest cost-effectiveness ratio is selected as the best value for money.

Provider

Total weighted Score

Price

Cost-effectiveness Ratio

A

9

$100,000

1 : 1.1

B

9

$150,000

1 : 1.6

C

9

$200,000

1 : 2.2

D

5

$100,000

1 : 2.0

Value add price analysis

This model involves deciding on the basis of extra value added.

  1. Review the weighted scores and short list those offers that are clearly able to fully deliver against the requirements.
  2. Disclose the price for the shortlisted offers.
  3. Invite the evaluation panel to identify differences in added value between the offers and compare the relative prices. This discussion focuses on whether the added value is worth the additional cost.
  4. Ask the panel to reach a consensus on which offer represents the best value for money.

Target price

The target price model is useful when the available budget is the main constraint, or when it's genuinely difficult to define the scope of the work in the specification of requirements – in this case, the agency is likely to receive a range of offers with prices that are hard to compare and might exceed the available budget.

One solution is to include the available budget (the ‘target price’) in the RFP as a guide for defining the scope of the services, and then invite suppliers to specify what they can do for that price.

The focus of the evaluation is then on the quality, quantity and outcomes of the services to be provided rather than price.

Use it when:

  • it is genuinely difficult to define the scope of the requirements, and
  • there is a fixed budget.

Brook’s Law (two envelope approach)

The Brooks’ Law model is useful where quality is the most important factor.

  1. Offers are evaluated on the merits without price being disclosed to the panel.
  2. Only those suppliers who are clearly able to fully deliver against the requirements are shortlisted.
  3. The highest-ranked supplier is invited to negotiate. At this point the price for this supplier is disclosed. All other prices remain unopened.
  4. If the negotiation is successful the supplier is awarded the contract.
  5. If no agreement is reached, the second ranked supplier is invited to negotiate. At this point the price for that supplier is disclosed. All other prices remain unopened. The process continues until a satisfactory agreement is negotiated.

Use it when:

  • the strongest emphasis is on quality rather than price.

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