Evaluating supplier bids

This note sets out a method for evaluating supplier bids received in response to a tender or request for quotation. It applies the sourcing, evaluation and ethics domains of the CBA standard for procurement and supply management, and the conflict-of-interest principles of the compliance and risk standard. It is written for procurement professionals and for anyone who sits on an evaluation panel.

A working template accompanies the note: a weighted scorecard with individual and moderated scores and a total cost of ownership calculation.

Public bodies are usually subject to procurement law that prescribes parts of this process. This note does not describe the legal requirements of any jurisdiction, and should be read alongside them where they apply.

An evaluation can only be as good as the requirement it is measured against. Before issuing an invitation, confirm:

• the need, including whether it can be met by an existing contract or by changing demand;
• the specification, preferably describing the outcome required rather than a particular product or method, so that the market can offer alternatives;
• the quantity and duration, challenged rather than copied from the last contract.

Most of the value in a purchase is fixed at this stage. A specification written around one supplier's product narrows the competition before the evaluation begins.

Decide what will be evaluated and how much each element counts before any bid is seen, and include both in the invitation. Typical criteria include:

• quality and technical merit of the proposed solution;
• ability to deliver: capacity, experience and resources;
• service levels and support;
• risk, including financial stability and continuity;
• sustainability and social value, where relevant;
• total cost.

Weightings should reflect what matters for this purchase. A routine commodity may be evaluated largely on cost; a complex service may give most weight to quality and delivery. Fixing the criteria in advance, and applying them as written, is what distinguishes an evaluation from a rationalisation of a preferred choice.

Each qualitative criterion needs a scoring scale with a written description of what each score means. For example, on a scale of zero to five, the descriptions might run from "no response or does not meet the requirement" to "fully meets the requirement with evidence of added value". Without descriptors, different evaluators interpret the same score differently, and the result depends on who happened to evaluate.

The purchase price is one part of the cost. For goods and services with a life of more than a single transaction, build a total cost of ownership model covering:

• purchase or contract price;
• delivery, installation and implementation;
• training and change;
• operating costs, consumables and energy;
• maintenance and support;
• end-of-life costs, including disposal and the cost of switching supplier.

Ask bidders to price in the structure of the model, so that costs are comparable. Build the model before bids arrive, so that it is not shaped to fit one of them.

The panel should include people with the knowledge to judge each criterion — technical, operational and commercial — and a procurement lead to run the process. Every panel member should declare any conflict of interest before seeing the bids, and anyone with a conflict should be removed from the evaluation of the affected bid.

Keep commercial and technical evaluation separate where practical, so that knowledge of price does not influence the quality scores.

Each evaluator should first score every bid alone, against the published criteria and scale, recording a short justification for each score based on the content of the bid. The panel then meets to moderate: discussing differences in scores, referring back to the evidence and agreeing a consensus score with its rationale.

Moderation should change a score only by reference to what the bid actually says. A score should not move because an evaluator knows or prefers a supplier, or because the panel wants a particular overall result.

Where a bid is ambiguous, seek written clarification. Clarification may confirm what a bidder has offered; it must not allow a bidder to improve or change the offer, and the same opportunity should be given to every bidder in the same position.

Record the final scores, the rationale for each and the resulting ranking. The record should allow someone who was not on the panel to understand why the winning bid won. Offer unsuccessful bidders feedback based on the evaluation, explaining how their bid scored against each criterion.

• Criteria decided after bids are opened. The evaluation can then be shaped to any result.
• Price-only evaluation of a complex requirement. Cost moves out of the price and into the life of the contract.
• No scoring descriptors. Scores reflect evaluators' habits rather than bids' merits.
• Undeclared conflicts of interest. The evaluation is compromised even if the outcome would have been the same.
• Negotiation disguised as clarification. One bidder is allowed to improve an offer the others cannot.