Scottish Public Procurement Toolkit

- The contracting authority's Standard Conditions of Contract and all other conditions of contract prepared on behalf of the the contracting authority, that will apply to any resulting contract.

- The Schedules to Tender for completion by the tenderer,
including but not restricted to:

- the Form of Tender;

- price schedule(s);

- technical proposal.

* A label showing the ITT reference number and tender receipt date if
electronic means of issuing and receipting documentation is not available.
In compiling the ITT, the buyer should ensure that it sets out all the obligation of the parties in a clear, complete, concise and unambiguous way. The foundations for contract management are laid in the stages before contract award.

Establish Tender Evaluation Criteria

Introduction

Before issuing an Invitation to Tender, purchasers must establish the award criteria by which the resulting bids will be evaluated. These criteria should be established in conjunction with the UIG and are essential not only to establish understanding between the purchaser and the stakeholders as to what is required of the contract, but as a matter of European Law.

For contracts subject to the European Procurement Directives, the rules regarding tender evaluation criteria are set forth in Regulation 30 of the Public Contracts (Scotland) Regulations 2006 and are as follows -

Contracts can be evaluated for which is

(a) the most economically advantageous to the contracting authority

(b) the lowest priced

Where "most economically advantageous" is used -

The criteria for "most economically advantageous" must be linked to the subject matter of the contract and can include "quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales services, technical assistance, delivery date and delivery period or period of completion."
The weighting attached to each criterion chosen must be stated in the OJEU contract notice, contract documents or where appropriate, the descriptive document.
The weightings may be given a range, specifying minimum and maximum weighting, where the contract authority considers it appropriate given the subject matter of the contract.
Where it is not possible to provide weightings on objective grounds, the criteria should be indicated in descending order of importance

As the aim of any procurement exercise should be to achieve Value for Money, it is recommended that the "most economically advantageous" evaluation be employed. Value for Money is defined as the optimum combination of whole life costs and quality (or fitness for purpose) to meet the customer's requirements, (see section on whole of life costs) and can be taken to be largely analogous with "most economically advantageous" . What constitutes the optimum combination of whole life costs and quality will clearly differ from commodity to commodity and will depend on the outputs required from the procurement exercises concerned.

Using an evaluation based on the "most economically advantageous" offer gives the buying organisation the opportunity to take factors other than price, into account when awarding contracts. The list of factors included in the UK Regulations is reproduced above , but may not be exhaustive, depending on the peculiarities of the contract.

Selecting the Criteria

Where the tenders are to be evaluated on the basis of which is the "most economically advantageous," it is necessary a list of weighted criteria to be selected upon which the decision can be based. To this end, the entire UIG should agree to a list of award criteria, based upon their knowledge of the goods, services or works to be procured. The work that the group carried out in the Commodity Profiling stage in defining the Key Commodity Characteristics will assist in the identification of the award criteria.

The criteria thus identified must relate directly to the subject matter and must provide an "economic advantage" to the contracting authority. The criteria will relate to key performance requirements and adherence to specification. Each award criterion should be clearly defined, so that there is a common understanding of what it means. Good criteria will assist not only in ensuring that bid responses are clearly addressed to the aspects of the specification that are key areas of concern, but will allow the tendering panel to make a fair and equal comparison of the bids in capability, commercial, technical (including performance) and financial terms.

The award criteria must relate to the goods, services or works to be provided and not to the suitability of the supplier. The selection of suppliers is subject to a separate set of rules outlined in the Supplier Selection and PPQs guidance.

Some examples of award criteria and definitions are given below -

Price- The whole life cost including the initial purchase price, running costs, consumables and disposal costs.
Delivery- The guaranteed turnaround time from order to delivery. Can any appropriate deadline be met?
Aesthetic and Functional Characteristics - How does the product look and feel? How easy is it to use?
After sales service- What support is required and available to the contracting authority after the contract is signed.
Technical merit- Is the product or service proposed fit for purpose? How well does it perform?

Weighting the Criteria

Each criterion should be weighted to reflect its relative importance to the contracting authority. The identification of criteria and weightings must be carried out with care to ensure that the contracting authority identifies the most economically advantageous offer, i.e. the tender offering best value for money. It is usually helpful for the UIG to decide on the overall split between price and quality criteria first and then to allocate weightings to the quality sub-criteria.

The table below shows some indicative price/quality ratios, based in guidance issued by HM Treasury. However, it is stressed that these are examples only and that it is the responsibility of the User Intelligence Group to make an informed decision based on their view of which weightings will provide the best value for money returns from tenderers.

Type of project	Indicative quality/price ratio
Type of project	for consultants	for contractors
Feasibility studies	80/20 to 90/10	Not applicable
Innovative projects	70/30 to 85/15	20/80 to 40/60
Complex projects	60/40 to 80/20	15/85 to 35/65
Straight forward projects	30/70 to 60/40	10/90 to 25/75
Repeat projects	10/90 to 30/70	5/95 to 10/90

Notification of Criteria

These award criteria and their weightings must be agreed by the UIG before then tenders are issued. For procurements subject to the European Directives, the award criteria and their relative weightings must be published in the OJEU notice for the contract, or detailed within the Invitation to tender documentation, although it best practice to state the criteria in both. The agreed and advertised award criteria must not be changed once they have been notified to the bidders. Failure to advise bidders in advance, of the criteria against which their tenders will be evaluated means that the decision may only be based on lowest price.

It is good practice in any case to provide the evaluation criteria in all procurement exercises, as it enables candidate suppliers to make informed decisions as to the aspects of the tender which are of most importance to the Contracting authority. It also acts as a protection against a supplier challenge on the grounds that the criteria where chosen post tender to favour another supplier.

Issue the ITT

EU Procurement Rules

The contracting authority should issue ITTs for projects they are involved in, and DPAs will issue ITTs in all other cases. It is standard practice to use the Electronic Tendering System to issue and receive tenders from suppliers. For purchasers who do not have access to this system the procedures on Issue of ITTs and Receipt of ITTs described here should be followed.

ITTs normally go to all short listed companies at the same time, although the Open Procedure allows for ITTs to be issued on request within a 52 day period. However, there may be an exceptional occasion when an ITT may be issued later but the recipient should be made aware that their timescale for returning the tender is reduced. The closing date for tender return should not normally be extended and advice from the Organisation must be sought if a request has been made to have the tender return date amended. If the date is amended, the new date should be notified to all tenderers, and if any tenderer indicates that they have already submitted a tender then they should be given the opportunity of withdrawing the original tender and submitting a revised one.

Companies cannot demand to be included in a tender list (unless the exercise is run under the EU 'Open' procedure), although purchasers are expected to justify the selection criteria in the line with international obligations. Selection criteria must, therefore, be determined before ITTs are issued as outlined above.

Open Supplier's Meeting

An Open Supplier's Meeting (also known as a bidder's conference) is where all potential tenderers are invited to attend at the same time and venue to address areas of the ITT which may require clarification, so ensuring that all potential tenderers receive identical information. Commercially sensitive information should be guarded at all times (e.g., do not reveal project/budget information).
If an Open Supplier's Meeting is arranged this must take place not too soon after ITT issue and not too close to the tender return date. If it takes place too soon supplier's will not be prepared, if it takes place too close to the return date, sufficient time will not be available to tenderers to take account of outcomes of Open Supplier's Meetings.

Open Supplier's Meetings should either be chaired by the purchaser who is taking the lead in the procurement exercise, or a senior manager from the Customer Division. The Chairperson will open the meeting by setting out the agenda and introducing the personnel involved. This will be followed by a presentation by the Customer Division, setting out the aims of the procurement and expected business benefits. Then the purchaser will address the procurement process. If appropriate, there can then be a walk round of the facilities/site, otherwise it is straight into a Question and Answer session. The overriding principle that should be applied is equality of information, questions raised and answers provided should be confirmed in writing and sent to all potential tenderers whether they were represented at the meeting or not. This information should be provided not later than 6 working days before the tender return date. [In conjunction with the information provided, suppliers may wish to take notes of the proceedings. Suppliers should not however, be permitted to use audio or visual recording equipment at any time during the course of the meeting. This should be made clear to suppliers when invited to attend the meeting]

All speakers should discuss their input to the meeting prior to it and to ensure that there are no contradictions or overlaps in information to be provided.
An Open Supplier's Meeting will not be necessary for every tender exercise. A judgement will have to be made by the project team, prior to the issue of the ITT, whether or not such a meeting is required, in order that it may be planned into the procurement timetable.

Receipt and Opening of Tenders

Introduction

It is standard practice within for some organisations to use the Electronic Tendering System to issue and receive tenders from suppliers. For purchasers who do not have access to this system, procedures on Receipt and Opening of ITTs are included in the guidance below.

Receipt of Tenders

You should obtain, as a minimum, 3 responsive tenders where possible - (it may be necessary to issue 5 or 6 tenders to receive 3). If less than 3 companies respond to the ITT, the companies that did not respond should be asked their reasons for not tendering, which should be documented on a registered file. Where only one tender is received the tender process can only proceed as a Non-Competitive Action where it is mandatory that The Organisation's approval is sought.

All formal tenders must be returned to the purchaser. The purchaser must ensure tenders are stored unopened, under lock and key in a secure cabinet, until the tender opening board meets to record the contents of each tender and, afterwards until contract award. Any tenders mistakenly returned to the customer must not be opened and should be forwarded immediately to the purchaser.

Tenders returned after the due date and time will only be considered in the following circumstances:

- if there is clear evidence that the completed tender documents had been received in the Department before the tender receipt date and time. A company's frank is not proof of despatch prior to tender receipt date;

- if there are exceptional circumstances that could not have been foreseen by tenderers. The tenderer will require to record and justify these circumstances. Late tenders will only be permitted with the formal approval of the Head of Procurement Operations.

Opening of Tenders

The tender opening board usually consists of at least two officers including the purchaser and customer representative. The board is responsible for opening, checking, and recording the details of one tender at a time on the tender opening form. The board must check that the tenderers declaration has been signed and dated by the tenderer, the price schedule has been completed with fixed prices and not estimates, and that Standard Conditions of Contract and all other conditions of contract prepared on behalf of t contracting authority, have not been amended or altered in any way nor any reference to the supplier's terms and conditions of contract have been made. Any omissions must be recorded in writing, either on the tender opening sheet or as a file note for the registered file.

Use should be made of the Tender Opening form to record the details of the bids received.

Tender Evaluation

All evaluations must at least include checking the arithmetical accuracy of quotations, considering the whole life cost of the purchase, and, ensuring that all proposals comply with requirements of the specification.
Evaluation criteria should allow comparison, in capability, commercial, technical (including performance), and financial terms. If any of the criteria are mandatory and not met, the result must be a rejection of the tender. If it is optional and not met, it can be given some measure of discretion by the evaluation panel. Where it is difficult to quantify technical and other criteria in monetary terms, the use of the weighting system and merit points has advantages. The establishment at this stage of a ' Marking System for Tender Evaluation ' for all tender evaluation is therefore recommended.

The appropriate level of evaluation will depend on the value and complexity of the purchase, but basic guidelines are provided below.

Identify the tender which offers best Value for Money (VFM)

Tenders must be evaluated using the evaluation criteria clearly defined in the Invitation to Tender (ITT), in line with the previously agreed weightings in the marking and justification system

Value for money (VFM) is defined as the "optimum combination of whole life cost and quality (or fitness for purpose) to meet the customer's requirement. The emphasis on Whole-life costs means that buyers are required to take account of all aspects of cost, including running and disposal costs, and not just the initial purchase price. The reference to "quality to meet the customer's requirement" enables organisations to specify what they need to meet their own operational and policy objectives while contributing to the Executive's objectives on sustainability and environmental matters. Where sustainability or environmental matters are to form part of the evaluation criteria, this must be made clear in the contract advertisement and the ITT.

Each tender should be individually assessed and the assessments compared, together with the prices tendered, to identify the tender which offers the best (VFM) (sometimes referred to, particularly if purchases are subject to EU Directives as "economically most advantageous tender") against the pre-determined evaluation criteria clearly defined in the invitation to tender (ITT).

It should be noted that SPD recommends that that all procurement decisions should be based on (VFM).

Where the EU procurement directives apply, SPD recommends that contracts be awarded on the basis of " most economically most advantageous tender", which equates broadly to vfm, and that subsidiary criteria be set, e.g. "technical merit, price and delivery" in all procurements. The only alternative allowed under the Directives is that the decision be made on the basis of lowest price only. It should be noted that recent judgements in the UK and European Courts indicate that, where the EU directives apply, failure to advise bidders in advance of the criteria against which tenders will be evaluated means that the decision may only be based on lowest price. For more information see EU Procurement Rules.

When assessing tenders the following should be considered:

Meeting the requirement - ensuring that the bid covers everything that is currently required, to the required quality of service
The most appropriate option - checking that all appropriate options have been considered before narrowing down the choices for the way forward.
Achievability - checking that the tenderer fully understands the implications of implementing the service and can support this with appropriate plans for risk management and quality.
Affordability - this should include checking that all relevant costs are included; any likelihood of significant cost changes over the life of the contract; any proposed changes in pricing structure over the life of the contract. There should also be continuing confirmation from within the department that funds are available.
A sound commercial arrangement - value for money to the department and reasonable return for the provider.

Evaluation Panel

The evaluation panel, often referred to as the Tender Evaluation Panel (TEP), should comprise of the customer(s), purchaser(s) and any other relevant officers with sufficient technical ability to evaluate detailed tenders. It is important that the evaluation panel should be above criticism and therefore no member of the panel should be associated in any way with any of the suppliers.
For high value/risk contracts SPD should be involved early and must be involved early if the value of the contract is likely to exceed the purchaser's delegated purchasing authority. The panel will:

evaluate the tenders;
make the recommendation for award; and
ensure Scottish Executive purchasing policy is adhered to.

Capability

This should establish whether tenderers have the capability to deliver the requirement. The starting point should have been the assessment of prospective bidders prior to the invitation to tender. See Supplier appraisal for further information.
Further detail will be provided in the tender submission, which may also contain proposals for innovative variations to the specification. All proposals should be evaluated.
Some of the areas that should be addressed under capability are:

the experience, capability and qualifications of the key personnel proposed to carry out the activity;
the management and supervisory support;
the checks made on tenderers' references covering their performance for other clients;
number of employees & staff turnover;
"companies portfolio"; and
existing "order book".

Evaluation Criteria

Commercial evaluation criteria could include:

Compliance with the ITT;
Check for arithmetical errors;
Acceptance of the organisation's terms and conditions of contract;
Compliance with tender validity period;
Where appropriate, detailed examination of the Bills of Quantities or Price Schedules;
Check that the tender is complete, no missing pages;
Check for unauthorised amendments;
Tender is signed by an authorised person;
Acceptance of payment terms;
Ownership of copyright e.g., in the case of a training course; and
Length of time that the product range/design will be on the market (affects continuity of range and spares - should be part of the specification, if critical).

The scope of technical evaluation will vary according to the type of goods, services or works required and their value. These aspects will be built in to the Evaluation Form prior to the bids being opened. In addition to establishing whether tenders meet the requirements set out in the specification, other criteria may include:

Capacity available;
Availability of facilities/employees, sufficient to meet the requirement;
Performance and productivity standards;
Quality (fit for purpose), can they deliver to the appropriate standards;
Inspection requirement;
Operational and maintenance costs;
Standardisation;
After sales service;
Cost and availability of spares and/or consumables;
Provision of manuals and training and Management Information;
Sample testing; and
Warranties.
Sustainability and environmental issues where relevant to the subject of the contract.

Any modifications proposed should be checked against the outputs defined in the specification to establish whether they provide an acceptable cost-effective approach or whether there is doubt about the tenderer's ability to meet the customer's needs.
If the examination of the tender documents reveals that an apparent error (e.g., arithmetic of pricing schedules) has been made in the computation of the tender, the tenderer should be informed of the error(s) and given the alternative of confirming or amending its offer to correct genuine errors.

If the tenderer elects to amend his offer and the revised tender no longer offers the best value for money it may be necessary to re-examine, not only that tender, but one or more of the others as well. This procedure should apply equally if a tenderer draws attention to an error. If the tenderer elects to confirm or amend its offer this must be done in writing. Extreme caution and care must be exercised in order to preserve integrity and avoid accusations by other tenderers of acting in bad faith.

Financial Evaluation

For UK manufactured/supplied goods and for services/works, the price basis is the delivered price excluding Value Added Tax (VAT). For goods supplied from overseas, the comparison should include costs additional to the Carriage, Insurance and Freight (CIF) price incurred after discharge at the port of entry into the UK including any duty payable.

In carrying out the financial evaluation of tenders, all the costs and benefits' which can be quantified in money terms should be compared. The emphasis on Whole-life costs means that buyers are required to take account of all aspects of cost, including running cost and disposal costs, and not just the initial purchase price. Whether such comparisons require the use of investment appraisal techniques (such as discounted cash flow calculations) will depend on the complexity and/or value of the procurement.
Financial evaluation criteria should include:

Whole Life Cost comparisons.
Quantifiable financial benefits arising from the technical evaluation (e.g. speed, fuel or electricity consumption, coverage, shelf life etc).
Fixed or variable pricing.
Cost of components, spare parts, consumables and servicing.
Risk analysis and financial appraisal (for major contracts of strategic importance, especially those of an innovative nature).

Evaluation tools (Suppliers, Bids, Products)

The decision matrix is a tool that can be used to evaluate and prioritise criteria for evaluating suppliers, products or bids.

Evaluation Matrix

Note that all formulas are embedded within the template therefore you only need to enter the values.

Contract Switching Checklist

Page updated: Wednesday, January 20, 2010

Scottish Government