Procurement: Prepare for the best

The UK public sector expenditure was more than £735bn in 2014. A significant amount of that money will have been spent via regulated procurements for public contracts, run in accordance with the EU procurement rules (currently the Public Contracts Regulations 2015 in England, Wales and Northern Ireland).

EU rules dictate that tenders for public contracts are awarded to the “most economically advantageous tender”, either on a lowest cost basis, or using a best price-quality ratio.

Most public sector bodies will opt for the best price-quality ratio and create an evaluation methodology that underpins the procurement process and aims to select a tender that fulfils all of their requirements in terms of price and quality.

An industry has built up around the creation of evaluation methodologies, which can be extremely complex and include the navigation of numerous formulae and gateways for selection of the winning bid. Nevertheless, these evaluation methodologies are often adopted by the client without it first confirming that they will produce the result it requires. The client is then disappointed when the winning bid (and/or bidder) is not quite what it expected or wanted.

• This “surprise” at the end of a procurement can be easily avoided by some careful forethought and planning at the beginning of the process, and a savvy client may consider the following:
• Undertake a dry-run of your evaluation methodology. Will it produce the result you require or are there sections that need tweaking to achieve the desired outcome? Undertake a trial scoring exercise on a couple of mock bids (or re-run past tenders from the last time this contract was put to the market) and feed the results through the evaluation methodology: does it produce the expected results?
• Consider the message your evaluation methodology presents to the market. Bidders will look past the flowery wording at the beginning of your procurement documents and see what emphasis the evaluation matrix puts on price - your brief may emphasise the need for a high-quality, end-user focused, social-value filled tender, but if you are awarding 60% for price, bidders will quickly see that price is the deciding factor and concentrate on that instead.
• Understand what bidder behaviour you are incentivising by adopting a particular evaluation weighting or methodology. Are you doing enough to prevent bidders from submitting an abnormally low or undeliverable price? Lowest-price-equals-highest-score tendering will always produce a race to the bottom in terms of price unless the overall price/quality split is so heavily quality-biased that it neutralises the price element of the tender.
• Confirm your evaluation split remains as stated and is not undermined by the evaluation methodology adopted. If you adopt a 60/40% price/quality split and award full price marks to the lowest price, but do not weight the winning quality mark back up to 60% and pro-rata the rest, the overall price/quality split is not 60/40% and price will end up being comparatively more important than you have stated in the tender documents. Does this undermine the headline evaluation message?
• Ensure that your evaluation team understands the procurement priorities, the key evaluation criteria and compliance issues arising: all team members should be sufficiently qualified in the relevant specialisms so that they are able to discern the difference between a poor/good/excellent answer. Evaluation can also be skewed in the event that the evaluation team bring their prejudices against certain bidders to the evaluation process: if the scoring criteria are not applied consistently or fairly across all bid proposals, this may adversely affect the ultimate rankings - for all bidders, particularly if a comparative pricing model is adopted.
• Avoid using an “off-the-shelf” evaluation methodology produced by a consultant or in-house team that has been used for other clients or contracts without ensuring that it fits the priorities for your contract.

Evaluating tenders is a science masquerading as an art and public-sector clients need to delve into the detail to ensure they get what they need out of their evaluation methodology. Criteria and formulae can be consistently applied and the outcome should be predictable and therefore produce a fit-for-purpose result. Clients are selling themselves short (and wasting time in procurement) if they fail to give this most important part of the procurement process the attention and detailed analysis it deserves.

Rebecca Rees is a procurement partner in law firm Trowers & Hamlins