Tender Analysis

Government agencies should aim to achieve value for money whenever they procure building and construction industry services. This requires clear project definition and selection of the best procurement method for the project. 

The Government’s tendering processes aim to ensure that the most suitable contractor is selected for each project. The processes are based on three principles: probity, fairness and value for money.

A tender evaluation process using weighted criteria should be adopted to determine the tender that offers the best value. This process is utilised where the performance of the contractor is of crucial importance to achieving the required 
Tender Analysis
outcome.

The weighted criteria method of tender evaluation requires that selection criteria in addition to price are included in tender documents and form part of the tender assessment process. 

A system of weighting the selection criteria is used to compare tenders and identify the tenderer with the best performance record in terms of time, cost and value for money.

PRINCIPLES 
The weighted criteria tender assessment process is based on the following principles: 
• selection criteria that reflect the critical elements of the project and that can be assigned a weighting; 
• weightings that reflect the relative importance of selection criteria; 
• scores that are based on information submitted with the tender bid; and 
• normalising the non-price criteria and the tender price before applying the weightings to allow for the true effect and advantage of the weighting system.

The system recognises contractors who have better performance records in terms of quality, time and cost. 
Weighting on the tender price normally exceeds 60%. A lower weighting on tender price would represent extraordinary circumstances. Evaluation Committees adopting a weighting of less than 60% will be required to justify their decision to the their agency Procurement Review Committee. 
The weighting for price would be lowest for tenders requiring innovative input and methodology. A lower price weighting results in a high price having a relatively low impact on the total score. 
Agencies should consider whether the extra cost incurred by a very good tender submission is matched by a reduction in the overall project costs or by the project’s running costs. This analysis should be carried out by the officer responsible for the project or the evaluation team.

SELECTION CRITERIA 
Rather than automatically accepting the lowest price, the tender evaluation process applies weighting for skills, quality, experience and previous performance in a manner to ensure value for money. 
To assess tenders, a system of criteria intended to encapsulate the competence of the tendering organisation to undertake a particular project is used to rate the tenderer’s bids. 

All relevant information requested in the tender documents and provided with the tender is used in the tender evaluation. 
Selection criteria are intended to assess the competence of the tendering organisations to achieve the required project outcome and are used to rate each of the tenders. 

The criteria are usually selected from the following: 
• relevant experience; 
• appreciation of the task; 
• past performance; 
• management and technical skills; 
• resources; 
• management systems; 
• methodology; and 
• price. 

Generally, no more than five criteria would be used. The criteria must be relevant to the project, they must be able to be evaluated in a meaningful way and they must be able to be used to allocate a score to the tender submissions. 

When weighting non-price evaluation criteria, Agencies shall ensure that any difference in scores between a good submission and a satisfactory submission does not overshadow a substantial price difference. Agencies assessing submissions with a substantial price difference must ultimately justify their selection in terms of value for money if the higher priced tender submission gets the higher score.