As the field of Procurement is still evolving and scholars don’t seem to subscribe to universal definition of concepts such as what constitute the procurement cycle, this article does not make reference to any textbook or academic publication. It is based on years of experience from practicing Public and Project Procurement and takes into consideration bid evaluation procedures and practices applicable under several Public and Project Procurement legal and regulatory frameworks.
Definition of Bid Evaluation
Bid evaluation is the organized process of examining and comparing bids to select the best offer in an effort to acquire goods, works and services necessary to achieve the goals of an organization. The best offer recommended as a result of bid evaluation is referred to as the lowest responsive evaluated bid. It may also be called the most economically advantageous tender (MEAT).
Bid evaluation is the responsibility of a body known as the Bid Evaluation Panel. How this panel is called depends on the organization. Synonymous terms are quotation review panel, bid review board or tender review committee, to name a few. Most procurement Legal and Regulatory Frameworks require it to be an ad-hoc body with at least three members knowledgeable in Procurement, with technical expertise in the specific item being procured and a representative of the user entity. For example, Section 30 of the Public Procurement and Concessions Act of the Republic of Liberia (PPCA-2010) states that evaluation of bid and recommendation for award is solely the function of the Bid Evaluation Panel. Prior to evaluation of bids, the evaluation criteria are predefined and included in the bidding documents. The bid evaluation panel evaluates bids based on the predefined criteria only and recommends award to the lowest responsive evaluated bid.
Lowest Responsive Evaluated Bid versus Lowest Priced Bid
Newbies to Public Procurement are usually confused when it comes to the difference between lowest responsive evaluated bid and lowest priced bid. A lowest responsive evaluated bid, as the phrase suggests, is a bid that has been examined and determined to be responsive to formal qualification requirements, evaluated in detail, found to be compliant with pre-defined evaluation criteria, and found to have the lowest price after price evaluation and comparison farmbrazil.com.br. On the other hand, the lowest priced bid is the bid with the lowest price read-out at the public bid opening event without being evaluated. Therefore, the bid recommended for contract award may not necessarily be the bid with the lowest read-out price.
Evaluation criteria are the standards against which bids are evaluated. Generally, evaluation criteria can be categorized into three categories including (i) mandatory criteria, (ii) weighted criteria and (iii) weighted criteria with mandatory elements (UNDP, 2016).
Mandatory criteria are used in straightforward bid evaluation methods where they are rated as pass/fail, responsive/non-responsive or comply/non-comply. They are usually used in evaluation for goods procurement, but may also be used for the procurement of services and infrastructure works. The mandatory criteria are the first criteria against which bids are evaluated in order to eliminate bids that do not conform to these requirements (UNDP, 2016).
Weighted criteria are criteria which can be measured in terms of degree of responsiveness. The scale used to measure the degree of responsiveness depends on the procurement method and category of procurement. Usually this applies to the evaluation of services.
Weighted criteria with mandatory elements are criteria that have mandatory minimum requirements defined and are measured above that minimum requirement (UNDP, 2016); for example, a requirement may be set for a consultant to be fluent in at least two international languages and a rated score may be assigned for persons with additional international language capabilities, if the additional language adds value to the requirement.
Stages of the Bid Evaluation Process
I will classify the bid evaluation process into four basic stages including (1) preliminary examination for responsiveness to formal qualification requirements, (2) evaluation for compliance with technical requirements, (3) price/financial evaluation and (4) post qualification/due diligence.
- Preliminary Examinations for Responsiveness to Formal Qualification Requirements: During preliminary examination, bids are examined to ensure they are from eligible companies or countries, that the bid is submitted with all requirements, that bid securities (when required) are valid, and that tax and other legal and commercial requirements are met. All bids determined non-responsive at this stage are not considered for the next stage.
- Evaluation for Compliance with Technical Requirements: At this stage, the panel evaluates for compliance with specified quality (specifications). They also look at issues such as the bidder’s experience, delivery schedule, compliance with quantity specified, works schedule, after sale services, warranty and other requirements specified in the bidding documents. These are, however, not fixed but predetermined based on the particular case. Bids that do not comply with the technical requirements are not considered for price/financial evaluation. Before price evaluation, all bids that are not responsive would be listed and clear reasons recorded for their not being eligible for further evaluation.
- Price/Financial Evaluation: At this stage, the panel examines the offered price for computational errors and, depending on the procurement type (goods, services or work), takes into consideration factors such as provisional sums and discounts, etc. Where bids are priced in more than one currency, all currencies are converted to a single currency for evaluation based on exchange rate from a specified source, as stated in the bidding documents. The corrected/evaluated prices are then compared and bids ranked in order beginning with the lowest responsive evaluated bid. A price reasonableness analysis is also done to ascertain that the price of the recommended bidder is fair given the prevailing market conditions. Most organizations do not see price reasonableness analysis as a mandatory evaluation requirement, but it is implied that it should be done; however, the Millennium Challenge Corporation’s Program Procurement Guidelines (MCC PPG) requires that this should be formally done (see MCCPPG P1.A.1.18).
- Post Qualification/Due Diligence: This activity applies to the lowest responsive evaluated bid. For some organizations, where prequalification of bidders was done, verification is done on the lowest responsive evaluated bidder to ascertain that such bidder still complies with the prequalification requirements. Where prequalification was not done, post qualification is done based on criteria specified in the bidding documents. The North American Development Bank, for example, requires this. Where there is no prequalification, this simple check is done based on qualification criteria defined in the bidding documents. Other organizations, such as the Millennium Challenge Corporation (see MCC PPG P1.A.2.70, P1.A.2.71) and the Asian Development Bank, waive post qualification where prequalification was done.