2.7.6 What criteria should I use to award the contract?

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The award of the contract takes place after the evaluation of the tenders submitted by the suitable candidates, i.e. by the candidates meeting the qualitative selection criteria.

Alternatively, the evaluation of tenders at the contract award stage may only take place using one of the following two criteria (award criteria):

Most economically advantageous tender (MEAT).
Lowest price.

In the event that the criterion chosen is that of the MEAT, the individual criteria to be used in identifying the most advantageous tender should be then specified.

These individual criteria must be linked solely to the scope of the specific contract and, depending on the particular case, may refer to the following:

Price
Quality
Aesthetic and functional features
Efficiency
After-sales service
Technical assistance
Date of delivery
Environmental performance
Lifecycle cost, etc.

A good practice for evaluating tenders in order to select the most economically advantageous tender is that of the two-stage evaluation process (technical evaluation and financial evaluation). In this case, the selection of the most economically advantageous tender takes place through the following steps:

Technical evaluation, during which marks are given to the technical merit of tenders on the basis of individual criteria (other than those related to the price offered). The definition of the individual criteria and their relative weights must be included in the tender documents.
Financial evaluation, during which the relative cost of each tender relative to the lowest price offered is calculated.
Final ranking of tenders, established on the basis of the aggregate marks of tenders as these result from weighting the technical value (technical evaluation mark) against the price offered (relative cost) for each tender. The weighting factor to be used for weighting the technical value against the price offered must be defined in the tender documents.

The following example explains the way in which the two-stage evaluation process is used to select the most economically advantageous tender.

 

Example 2-3: Using the two-stage evaluation process for selecting the most economically advantageous tender

Step 1: Technical evaluation

The Table below presents the criteria chosen and their corresponding weighting factors.

The weighting factors for all criteria are expressed as per cent rates and thus they add up to 100.

Each criterion is given a mark ranging from 80 to 120 (supplies contract), with the following rationale:

A mark of 100 is given in cases where all the requirements of the Tender Documents regarding the particular criterion are fully met.
The mark given may be increased up to 120 in cases where all or some of the requirements of the Tender Documents are more than fully met.
The mark given may be lowered down to 80 in cases where the requirements of the Tender Documents are not fully covered, provided that the Tender has been considered acceptable and the deviations have been considered minor.

 

Evaluation Criteria

Weighting

factor (%)             

(1)

Criterion

mark

(2)

Weighted

mark

(3)=(1)Χ(2)

Criterion 1

20

85

17

Criterion 2

35

110

38.5

Criterion 3

45

100

45

Total technical evaluation mark (Τ)

100.5

 

Step 2: Financial evaluation

For marking financial offers, the relative cost C of each Tender is calculated as follows:

Financial Offer of the Lowest Bidder

C        =        ------------------------------------------------------------------- x 100

Evaluated Financial Offer

where the Evaluated Financial Offer is the total amount for which the Tenderer intends to carry out the contract, and the Financial Offer of Lowest Bidder is the price of the tender with the lowest financial offer.

If the lowest price is €300,000, then a tender with a price of €320,000 will be marked as follows:

Κ = {(300,000) / (320,000)} Χ 100 = 93,75

The financial offer of the lowest bidder is given a mark of 100.

 

Step 3: Final ranking of tenders

Finally, the Tenders are ranked in decreasing order of their aggregate mark L, obtained by applying the formula below:

L =  Τ * n + C * (1-n)

where:

Τ  = the tenders technical evaluation mark

C  = the relative cost of the financial offer

n =  the weighting factor used to weight the technical value of the contract against the price offered.

In the above example, if the weighting factor chosen is 80%, then the final mark is:

L = (100.5 Χ 0.80) + (93.75 Χ 0.20) = 99.15

 

In concluding, the decisions concerning the planning of the contract award stage which the Contracting Authorities should take at the level of formulation of the evaluation strategy are the following:

Selection of award criterion.
Weighting of the technical value of the contract against the price offered (only in cases where the award criterion chosen is that of the most economically advantageous tender).

Whereas the decisions proposed to be taken during the tender documents preparation phase are the following:

Selection of individual award criteria (only in cases where the award criterion chosen is that of the most economically advantageous tender).
Selection of weighting factors for the individual criteria (only in cases where the award criterion chosen is that of the most economically advantageous tender).

Instructions on how to address these two issues are given in Chapter 3 of the Guide.

The figure below presents all the decisions which must be taken for planning the contract award stage, and indicates the level at which they are taken.

 

Figure 2-8: Decisions of the contract award stage and level at which they are taken

 

Selection of award criterion

Contracting Authorities may award public contracts following an open, restricted or negotiated procedure (with or without publication of a contract notice), using only two alternative criteria:

The most economically advantageous tender
The lowest price.

If the procedure selected is the competitive dialogue, the contract may be awarded only to the most economically advantageous tender. The decision on the selection of the most suitable award criterion depends mainly on the way in which the scope of the contract to be awarded will be described in the tender documents.

Public contracts whose scope is detailed in a binding manner in the tender documents do not allow candidate economic operators to plan different solution proposals, which would justify the need for evaluating their technical merit in order to select the best tender using the criterion of the most economically advantageous tender. In such cases, selection of the lowest price as the award criterion seems to be the best solution.

Therefore, when deciding on the method to be used for developing the technical specifications and during their actual development, we should always keep in mind that these decisions will greatly influence the selection of the award criterion. As a general rule, we can say this: the more significant the opportunity provided to economic operators to influence through their tenders the planning and the results of the project, the more attractive the criterion of the most economically advantageous tender becomes compared to the criterion of the lowest price.

The Table below presents typical examples regarding the use of the two award criteria.

 

Table 2-24: Examples of using the two award criteria

Public works contracts

Use of the lowest price as the award criterion is a common and good practice for works which are put out to tender after their corresponding detailed designs have been developed.

In contrast, in the case of works put out to tender as design-built contracts or of works put out to tender as lump-sum contracts that make no use of bills of quantities and rely on output-focused specifications, the criterion of the most economically advantageous tender seems to be the best practice.

Public supplies contracts

A common practice in public supplies contracts is to use the criterion of the lowest price, as in most cases Contracting Authorities are in a position to know precisely what products they need and to provide detailed descriptions of their features.

The criterion of the most economically advantageous tender would be a good practice in cases where the Contracting Authority decides to specify the minimum requirements for all or some of the key features of the products it intends to procure, so as to allow candidate economic operators to differentiate their tenders by offering products with superior features. The Contracting Authority may also allow candidate economic operators to differentiate their tenders in terms of the delivery time.

Finally, in the case of public supplies contracts that involve significant and specialised product installation and/or maintenance and/or user training activities, a good practice is to award these contracts using the criterion of the most economically advantageous tender.

Public services contracts

In the case of public services contracts, given that in most cases it is relatively difficult for Contracting Authorities to determine the scope of the services in a way that will prevent candidate economic operators from interfering with the planning and output of the contract, it would seem that the criterion of the most economically advantageous tender is a good practice in general.

There are of course cases of public services contracts where the criterion of the lowest price starts to become an attractive option. Indicative examples of such cases would be public contracts for cleaning services for buildings, publishing services, transport services etc., where the Contracting Authorities are often in a position and prefer to specify themselves the contract scope at a level of detail, based on which candidates are only required to acknowledge the specifications in their tenders and differentiate them only in terms of the price offered.

 

Weighting the technical value of the contract against the price offered

Weighting the technical value of the contract against the price offered is done by selecting the weighting factor which is appropriate in each case, as presented in detail in the above example of using the two-stage evaluation process.

In other words, it is necessary to select the appropriate factor n which will determin the final ranking of tenders in decreasing order of their aggregate mark L:

L =  Τ * n + C * (1-n)

where:

Τ  = the tenders technical evaluation mark

C  = the relative cost of the financial offer

n =  the weighting factor used to weight the technical value of the contract against the price offered.

High weighting factors “n” (over 80%) effectively lead to the contract being awarded to the economic operator whose tender has the highest technical value, while low weighting factors “n” (less than 60%) effectively being to transform the criterion of the most economically advantageous tender into a lowest price criterion.

Put simply, the weighting factor n determines how much extra money the Contracting Authority is prepared to “pay” in order to award the contract to an economic operator whose tender is of a higher technical value. The definition of the appropriate weighting factor n (according to the requirements of every contract) is one of the key parameters that contribute to the achievement of best value for money (BVFM).

The example below presents the way in which the weighting factor functions.

 

Table 2-25: Functioning of the weighting factor

Assuming that the weighting factor chosen to weight the technical value of the contract against the price offered is n=80%, then the fraction n/(100-n) = 80/20 = 4 shows that we have decided to accept a higher price by up to 4% in order to achieve an increase of the technical value by 1%, or a higher price by up to 8% for an increase of the technical value by 2%, a.s.o.

In other words, if a financial offer is higher by 4.1% (4.1 > 4) than another one while its technical value (technical evaluation mark) is lower by 1%, then the tender with the cheaper price and lower technical value will be preferred.

In contrast, if a financial offer is higher by 3.9% (3.9 < 4) than another one while its technical value (technical evaluation mark) is lower than 1%, then the tender with the higher price and higher technical value will be preferred.

Similarly, if the weighting factor is n=60%, then the fraction expressing the weighting of the value of the technical solution against the price offered is n/(100-n) = 60/40 = 1.5, i.e. it is significantly reduced. Thus, the additional percent rate on the offered price which the Contracting Authority is willing to accept in order to award the contract to economic operators whose tenders are of a higher technical value is also significantly reduced.

In order to be able to compare the results of the final ranking of tenders using the weighting factors of 80 and 60, we present the above examples also in the case where the weighting factor chosen is 60.

if a financial offer is higher by 1.6% (1.6 > 1.5) than another one while its technical value (technical evaluation mark) is lower by 1%, then the tender with the cheaper price and lower technical value will be preferred.

In contrast, if a financial offer is higher by 1.4% (1.4 < 1.5) than another one while its technical value (technical evaluation mark) is lower than 1%, then the tender with the higher price and higher technical value will be preferred.

To assist Contracting Authorities in defining the weighting factor to be used for weighting the technical value of the contract against the price offered, the Table below lists the key factors which as a rule lead to the selection of higher weighting factors.

Table 2-26: Factors leading to the selection of higher weighting factors

Contracts with specialised scope, for which significant experience is not available in the market and therefore the Contracting Authority is willing to accept a higher price in order to ensure their successful implementation.
Contracts the result of which is crucial and extremely important for the Contracting Authority. This importance may be the result of:
oSignificant benefits from the implementation of the contract.
oSignificant adverse consequences from the unsuccessful or delayed implementation of the contract.
oLarge number of direct or indirect beneficiaries.
oThe nature of the scope of the contract, which may concern e.g. interventions in socially sensitive areas.
oNeed for compliance with obligations and commitments undertaken at the national level.

 


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