Proxima examines the systems currently in place for awarding public sector contracts, and asks whether there are alternative options that achieve better value
Anyone who has been involved in competitive procurement processes in the public sector will be well-versed in the “most economically advantageous tender” (MEAT) basis for awarding contracts. Whilst MEAT has traditionally been considered a balanced and fair approach, there is a growing pool of criticism about how evaluation processes are designed, which can result in poor value outcomes and challenges to the process.
In this article, we examine some of the most common ways of assessing costs and explore some alternative options that may achieve better value outcomes, when used appropriately.
Let’s imagine a scenario…
You’ve been asked by a stakeholder to run an OJEU procurement for a complex professional service. You have designed the quality:price scoring ratio as 60:40. You have a variety of responses, but the best quality is not the best cost (thus, overall ‘value’?). What do you do…? What would your stakeholder want? What is fair by the supplier-market and under Public Contract Regulations 2015…?
How does the ‘MEAT’ method of evaluating tender submissions help us in this scenario?
The basic principle of MEAT is that cost and quality both need to be assessed using a fair, objective and transparent process that demonstrates a clear outcome. Buyers therefore need to tie together the two components and demonstrate the trade-offs between them. This is usually applied through an arithmetic calculation, allowing scores for quality and price to be drawn together in an overall evaluation of each bid. To do this, the price quoted by bidders needs to be translated into a point score.
In the majority of public sector bids which Proxima is invited to respond to, and that we have seen or delivered in working with our clients, the formula consistently applied to score cost is a Chartered Institute of Public Finance and Accounting (CIPFA) standard scoring mechanism that uses the calculation below:
This score is then added to the total Quality score (also multiplied by the appropriate weighting) to give the total score for each bid.
In our scenario, let’s imagine the following scores are allocated across three bidders:
In the above scenario, Bidder B wins with 82.3 points.
However – the outcome in our scenario can be changed by a seemingly irrelevant bid…
Let us consider the above example, but now with a fourth bidder, D, that submits a bid with a price of 250, and is awarded a quality score of 20. The price scores and overall totals change as follows:
Bidder A now wins. Bidder B (the winner without supplier D as competition) has put in the identical bid but its bid is marked as being less economically advantageous than that of Bidder A even though neither of these bids has changed. The relative advantage of Bidder A over Bidder B (and vice versa) is determined by an essentially irrelevant factor, namely the existence and score of the bid put in by Bidder D.
Of course, depending on the rules of the bid, Bidder B might in the second scenario claim that Bidder D’s bid was abnormally low or failed to meet a relevant quality threshold so that it should not be treated as a valid bid. Whatever the rights and wrongs of this debate, the fact remains that the outcome of the contest between the two highest quality bids turns on the price of the lowest price bid.
Furthermore, if the weighting of cost against quality is changed to give greater emphasis to quality, there are instances where a bid of 2, 3 or even 4 times the value of the lowest acceptable bid might still win. This clearly would not look like value for money to the taxpayer.
What alternatives are employed by other EU countries?
One of the key features of EU procurement law is that the system is designed to produce predictable and transparent outcomes. The expectation is that the stated tender evaluation system should generate an answer in a manner that is protected from inappropriate interference and should be seen as predictable by bidders. It should also be possible for those wanting to contract to understand in advance how the choice of one evaluation model or another would affect the sort of offer that is likely to be accepted. It is strange, therefore, that a process so commonly applied should so often operate unpredictably and be possible for suppliers to ‘game’, as showed above in our scenario.
In fact, in some EU jurisdictions (notably in France and Portugal) the scoring mechanism above is considered inappropriate in all circumstances.
These issues are real and pressing for contracting authorities planning their procurements and attempting to predict the outcomes based on their published evaluation methodology. They also raise difficulties for bidders trying to establish a winning bid strategy.
Proxima's most recent report - Why 'Savings' is a dirty word in government - is available here.
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