Evaluation of tenders

A note setting out the issues to consider when carrying out an evaluation of tenders for a contract subject to the public procurement regime.

PLC Public Sector
Contents

Impact of the public procurement regime on evaluating tenders

Evaluation, the assessment of tenders against a contracting authority's requirements, is the most important part of the procurement process. It is also the stage of the process which is most frequently challenged.

The manner in which UK public sector bodies are able to procure goods, services or works is determined by the Public Sector Procurement Directive (2004/18/EC) and Directive 2004/17/EC (Utilities Directive), which have been implemented in the UK via the Public Contracts Regulations 2006 (SI 2006/5) (PCR 2006), the Utilities Contracts Regulations 2006 (SI 2006/6) and case law (see Practice note, Public procurement in the UK: Legal framework (www.practicallaw.com/5-383-9734) and Public procurement case tracker (www.practicallaw.com/2-505-0649)).

The aim of the EU procurement regime is to create a single market by removing all discrimination between bidders from different member states in the manner in which contracting authorities award pubic contracts. The following key principles of the Treaty on the Functioning of the European Union (TFEU) (www.practicallaw.com/2-107-6192) apply to all aspects of the procurement process, including selection of bidders and evaluation of tenders:

  • Transparency: this is not simply about disclosure and openness but also the removal of discretion and subjectivity. Evaluation must be based on objective criteria that are known to bidders in advance.

  • Fairness: evaluation criteria and the evidence required from bidders must be actually and demonstrably related to the subject matter of the contract and applied proportionately to the stated objectives.

  • Equal treatment (or non-discrimination): all bidders and potential bidders must be given the same opportunity, based on the same information and criteria, and evaluated in a non-discriminatory manner.

These principles apply to all public contracts, including those which fall below the relevant thresholds in the PCR 2006 where there is cross border interest in the contract.

In short, legal compliance requires the contracting authority to determine and disclose how it will assess a winning bid before it receives any information from the bidders.

For further information on the obligations imposed by the public procurement regime, see:

 

Purpose of evaluation in the procurement process

The main aim of any effective tender evaluation should be to determine the tender which:

  • Best meets the needs of the public body.

  • Achieves value for money.

The evaluation should therefore identify the best available and affordable business solution, within applicable legal constraints, through a robust and defensible award process.

The key to best practice evaluations

Whichever procurement procedure is chosen:

  • Start planning early: it is best practice to have considered the evaluation criteria at an early stage of the project to ensure that the right result in achieved.

  • Test the evaluation process: identify any potential problems. The planning process will normally include market consultation and running dummy scores through the proposed model. Once the evaluation criteria are set, they must be adhered to. No adjustment of the criteria or their weightings is permitted (see Use of scoring to evaluate tenders).

  • Advance disclosure: make the evaluation criteria known to bidders at the first opportunity (see Advance disclosure of criteria and weightings). A distinction should be drawn between:

    • criteria (the qualities or deliverables the public body wants to secure); and

    • evidence (the behaviours or characteristics that may support the authority's judgement about the criteria).

  • Keep an audit trail: document the reasons for awarding scores to each bidder and, where unusual, the reasons for choosing the criteria and weightings. Authorities must be able to defend the award process (see Audit trail).

 

Selection and evaluation

Requirement to distinguish between selection and award criteria

Regulated contracts are procured through using one of the following procedures:

All these procedures, except the open procedure, permit the contracting authority to shortlist the bidders against certain specified criteria (selection criteria) before inviting those shortlisted bidders to submit tenders to be evaluated against the award criteria.

  • Selection criteria relate to the bidder and are used to assess the bidder's ability to perform the proposed contract (for example, in terms of experience, economic standing and qualifications) (see Selection criteria). Selection criteria may only be applied at the pre-qualification stage in order to short-list bidders to be invited to tender or participate in dialogue, under the restricted and competitive dialogue procedures respectively. In an open procedure, the contracting authority will usually evaluate the selection criteria and, if the bidder meets the minimum requirements, will then move on to consider the rest of the tender. Selection criteria may not be assessed during the award stage.

  • Award criteria relate to the tender and are used to identify the tender that is the cheapest or the most economically advantageous (for example, in terms of price, technical specifications and project management proposals) (see Award criteria).

In simple terms, selection criteria aims to establish "can they do it?" and award criteria "how will they do it?".

In Case 31/87, Gebroeders Beentjes v the Netherlands [1988] ECR 4635, the European Court of Justice (www.practicallaw.com/5-107-6553) (ECJ) clarified that the examination of a bidder’s suitability (i.e. the application of the selection criteria) and the award of the contract are two separate processes, although they may be carried out simultaneously. In Lianakis v Dimos Alexandroupolis (Case C-532/06), the ECJ held that the contracting authority was wrong to assess the bidders’ experience at award stage (see paragraphs 29-32 of the judgment):

although (...) Article 36(1) of Directive 92/50 does not set out an exhaustive list of the criteria which may be chosen by the contracting authorities, and therefore leaves it open to the authorities awarding contracts to select the criteria on which they propose to base their award of the contract, their choice is nevertheless limited to criteria aimed at identifying the tender which is economically the most advantageous (…) ‘award criteria’ do not include criteria that are not aimed at identifying the tender which is economically the most advantageous, but are instead essentially linked to the evaluation of the tenderers’ ability to perform the contract in question (..) in a tendering procedure, a contracting authority is precluded by Articles 23(1), 32 and 36(1) of Directive 92/50 from taking into account as ‘award criteria’ rather than as ‘qualitative selection criteria’ the tenderers’ experience, manpower and equipment, or their ability to perform the contract by the anticipated deadline.

For further details of the ECJ's ruling, see Legal update, ECJ ruling on award criteria under public procurement rules (www.practicallaw.com/3-380-4014).

Selection criteria

There are only three selection criteria permitted by the PCR 2006:

  • Exclusion or rejection: bidders must be disqualified on certain grounds, for example, money laundering, bankruptcy and certain criminal offences, and may be disqualified on certain other grounds, for example professional misconduct (regulation 23). However, even where exclusion is expressed to be mandatory, a contracting authority can still permit that bidder to proceed if it is satisfied that overriding requirements in the general interest apply. The pre-qualification questionnaire (www.practicallaw.com/2-385-1379) (PQQ) should list these grounds and require bidders to confirm whether any apply. If they do, bidders should be invited to offer an explanation. For more information, see Practice note, Debarment from public contracts and the Bribery Act 2010. (www.practicallaw.com/1-505-6883)

  • Economic and financial standing: bidders may be eliminated if they do not meet the minimum financial thresholds set out in the PQQ (regulation 24). Contracting authorities usually set the threshold test with reference to the bidder's turnover, that is, that the contract value should not exceed a specified percentage of the bidder's turnover. It is important to ensure that the threshold is proportionate in each case, rather than using the same threshold for each procurement, so that bidders are not unnecessarily excluded from participation. The contracting authority may also consider the bidders’ general financial standing (see Opinion, Do credit checks and the public procurement regime add up?).

  • Technical and professional ability: the PQQ may specify minimum technical standards, skill levels and experience but only as relevant to the purpose, nature, quantity or importance of the contract (regulation 25). Regulation 25(2) sets out what information may be required from bidders and taken into consideration for this purpose. This information relates to the bidder and not to any potential solution they may be able to offer.

Technical and professional ability is often assessed by asking bidders to submit details of comparable projects. If using this approach, it is important to provide some context to the information which is being elicited, for example, minimum thresholds, scope, value or relating the projects to the subject of the contract, so that bidders and evaluators are clear what information should be provided and how it will be evaluated (see Legal update, Northern Ireland High Court sets aside contract award decisions due to errors in applying selection criteria (www.practicallaw.com/6-518-9772)).

Applying selection criteria to sub-contractors

Where the bidder intends to sub-contract the work, it may also be appropriate to check that the sub-contractors meet the mandatory requirements, depending on the scale and nature of the sub-contract. In Easycoach v Ltd Department for Regional Development [2012] NIQB 10, the contracting authority required the bidders to demonstrate they held a bus operators licence. In evaluating whether the bidder in question met that requirement, the panel did not have access to the part of the bidder's tender which revealed that it intended to use sub-contractors. It therefore could not sensibly or knowledgeably evaluate whether the tender met that mandatory requirement (see Legal update, Northern Ireland High Court sets aside contract award decisions due to errors in applying selection criteria (www.practicallaw.com/6-518-9772)).

For further guidance on the selection stage, see Practice notes:

Award criteria

The setting of evaluation (that is, award) criteria is not as prescriptive. Subject to the requirements of regulation 30 of the PCR 2006, the criteria set out the basis on which the contract will be awarded by measuring value for money. Value for money cannot be an award criteria in itself, it is the constituent parts of a bid that will establish whether the bid represents value for money.

When carrying out a procurement, a public body can award a contract on the basis of:

The evaluation approach must be decided and disclosed at the outset.

 

Lowest price approach

If the lowest price approach is used, the contract will be awarded to the cheapest bid. No assessment is made of the quality of the bid. The lowest price approach is generally only suitable for simple procurements for short-term, low-level services or goods of a standard specification, such as some stationery or linen.

This approach may also be useful in the procurement of a clearly-specified product, service or works, which has sufficient mandatory aspects that would allow a simple choice on the basis of lowest price.

 

Most economically advantageous tender (MEAT) approach

A balance between quality and cost

Once an authority has determined that it is appropriate to use the MEAT approach to evaluate the tenders for its procurement, it needs to decide the weighting split between quality and price (or cost). In a MEAT evaluation, the quality and price scores are converted into percentages in accordance with the pre-set weightings to create a combined score that should identify the successful bidder.

There are no fixed or generally recommended splits as the impact of the split will depend on the scoring methodology and various other factors. This is a matter for each public body to decide having considered the requirements of each individual procurement. For example:

  • A very restricted budget combined with a clear and detailed statement of requirements may be more suitable to a higher price weighting. However, it is meaningless to simply allocate, for example 60% to price and 40% to quality. The authority should consider running some dummy scores through its model to ensure that the 60/40 (or other ratio) will deliver an appropriate result, see Use of a scoring model to evaluate the financial element.

  • Where the level of service to be delivered is key to the public body, such as many consultancy services, it is likely that quality would have the higher weighting.

  • Where thresholds are used, the ratio may change. For example, if bidders are required to meet a minimum threshold in the quality criteria, cost may attract a higher weighting as any poor quality bids can be rejected as non-compliant (see Legal update, Northern Irish High Court dismisses procurement appeal by Irish Waste (www.practicallaw.com/4-525-6282)).

  • In some circumstances, it might also be appropriate to have a specific weighting for legal considerations. However, unless the competitive dialogue procedure (www.practicallaw.com/0-385-1375) is used, the public authority can determine the contract terms at the outset and refuse to negotiate them with individual bidders. Where the authority is contracting on its standard terms, it should ensure they are reasonable. Where amendments to the terms are permitted, the contracting authority must determine how these are to be evaluated, and any impact of the suggested change on the other criteria, for example cost, must also be considered.

Although the quality/ cost ratio is at the discretion of the contracting authority, there may be circumstances in which the ratio must be justified. In Traffic Signs & Equipment Ltd v Department for Regional Development [2011] NIQB 25, the contracting authority used a 40:60 quality/ price ratio when previously it had used a 20:80 ratio. The change meant that the claimant did not win contracts it otherwise would have won under the old system. It argued, among other things, that the introduction of a mandatory international standard in the industry meant that there was a reduced need for a qualitative assessment. The court agreed that, in such circumstances, the contracting authority was obliged to explain and justify the 40:60 split. The fact that it hadn’t meant it was in breach of its obligations of objectivity and transparency (see Legal update, Northern Ireland High Court ruling on price/quality split in evaluation of tenders (www.practicallaw.com/0-505-5756)).

Possible criteria to assess quality

Regulation 30 (2) PCR 2006 provides: A contracting authority shall use criteria linked to the subject matter of the contract to determine that an offer is the most economically advantageous, including:

  • Quality

  • Price

  • Technical merit

  • Aesthetic and functional characteristics

  • Environmental characteristics

  • Running costs

  • Cost effectiveness

  • After sales service

  • Technical assistance

  • Delivery date and delivery period and period of completion.

The examples given tend to suggest goods contracts. However, other criteria may be used, for example, for a services contract:

  • Agility and ability to respond to contingencies

  • Customer care policies

  • Continuous improvement

  • Performance standards, quality control, self monitoring and complaints.

What is meant by “criteria linked to the subject matter of the contract”?

Evaluation criteria must be directly related and proportionate to the contracting authority's requirements. The extent to which an authority can assess bids against criteria, or impose contract conditions, which relate to environmental or social matters has been considered on several occasions by the courts.

The case law has confirmed that requirements (whether in award criteria or contract conditions) which go beyond a proportionate reflection of the authority's legitimate requirements in connection with the contract are likely to be unlawful. Hence requirements which are applied to economic operators' business activities as a whole, as opposed to the service, goods or works to be supplied under the contract, run a high risk of being unlawful.

For more information, see Practice note, Sustainable procurement (www.practicallaw.com/2-500-8896).

Evaluating “past experience” at tender stage

As stated above, the Lianakis judgment makes it clear that contracting authorities should not evaluate matters at award stage which properly fall to be considered at selection stage. This includes the bidders’ technical and professional ability. Since Lianakis, the courts have followed this approach (see Legal update, General Court annuls Commission procurement decision (www.practicallaw.com/7-521-7816)). However, this causes difficulties at award stage when no further distinction can be made between a bidder which has excellent credentials, and one which is merely adequate.

Case law is now refining this basic principle to reflect how information about a bidder’s technical and professional expertise can be considered differently at the two stages of the process.

The decision in J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2010] EWHC 1404 (QB) suggests that there is some scope to revert to selection criteria at award stage. In this instance, the judge held that it could be lawful to require information about the financial standing of bidders (a selection criteria) at the award stage if the council in question had disclosed in advance in the ITT that an assessment of the risk of non-performance because of lack of financial stability was one of the matters which it would be taking into account in determining which tenders were economically most advantageous (see Legal update, High Court dismisses claim for damages for breach of procurement rules (www.practicallaw.com/1-502-5429)). While the Court of Appeal rejected an appeal against the High Court's decision in Varney, it should be noted that this part of the decision was not appealed (see Legal update, Court of Appeal dismisses appeal about Hertfordshire County Council waste recycling contracts procurement (www.practicallaw.com/3-506-5688)).

In Case T 447/10, Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v Court of Justice of European Union, a case concerning the procurement by the ECJ of IT services, the ECJ had asked bidders to submit the CVs of 34 members of staff in order to assess whether the bidders were capable of making available to it a team for all the services, having the minimum technical skills, as well as the bidders' capacity to make available additional persons having those skills in order to meet any additional needs. A disappointed bidder claimed, among other things, that this amounted to the unlawful use of selection criteria at award stage.

The General Court, rejecting that part of the claim, held that:

a criterion based on the technical skills and professional experience of the members of a team which a tenderer proposes for performance of a framework contract may, in certain situations, constitute an award criterion. Award criteria are not necessarily all required to be quantitative. In a case where a framework contract relates to services of a highly technical nature and the precise subject-matter of the services to be provided must be determined progressively as performance of that contract proceeds, the technical skills and professional experience of the members of the team proposed are liable to have an impact upon the quality of the services rendered under the contract. In such a situation, the technical skills and professional experience may therefore determine the technical value of a bidder's tender and, consequently, its economic value.
in this tender the examination of the curricula vitae during the selection phase was designed to assess the tenderers' ability to perform the contract. However, the evaluation of the curricula vitae during the award phase was different to that conducted at the selection phase. The ECJ did not merely examine whether the curricula vitae displayed the minimum characteristics required, but sought to evaluate the technical quality and merit of the proposed team. This was intended to identify which of the contracts was most economically advantageous. With regard to the nature of the contract, the technical quality and professional experience of the proposed team had an impact on the technical value of the tender and so on its economic value.

For more information, see Legal update, General Court annuls ECJ procurement decision for lack of reasoning. (www.practicallaw.com/5-521-9152)

 

Allocation of weightings to award criteria

The criteria chosen should be allotted weightings to reflect what is most important in any particular procurement. Weightings may be exact percentages or a specified range, where this is appropriate in view of the subject matter. The criteria and weightings must be disclosed in the contract documents (Regulation 30(3), PCR 2006).

Each broad criterion should ideally be broken down to set out what it is that the public body is looking for to ensure consistent scoring is applied.

If it is not possible, on objective grounds, to provide weightings for the award criteria, it is permissible to indicate the criteria in descending order of importance (regulation 30(5), PCR 2006), but this is unlikely to be the case in most procurements.

Example evaluation criteria showing weightings and ranges:

Quality: 60% made up of:

Cost: 40%, made up of:

Technical merit

[30%] OR [20-30%]

Contract price

[20%] OR [20-30%]

Mobilisation plan

[20%] OR [20-30%]

Contract management costs

[10%] OR [5-10%]

Business continuity/ agility

[5%] OR [5-10%]

Contracting authority's contributions (for example, contractor's use of authority assets)

[10%] OR [5-10%]

Service improvement

[5%] OR [5-10%]

Advance disclosure of criteria and weightings

Case law has examined the extent to which advance disclosure of criteria and weightings is required.

In Lettings International Ltd v London Borough of Newham [2008] EWHC 1583 (QB) the High Court held that the weighting of sub-criteria should also be disclosed, where known (see Legal update, Court of Appeal allows interim injunction to prevent award of contracts (www.practicallaw.com/4-381-0811)).

However, arguably Lettings goes beyond what is required in EU law.

In Case C-331/04, ATI EAC Srl e Viaggi di Maio Snc and others v ATCV Venezia SpA and others, one of the award criterion (organisational procedures) was allocated a maximum of 25 possible points. The contract documents set out five factors that would be taken into account in the assessment of this criterion. After the bids had been submitted and opened, the jury responsible for assessing the bids decided to split the 25 maximum points for this criterion between the five specified factors (giving between 8 to 2 points for each factor).

The ECJ held that it was for the national court to determine whether:

  • In all the circumstances of the case, the decision to apply such weighting altered the criteria for the award of the contract set out in the contract documents or the contract notice.

  • The decision contains elements which, if they had been known at the time that the tenders were prepared, could have affected that preparation.

  • The decision to apply the weighting was adopted on the basis of matters which were likely to give rise to discrimination against one of the bidders.

If each of these questions can be answered in the negative, then the Directives do not preclude the contracting authority from attaching specific weight to the subheadings of an award criterion, which were defined in advance, by dividing among those headings the points allocated for that criterion by the contracting authority in the contract documents or the contract notice (see Legal update, ECJ ruling on weighting of award criteria (www.practicallaw.com/5-201-6412)).

This ruling was followed by the Court of Appeal in J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2011] EWCA Civ 708, (see Legal update, Court of Appeal dismisses appeal about Hertfordshire County Council waste recycling contracts procurement (www.practicallaw.com/3-506-5688)).

The OGC's procurement policy note on the selection and award stages of a public procurement reaffirmed the need to disclose award criteria, weightings and scoring to bidders as early as practicable in the procurement process and no later than the invitation to tender stage. For further information, see Legal update, OGC publishes procurement policy note on selection and award. (www.practicallaw.com/6-386-0032)

Disclosure of evaluation criteria for Part B or below threshold procurements

The EC Treaty principles may require disclosure of criteria and weightings for procurements that are not covered in whole or part by the PCR 2006 (see Practice note, Part B, below threshold and other procurements outside the regulations (www.practicallaw.com/6-384-1798)).

On 18 November 2010, the ECJ partially upheld an action brought by the European Commission alleging that Ireland had breached its obligations in relation to the procurement of translation services. The relevant services were "Part B" services that are not subject to the full application of Directive 2004/18. The ECJ concluded that Ireland did not breach the principle of equal treatment and the consequent obligation of transparency by setting the weighting attributable to stated award criteria only after the bids were submitted. However, the modification of the award criteria weightings after an initial review of the bids did amount to a breach of the principles of equal treatment and transparency. For more information, see Legal update, ECJ rules that Ireland breached principles of equal treatment and transparency by altering weighting of award criteria. (www.practicallaw.com/2-503-9553)

The following conclusions can therefore be drawn in respect of contracts which are not subject to the full regime:

  • The contracting authority is not legally obliged to disclose evaluation criteria.

  • It is advisable to disclose evaluation criteria to comply with the EC Treaty principles as well as to elicit appropriately tailored bids.

  • Weightings should not be allocated or changed after tenders have been reviewed.

Aside from the procurement rules, tendering procedures for Part B services have also been challenged in judicial review. In Law Society of England and Wales v Legal Services Commission [2010] EWHC 2550 the High Court found that the Legal Services Commission's tender for the award of contracts for family legal aid services was unlawful for irrationality. Despite having widely consulted on changes to the system, including on its selection criteria for successful firms, when it issued its tender additional criteria, notably a requirement to hold an accreditation, was included. As firms were unable to obtain this accreditation within the 8 week tender window, many firms failed to win any work (see Legal update, Judgment on errors in tender procedure held by Legal Services Commission (www.practicallaw.com/0-503-6541)).

Use of "pass or fail" hurdles

If some aspects of the requirements are fundamental, a contracting authority may want to include:

  • Mandatory requirements that must be met in order for a bid to be compliant; or

  • Mandatory hurdles, i.e minimum scores which must be achieved in respect of certain or all criteria.

Failure to achieve these mandatory requirements or hurdles will result in a non compliant bid.

For example, for a transport contract, the successful bus service operator must have appropriate licences in place or a particular aspect of the service must be to a specified ISO standard, as certified by a particular authority. These mandatory requirements, and the consequences of failing to evidence compliance to the required level, should be set out clearly in the tender documents (see Legal update, Court of Appeal dismisses appeal against striking out of public procurement claim) (www.practicallaw.com/7-505-6432).

A scoring hurdle can be used where only bids which score a specified minimum on clearly identified and specified key aspects would be considered, for example, using the 0 to 5 scoring system, a contracting authority could specify that only those bids scoring a minimum of 3 in certain requirements will be considered. This avoids the risk of a winner which scored very highly in one or more areas but very poorly in another. However, contracting authorities should be wary of adopting this approach for criteria which are less important to it, for risk that an otherwise strong bid is excluded on minor grounds.

In Irish Waste Services Ltd v Northern Ireland Water Ltd & Ors [2013] NIQB 41 the High Court of Justice in Northern Ireland ruled that contracting authorities may reject and not evaluate the remainder of a tender where it has failed to meet its stated minimum thresholds. The case was brought under the Utilities Contracts Regulations 2006, but may be of wider application (see Legal update, Northern Irish High Court dismisses procurement appeal by Irish Waste (www.practicallaw.com/4-525-6282)).

Use of tie-breakers

Nobody ever expects a tie, but this can happen. Consider building in potential tie-breakers into the evaluation model and disclosing to bidders upfront how such a mechanism may be used if there is a tie. For example, this may be by:

  • Setting additional questions to be answered.

  • Re-valuing (up or down) previously specified points.

  • Re-opening certain parts of the tender to be re-evaluated in writing or through a presentation.

A tie does not have to be an exact tie but a statistical tie (that is, a tie within acceptable margins of error) making it difficult, if not impossible, to differentiate between two or more bids.

The Commission Interpretative Communication on social considerations (see Interpretative Communication of The Commission on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement, 15 October 2001) provides guidance that where a contracting authority is left with two equally economically advantageous tenders at the award stage, it can then apply additional social (or environmental) award criteria to differentiate between them, provided this additional criteria is disclosed. For more information, see Practice note, Sustainable procurement (www.practicallaw.com/2-500-8896).

 

Evaluation methods

Authorities also need to consider what methods they will use to evaluate the award criteria and set these out in the tender documents so that all bidders have a fair and equal opportunity of presenting the authority with the appropriate information. Possible methods include:

  • Written tender (for example a response as to how the bidder will meet each of the requirements of the specification).

  • Method statements (as above, but the questions will generally be on thematic lines and one question may cover a number of requirements).

  • Presentations or interviews (typically used to demonstrate a product, for example a software solution. Interviews may also be used to assess softer criteria, for example communication skills and working with the authority, or, in a social or health care context, its service users (see Ask the team: How can a contracting authority take account of service user choice in a procurement process? (www.practicallaw.com/8-504-2208)).

  • References (as these refer to past experience they should generally be taken at PQQ stage, though they may be used at award stage to support the bidder's proposal for the tendered service).

  • Site visits (these may or may not refer to past experience. If they evidence how the bidder is delivering services to current customers, they should generally be evaluated at PQQ stage. However, they may be used at award stage to support the bidder's proposal for the tendered service).

  • Sample products.

Authorities will need to decide what percentage of the overall scores each of the criteria carry and how these will be built into an evaluation. For example, an interview or presentation could be used to assess a different part of the technical requirements from the written tender or it might be a means of adjusting the written tender scores. In any event, presentations must be scored as part of the quality or price evaluation, not added to the final overall quality or price marks as this could distort the evaluation process.

If interviews or presentations are used, all bidders for a regulated contract must be invited to participate. Unless the competitive dialogue procedure is used, there is no scope to reduce the number of bidders during the tender stage. For more information, see Ask the team: Can a contracting authority invite only the top scoring bidders in a tender process to interview or must it invite all bidders? (www.practicallaw.com/5-503-8953)

Where the questions, presentations, or other evaluation methods are not equally weighted, this should be disclosed to bidders. For example, quality is assessed as follows:

Quality: 60%, made up of:

Technical merit

30%

Mobilisation plan

20%

Business continuity/ agility

5%

Service improvement

5%

If there are 3 questions to assess Technical Merit, and 3 questions to assess Service Improvement, those questions will not have equal weighting overall because those criterion are weighted differently (see Legal update, High Court rules that Leeds City Council is liable for damages for breach of public procurement rules (www.practicallaw.com/9-505-7874)).

Awarding a score for quality

One of the easiest ways to ensure that evaluation of quality is done consistently is to mark all questions out of a set figure (for example, five) and apply the relevant weighting for that particular criteria to obtain a score. For example:

Score

Criteria for awarding score

0

Completely fails to meet required standard or does not provide a proposal.

1

Proposal significantly fails to meet the standards required, contains significant shortcomings and/or is inconsistent with other proposals.

2

Proposal falls short of achieving expected standard in a number of identifiable respects.

3

Proposal meets the required standard in most material respects, but is lacking or inconsistent in others.

4

Proposal meets the required standard in all material respects.

5

Proposal meets the required standard in all material respects and exceeds some or all of the major requirements.

If this model is used, a bidder meeting the specification in full will only score 4 out of 5 (or 80%) for each assessed requirement. By allowing the fifth mark (20%) for added value the public body is leaving some scope for the bidders to improve on the specification and demonstrate to the authority what else they can provide. In such cases, the tender documents should specify that bidders are expected not only to meet the required standard but to exceed them, if they are to obtain the maximum available score (see Legal update, High Court rules that Leeds City Council is liable for damages for breach of public procurement rules (www.practicallaw.com/9-505-7874)). However, the authority does not want to award the extra 20% for additions that are no use to it. Therefore, and to avoid any suggestion of a lack of transparency, it should consider providing some guidance as to the added benefits it has in mind.

Alternatively, a scoring system which permits a range of marks within each description could encourage more thoughtful marking. For example:

Score

Classification

Definition

0

No response (complete noncompliance)

No response at all or insufficient information provided in the response such that the solution is totally unassessable and/or incomprehensible.

1-2

Unsatisfactory response (potential for some compliance but very major areas of weakness)

Substantially unacceptable submission which fails in several significant areas to set out a solution that addresses and meets the requirements: little or no detail may (and, where evidence is required or necessary, no evidence) have been provided to support and demonstrate that the tenderer will be able to provide the services and/or considerable reservations as to the tenderer's proposals in respect of relevant ability, understanding, expertise, skills and/or resources to deliver the requirements.

Would represent a very high risk solution for the contracting authority

3-4

Partially acceptable response (one or more areas of major weakness)

Weak submission which does not set out a solution that fully addresses and meets the requirements: response may be basic/ minimal with little or no detail (and, where evidence is required or necessary, with insufficient evidence) provided to support the solution and demonstrate that the tenderer will be able to provide the services and/or some reservations as to the tenderer’s solution in respect of relevant ability, understanding, expertise, skills and/or resources to deliver the requirements.

May represent a high risk solution for the contracting authority.

5-6

Satisfactory and acceptable response (substantial compliance with no major concerns)

Submission sets out a solution that largely addresses and meets the requirements, with some detail (or, where evidence is required or necessary, some relevant evidence) provided to support the solution; minor reservations or weakness in a few areas of the solution in respect of relevant ability, understanding, expertise, skills and/or resources to deliver the requirements.

Medium, acceptable risk solution to the contracting authority.

7-8

Fully satisfactory /very good response (fully compliant with requirements).

Submission sets out a robust solution that fully addresses and meets the requirements, with full details (and, where evidence is required or necessary, full and relevant evidence) provided to support the solution; provides full confidence as to the relevant ability, understanding, expertise, skills and/or resources to deliver the requirements.

Low/No risk solution for the contracting authority.

9-10

Outstanding response (fully compliant, with some areas exceeding requirements)

Submission sets out a robust solution (as for a 7-8 score – above) and, in addition, provides or proposes additional value and/or elements of the solution which exceed the requirements in substance and outcomes in a manner acceptable to the contracting authority; provides full confidence as to the relevant ability, understanding, expertise, skills and/or resources not only to deliver the requirements, but also exceed it as described.

Low/No risk solution for the contracting authority.

Use of a scoring model to evaluate price

In most procurements, the financial element of the evaluation consists of an assessment of the bidder’s tendered price. This may be presented as a unit price, an annual price, or a price for the life of the contract.

In some, usually more complex procurements, additional factors will be considered, such as the cost to the authority of that bidder winning the contract. This could include costs such as contract management, transition costs and costs of the contracting authority’s staff or assets to support the delivery of the contract, which may vary from bidder to bidder, depending on their solutions. Where several contracts are being tendered together, the financial assessment may also take into account any savings where one bidder wins more than one contract.

Turning prices into scores can be challenging. A number of approaches may be used to evaluate the financial element of a tender, but in no case should a simple aggregation be used as this almost always distorts the price scores.

A scoring model (no matter how simple) to create some sort of comparable figure across bids should always be used. The two most common methods of evaluating price are to:

  • Award 100% to the cheapest bid, then compare that lowest figure as a percentage of the other bids. (See the following two worked examples.)

  • Disclose a threshold price to bidders, which scores zero, and all bids under that threshold are scored comparatively, inverting the model below. For example, if the threshold is £100, a bid of £60 would score 40 (as £60 is 40% of £100) and a bid of £70, 30. Bids above the threshold would be non compliant, or would incur minus marks.

Outsourcing contract

Formula:

(Lowest price / price you are evaluating) x 100 = price score for that bidder

Bids

The bids are based on a fixed price per annum.

You have three bids:

  • Bidder A: £1.2 million.

  • Bidder B: £950,000.

  • Bidder C: £1.5 million.

Scores

Following the above formula, the results are:

  • Bidder B: 100% (as it is the lowest bid).

  • Bidder A: 79% ((950,000 / 1.2 million) x 100).

  • Bidder C: 63% ((950,000 / 1.5 million) x 100).

Domiciliary care contract

Formula:

(Lowest price / price you are evaluating) x 100 = price score for that bidder

Bids

The bids are based on hourly rates with no fixed or estimated number of hours required and therefore no overall price. However, the same formula can be used by applying it to the hourly rate quoted.

You have three bids:

  • Bidder A: £16.

  • Bidder B: £18.

  • Bidder C: £17.50.

Scores

Following the above formula, the results are:

  • Bidder A: 100% (as it is the lowest bid).

  • Bidder C: 91.4% ((16 / 17.50) x 100).

  • Bidder B: 88.8% ((16 / 18) x 100).

Note that the difference between the bids in the domiciliary care contract is very small and therefore the pricing evaluation for that contract will have very little impact on the outcome. Quality could therefore become the decisive factor, which, unless a price ceiling is used, is more likely to advantage a more expensive tender. If both these tenders specified a division of 60:40 in respect of quality and price, pricing would be more important in the outsourcing contract because pricing is not so uniform in this type of service. These examples illustrate the importance of working through some examples based on the sorts of bids which are likely to be received before deciding on the appropriate quality/price weighting. Weightings cannot be altered later.

In Case T 461/08 - Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Commission, judgment of 20 September 2011, the General Court held that the European Investment Bank was in breach of the principles of non-discrimination and equal treatment when it sought to alter its 75:25 quality/ price split when, following evaluation of the tenders, it became clear that by attributing only 25% of the marks to the financial evaluation, that part was essentially neutralised (see Legal update, General Court annuls procurement decision of the European Investment Bank). (www.practicallaw.com/6-508-2950)

Contracting authorities should disclose their intended scoring methodology to bidders in advance.

Scoring savings

An alternative to scoring price is to award marks for the savings that bidders' propose on the current cost of the services.

In the following example, the cost of the current service is £1m. The contracting authority has carried out market testing which has shown that it is able to achieve savings of at least 10% on this service. In its procurement, the contracting authority has imposed a mandatory price ceiling of 10% less than the current cost to it of receiving the services, i.e. £900,000. Bids which exceed the £900,000 cap will be rejected as non-compliant. Bids which demonstrate additional savings will score additional points, up to a maximum of an overall 20% saving:

Score (out of 10)

Submitted price (£)

Equivalent percentage saving

10

£800,000

20%

9

£810,000

19%

8

£820,000

18%

7

£830,000

17%

6

£840,000

16%

5

£850,000

15%

4

£860,000

14%

3

£870,000

13%

2

£880,000

12%

1

£890,000

11%

0

£900,000

10%

Use of model answers

It is relatively common for contracting authorities to provide their evaluators with model answers to assist with their scoring. However, contracting authorities must ensure that these do not introduce new, undisclosed criteria. The model answers must respond to the relevant questions in a manner which would be reasonably foreseeable by a reasonably informed and normally diligent bidder (see Legal updates, High Court rules that Leeds City Council is liable for damages for breach of public procurement rules (www.practicallaw.com/9-505-7874) which discusses this point and High Court ruling on grant of injunction in public procurement action (www.practicallaw.com/1-502-7094)).

Abnormally low tenders

A contracting authority may reject a tender which is abnormally low, provided it has:

  • Requested an explanation in writing of those parts of the tender which it considers contribute to the offer being abnormally low.

  • Taking account of evidence submitted by the bidder in response to the request.

  • Subsequently verified the tender or parts of the tender being abnormally low with the bidder.

(Regulation 30(6), PCR 2006).

Regulation 30(7), PCR 2006 provides a non-exhaustive list of the information that may be requested from the bidder. A tender which is abnormally low due to the bidder receiving unlawful state aid may be rejected in accordance with Regulation 30(8), PCR 2006.

In respect of Part B services contracts, ECJ has stated that, even where there is certain cross-border interest, it may be acceptable automatically to exclude tenders for being abnormally low if there is an unduly large number of tenders and examination of all bids would exceed the authority's administrative capacity and jeopardise implementation of the project (see Legal update, ECJ ruling on treatment of abnormally low tenders (www.practicallaw.com/4-381-9543)).

For more information, see Opinion: Is a tender too good to be true? Check or you may be injuncted and High Court ruling on grant of injunction in public procurement action (www.practicallaw.com/1-502-7094).

Evaluation of terms and conditions

In most procurements, the contracting authority will specify the terms on which it is prepared to contract. It is common to consult on these terms in advance to ensure they do not present any difficulties to the market. Bids must therefore be made on the basis that no substantial amendments to the terms and conditions are required. In those circumstances, a rejection of the proposed terms and conditions will render the bid non-compliant.

However, sometimes requests to amend certain terms will arise during the process. In these circumstances, the contracting authority may consider the request and decide whether a change to the terms is necessary. Requests to change terms, and the contracting authority's response, should be issued to all bidders through a clarification log. If the contracting authority decides to issue a revised contract, it should consider whether any extension to the tender return date is required.

For more complex procurements, such as those conducted under the competitive dialogue procedure, it is usual for bidders to mark up the draft contract to reflect their solutions. Changes to the terms which impact on the selection of the most economically advantageous tender, for example because they could increase the contract price or otherwise impact on risk, should be evaluated with the pricing evaluation.

Some risks may not be capable of consideration in the pricing evaluation, either because they do not relate directly to cost, or because the model for evaluating price is not sufficiently sophisticated to allow for adjustments for risk.

In those circumstances, it may be permissible to consider the legal evaluation as a separate component. Such an assessment could consider the general balance of risks, such as proposed changes to liability caps, indemnities, warranties, supply chain rights and termination rights, to arrive at a score for the proposed changes.

Moderation of scores

As there is likely to be more than one evaluator, unless all members of the panel score the tenders collectively, their scores should be moderated to produce a single agreed score for the question or criterion in question. There are various approaches to moderating scores. A practical approach is for all evaluators could score individually then submit their scores to a central coordinator who highlights any differential in the scores. The panel members then meet to discuss the differentials in the scores to try to address any disparity of views and arrive at an agreed score.

 

Clarification if bid is unclear

Often, when evaluating a bid, a submission may be unclear or an evaluator may feel that they need further information to enable them to evaluate the response properly. In this situation, the public body must ensure that it is fair and treats all bidders equally in the way that it seeks to clarify these matters. For example, if two bidders have both been vague in different ways about the provision of a service, both should be asked to clarify their answers.

In Case C‑599/10 - SAG ELV Slovensko a.s., and others v Úrad pre verejné obstarávanie, the ECJ set out the principles to be applied when dealing with an imprecise tender (paragraphs 37-44):

To enable the contracting authority to require a tenderer whose tender it regards as imprecise or as failing to meet the technical requirements of the tender specifications to provide clarification in that regard would be to run the risk of making the contracting authority appear to have negotiated with the tenderer on a confidential basis, in the event that that tenderer was finally successful, to the detriment of the other tenderers and in breach of the principle of equal treatment.
(..) it does not follow from Article 2 or from any other provision of Directive 2004/18, or from the principle of equal treatment or the obligation of transparency, that, in such a situation, the contracting authority is obliged to contact the tenderers concerned.
(..) Article 2 of that directive does not preclude, in particular, the correction or amplification of details of a tender where appropriate, on an exceptional basis, particularly when it is clear that they require mere clarification, or to correct obvious material errors, provided that such amendment does not in reality lead to the submission of a new tender. (..)
In the exercise of the discretion thus enjoyed by the contracting authority, that authority must treat the various tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome.
(..) a request for clarification of a tender may be made only after the contracting authority has looked at all the tenders (..)
Furthermore, that request must be sent in an equivalent manner to all undertakings which are in the same situation, unless there is an objectively verifiable ground capable of justifying different treatment of the tenderers in that regard, in particular where the tender must, in any event, in the light of other factors, be rejected.
(..) In addition, that request must relate to all sections of the tender which are imprecise or which do not meet the technical requirements of the tender specifications, without the contracting authority being entitled to reject a tender because of the lack of clarity of a part thereof which was not covered in that request.

For more information, see Legal update, ECJ judgment on ability of contracting authority to seek clarification of tenders (www.practicallaw.com/4-518-7378). See also, Northern Ireland High Court ruling on clarity of selection criterion and missing information in tender (www.practicallaw.com/9-518-7658).

Clarifications and responses on clarifications should always be in writing and made through one channel, see Legal update, Northern Ireland High Court dismisses appeal against exclusion of bidder (www.practicallaw.com/6-500-1968).

It is a good idea to record the clarification questions and answers in a log which is regularly circulated to all bidders. Statements made in clarification questions and answers which relate to the performance of the contract should be incorporated into the final contract to ensure they are binding.

 

Evaluation team

When preparing to issue a tender, public bodies need to establish who will be involved in the evaluation of responses and ensure that there is sufficient capacity available to meet the required timeframes.

For complex procurements, it is likely that a range of individuals from different disciplines will need to be involved to evaluate the bids properly and it is likely to be a time-consuming task. When using a team to evaluate bids, each member of the team should:

  • Be fully briefed about the evaluation methodology that is being used.

  • Ideally consider the tenders separately before coming together to moderate their scores.

This approach ensures that the risk of potential bias is reduced as far as possible. As with all public sector decision-making, due process must be followed.

In Healthcare At Home Ltd, v The Common Services Agency [2013] ScotCS CSIH_22, the Scottish Court of Session held that in respect of a tender for a drug dispensing and nursing service, it was not necessary for every member of the evaluation team to see the whole of the tender. It was implicit in the ITT that sections might be scored individually (see Legal update, Scottish Court of Session confirms no lack of clarity or error in award criteria in procurement procedure). (www.practicallaw.com/9-525-3988)

It is established case law that the quality of the tenders must be assessed on the basis of the tenders themselves and not on that of the experience acquired by the tenderers with the contracting authority in connection with previous contracts (see Legal update, General Court annuls procurement decision of EU body) (www.practicallaw.com/2-523-1320). Evaluators should therefore put out of their minds any prior knowledge they might have of the bidders in question. Where an evaluator suspects that a submission is not true, for example because their prior knowledge of the bidder does not support the contents of the tender, the evaluator should seek clarification of the tender (see Clarification if bid is unclear).

If, during a complex procurement, one of the evaluation team needs to be replaced, a thorough and detailed briefing must be given to the new team member to ensure that they fully understand the process that they are stepping into and the evaluation method being used. All of these must be clearly documented.

Disgruntled parties can challenge evaluation decisions through judicial review on the grounds of illegality, irrationality, procedural unfairness or legitimate expectation (see Topic, Judicial Review (www.practicallaw.com/5-384-0921)).

Conflicts of interest

Regulation 4, PCR 2006 requires contracting authorities to

  • Treat economic operators equally and in a non-discriminatory way.

  • Act in a transparent way.

These principles apply to the whole of the tender process including evaluation. The contracting authority should therefore take steps to manage conflicts of interest. Members of the panel should therefore be required to disclose in advance any connections they have to bidders.

A number of cases have been brought against contracting authorities claiming injustice due to a conflict of interest in the evaluation of tenders when a party who worked for one of the bidders had also advised the contracting authority in respect of the tender in question, see Legal updates:

 

Confidentiality of evaluation materials

Under regulation 43, PCR 2006, a contracting authority shall not disclose information forwarded to it by an economic operator which the economic operator has reasonably designated as confidential. Confidential information includes technical or trade secrets and the confidential aspects of tenders.

Therefore, the public body should treat all bidder responses in a confidential manner during and after the procurement process. This is particularly important where an incumbent supplier may be bidding for a new contract and has access to the contracting authority's premises or systems.

In brief, the following points should be complied with:

  • All reasonable precautions must be taken to ensure that documentation from bidders and the evaluation materials are kept secure at all times.

  • Only relevant personnel should be granted access to the materials.

  • Information received from bidders must not be passed to any third party other than the agreed external advisors.

  • Copies of the information taken outside of the workplace must be subject to additional care and no copies should be made on any personal IT apparatus.

These precautions are subject to any disclosure obligations the public body has under the Freedom of Information Act 2000 (FOIA) (see Practice note, Freedom of information (www.practicallaw.com/0-200-9452)). However, prior to disclosing any information obtained during the course of a procurement, the exemptions in sections 41 (confidential information) and 43 (commercial interests) of FOIA should be reviewed to see if they apply. The OGC has also provided guidance on what information relating to a procurement is likely to be exempt from disclosure under FOIA, see OGC, FOI and Civil Procurement guidance.

In relation to the duty on local authorities to disclose information relating to contracts under section 15 of the Audit Act 1998, see Legal update, Court of Appeal rules that a company's financial model and profit margin should not be disclosed. (www.practicallaw.com/0-503-7946)

 

Variant bids

A variant bid (www.practicallaw.com/7-385-1367) is where bidders have proposed an alternative solution to that set out by the public body. Regulation 10 (www.practicallaw.com/7-538-7465), PCR 2006 permits a contracting authority to accept variant bids provided it is using the MEAT approach and the contract notice expressly permits bidders to submit variants.

The contract documents must set out the minimum requirements to be met by the variants and any specific requirements for the presentation of an tender which contains variants.

The contracting authority should also specify whether bidders must also submit a standard bid alongside their variant bid.

Variant bids are useful because they allow bidders to suggest innovative ways of delivering the public body's requirements, which may be beneficial. However, the authority should set out clear parameters within which such variants may be made, that is, which areas may be varied. All variant bids should be evaluated using the same criteria as the standard bids and compared on a like-for-like basis. This can often be hard to achieve unless the parameters set are sufficiently clear.

In Traunfellner GmbH v Osterreichische A Sfinag C-421/01, a case concerning a contract for the repair of a road which specified that the road should be made of concrete, the ECJ held that it was not sufficiently clear for the Austrian authority to permit a variant bid if it ensured the performance of qualitatively equivalent work, wording deriving from a provision of Austrian law. The Austrian authority should have specified in the contract documents the comparative parameters by which such equivalence was to be assessed (see Legal update, Preliminary reference on criteria for variant bids in a procurement procedure (www.practicallaw.com/8-102-5010)).

The public body does not have to accept a variant bid if it is the highest scoring response, so long as it has reserved this right in advance. It is therefore essential to also set out in the tender documents what discretion the public body may exercise in relation to variant bids.

 

Audit trail

Evaluation is an area that is seeing an increasing number of challenges in the courts from bidders who are unhappy with the way in which public bodies have dealt with their bids. Bidders can potentially claim not only their wasted tender costs but also potential loss of profit for the contract. As recent cases have indicated, it is not even necessary for unsuccessful bidders to prove that they would have been successful but for the evaluation errors. All they have to show is that they have been denied a fair attempt at the tender (see Practice note, New remedies in public procurement law (www.practicallaw.com/0-500-9991)).

As a result of this increased risk to the public body, it is vital that a clear audit trail of the entire decision-making process throughout the evaluation process is maintained together with copies of all tenders submitted.

For cases on evaluation, see Public procurement case tracker; Evaluation. (www.practicallaw.com/2-505-0649)

 
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