How do you evaluate bids and tenders?
According to Peter Smith, director of Procurement Excellence, writing in SM, some buyers believe using a structured approach to evaluating bids is a “waste of time”.
“They might say applying a scoring process is meaningless and it should come down to judgment, but that approach brings a number of problems,” he continues – not least of which that if you’re in the public sector you could be challenged by a supplier and ultimately taken to court.
And in any case a degree of transparency in the public sector is now mandatory.
Smith goes on to point out that even those who use a formal scoring process should consider that the impact of using a slightly altered appraisal system is likely to result in a completely different conclusion.
“I recently saw a big procurement project where the entire supplier selection hinged on how cost was scored as part of the evaluation model. In this instance there were two acceptable vendors, both with strong bids; with a slightly different scoring scheme it could have gone the other way.”
Smith outlines several approaches for buyers to consider then concludes: “it would be good to see more debate and work – academic or practitioner – in this area”: so what’s your view? What advice do you have for peers? What approach do you take?
![[Bloglines]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/bloglines.png)
![[del.icio.us]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/delicious.png)
![[Digg]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/digg.png)
![[Facebook]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/facebook.png)
![[Google]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/google.png)
![[LinkedIn]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/linkedin.png)
![[Twitter]](http://blog.supplymanagement.com/wp-content/plugins/bookmarkify/twitter.png)
The best solution to evaluating bids is a blend of judgement and quantified assessment. Rate each bid using a scoring system to obtain an indication of the suppliers’ ability to meet your requirements. Never include price. You can then compare the relative merits of each bid with the relative costs and make an informed decision about the best option – and even use this information to drive out the best deals from the best suppliers.
David F, thanks for the comment, – in the private sector your method might work – although it is still open to manipulation.
For instance (and this is a real example) the IT Director I knew who used that process to make sure his favourite firm won bids; ‘favourite’ based on who took him to the most extravagant sporting event that year!
In the public sector, perhaps unfortunately, ‘informed decisions’ just don’t cut it legally I’m afraid!
(Peter Smith – article author)
In the Public sector, our contract awards are so fundamentally affected by the criteria we choose and publish that I’m amazed this doesn’t attract more attention.
The difficulty is also that there is no certain way of knowing what the “correct” method is in each case. Perhaps the closest we can hope to get is by a sensitivity analysis before and after a tendering exercise to understand what the outcomes might have been, and the benefit of experience.