Tender Evaluation and reasons why you might be losing contracts

Tender Evaluation and why you might be losing contracts

Introduction

There are significant differences in the approaches of the public and private sectors when tenders are being evaluated. In both sectors, the value of the tender will be an influence, as will the risk the procurement presents. The public sector will seek to comply with their tender evaluation guidance and, when applicable, the EU Procurement Directives. In some situations, the tendering organisation will expend considerable time and money, seeking to submit a winning tender. It is reasonable to expect the tender recipient to conduct a highly professional evaluation that will withstand the ultimate scrutiny. This white paper is informed by a management audit of the state of Illinois Multi – Year Beverage Vending and Pouring Contract. Two companies Coca-Cola Enterprises Bottling Companies (Coke) and Pepsi Americas, Inc (Pepsi), submitted proposals. The audit report highlights considerations that can inform others when they are evaluating tenders.

Contract Award

The contract was awarded to Pepsi, whose technical proposal received an average score of 383 points. Coke’s technical proposal received an average score of 341 points. This was below the 350 point minimum established in the RFP (Request for Proposal). As a result, Coke’s proposal was rejected but they were not notified that their proposal did not meet the 350 point requirement until six months after the price proposal was opened and after Coke was told they would be asked to submit a best and final offer (BAFO).

Professional thoughts extrapolated to procurement issues

• When there is a minimum score that must be met, is the scoring by the evaluation panel capable of such precision that they fail by 9 points?
• Note the word ‘average’ in regard to the total score. Assuming there are wide discrepancies in individual evaluation panel members, how were the discrepancies resolved?
• Why did it take six months after opening price proposals to advise Coke and why were they told they would be asked for a BAFO?
• Who defines the communication protocol between the buying organisation and tenderers?

The evaluation team

There were nine members of the evaluation team. They individually scored the bidder’s technical proposals. The evaluation team did not meet to discuss major differences in scores and, perhaps, unsurprisingly the individual scores varied greatly. 500 points was the maximum score possible, the lowest overall score for Coke was 206 whilst the highest score was 435. The lowest overall score for Pepsi was 298 and the highest score was 453. Additionally, scores for individual subcategories within the evaluation tool also varied greatly. For example, the revenue growth subcategory for Coke ranged from a score of Zero to a perfect 75. It is reported that two evaluation team members left certain elements on their evaluation tools blank but it was not determined if that was the evaluator’s intention. In the event the blanks were given a zero score. Only two of the nine evaluators provided notes or comments with their scoring instruments. The procurement file did not contain adequate records of evaluation committee meetings.

The audit report shows a table with the individual scores of each evaluator.

It is these scores that resulted in the average score for each bidders.

Professional thoughts extrapolated to procurement issues

• Define the membership and roles of each member of the evaluation team.
• Each member of the evaluation team to independently score and reach a ‘provisional’ score – ensuring comments are recorded to explain their score.
•  Then the evaluation panel meets to discuss discrepancies in scoring – then each member has the right to amend their score and if they do to maintain a recorded audit trail.
• No blanks permitted, all sections should be capable of being market if the team members have had a briefing on the scoring system and what a model answer would contain.
• Evaluation team meetings to be accurately recorded and perhaps subjected to a clarification routine but only if each bidder is treated the same.

The technical content

The RFP was very specific as to what was to be included in the technical proposal, however, the technical proposal submitted by Coke and Pepsi both lacked key information that was to be included. Exhibit 2.1 shows information not included in either vendor’s offer. These included ‘Technical Approach’ – ‘The Vendor must provide a detailed description of how the vendor plans to approach each service requirement ………’ It also included ‘Revenue Growth Plan’ – ‘The vendor shall provide a plan for growing current annual volumes and make projections related to gross and net sales and machine expansion.’ Coke’s entire technical approach consisted of the following: ‘We are unable to satisfy all the requirements of section 4 of the RFP. The following are examples:

• Increase the number of vendors and gross sales
• Staffing specifications
• Vending separations
• Debit card technology

There were an additional ten factors noted!

Pepsi’s entire technical approach section consisted of the following: ‘Pepsi Americas operates a state of the art full service and third party vender operation. This operation manages over 78,000 venders and supports these with over 11,000 MEM employees who maintain and service these machines. Our proposal will comply will (sic) all elements of the RFP except those identified in Exhibit 2. See Exhibit 3 for the vending implementation plan for the conversion and management of vending business.’ The report explains that Exhibit 2 was a three-page listing of RFP or contract sections where Pepsi had potential legal concerns.

Professional thoughts extrapolated to procurement issues!

• Determine how the technical content will be scored and whether any facets will be a PASS/FAIL.
• Request detailed method statements.
• IT there are only two proposals and neither is acceptable, consider failing both and re-advertise the opportunity.
• Ensure that the evaluation team includes those who have the ability to assess all the technical content.

Price Negotiation

Coke was eliminated from the process after it was ascertained that they had not achieved the minimum score. The Department of Revenue negotiated a best and final pricing with Pepsi (noting that Coke’s pricing proposal was opened for evaluation). Exhibit 2-6 in the Audit Report shows differences between Pepsi’s initial proposal and the best and final offer. We show below only two extracts, demonstrating significant shifts in the pricing model detail.

Professional thoughts extrapolated to procurement issues!

• Make the rules very clear about negotiation!
• Make the rules very clear on inviting Best & Final Offers!
• Interrogate changes in pricing and the strategy behind the tendered amounts.
• Nothing in the Best and Final Offer that these is a difference of $7 between the initial offer and the BAFO, however see the swings for, e.g. Urban-Champaign University.

Conclusion

We have provided a summary of selected parts of the Audit Report and you are strongly advised to read it all. There are lessons to be learned, including the Risks when tender processes do not stand the ultimate scrutiny.