Public sector bodies have a new focus regarding procuring tender bids from private companies - social value. Those private companies will emphasise the social value of the tenders within their bids, providing evidence their services can deliver tangible benefits such as new jobs, economic growth and sustainability, among other benefits for local communities.
This is an effort to improve the way procurement happens and secure better deals for communities across the UK. For public sector representatives, this also means the procurement process needs to be improved. It’s no longer about competing on price alone. Public sector bodies must enhance their bid evaluation policies and practices to better secure the right deals.
This blog explores bid evaluation, how it'll change in light of the focus on social value within bids and how the public sector can improve evaluation.
- The New Approach to Bid Evaluation
- Balancing the Importance of Price, Quality and Social Value
- Evaluating Quality
- Evaluating Price
- Testing Your Evaluation Model
- Ensuring Due Diligence
The New Approach to Bid Evaluation
With the emphasis on bids providing a tangible impact on social value, public sector representatives need to better assess how they evaluate bids. This needs to include a process to determine which is the most advantageous for a community, area or industry from an overall impact, performance, value for money and social impact perspective.
The public sector isn’t simply looking for the cheapest bid. Yes, price is a heavily influential factor, but it isn't the be-all and end-all. Good evaluations weigh up the entire impact of the bid, with a high level of well-developed and rigorous scrutiny.
This has been a longstanding process within the public sector, who gain much of their services from private sector providers. However, recently, the government has changed its view on what it wants to gain from bids.
Balancing the Importance of Price, Quality and Social Value
Now, public sector organisations will look for financial benefits and complete social impact. There's now more potential for smaller businesses with smaller buying power to not be beaten on price by larger organisations that can charge less. In the bid evaluation guidance note, it explains:
Government policy is to award contracts on the basis of value for money. Value for money means securing the best mix of quality and effectiveness for the least outlay over the period of use of the goods/services bought. It is not about the lowest upfront price. To achieve the desired business objectives, outputs and outcomes of a service, it is essential to effectively determine quality through the bid evaluation process. Quality, in this context, means all non-price factors including social value.
With the public sector scrutinising tenders more, larger companies will need to consider the social and environmental impact they can provide, as set out by the UK government’s green paper ‘Transforming public procurement’. This will hopefully create a far more diverse and competitive market for suppliers to do business in.
A key focus for public sector representatives looking for suppliers is to remember to evaluate bids with balance in mind. Searching for price alone can create false economies and completely ruin public sector projects that were started to help local communities.
When evaluating bids, it’s common for there to be a bias towards low-cost bids. Bid evaluators must always consider value for money through the lens of both cost and quality.
Evaluators can look at section 4.2.2 of the Government Functional Standard to understand the expectations placed on commercial providers. These include:
- Capability, knowledge and skills
- Social value
- Price and whole-life cost
When evaluating the quality of a tender, this must be done in relation to the criteria set out by the procuring organisation. Setting up the right criteria allows public sector organisations to differentiate between tenders and sort the wheat from the chaff.
Evaluating quality is all about investigating both the priced and unpriced elements of a tender. It also means considering each contract’s potential weakness and limitations - even if a particular contract is looking to be the most advantageous.
Evaluating quality requires several things from the procuring party:
- Objective, proportionate and clear criteria which are fully relevant to the required service, developed by subject matter experts.
- A scoring approach that allows bids to be easily differentiated.
- Weightings set according to the relative importance of each criteria.
Additionally, evaluating quality also includes evaluation innovation, such as identifying whether emerging technologies are being utilised.
Finance teams should be consulted when evaluating price and the fixed and variable costs that might become actualised.
Similarly, evaluating price should include considering the whole-life cost. However, that whole-life cost is different from the initial cost, covering the total running costs of a service over the entire contract lifecycle.
These costs will include:
- Operating costs
- Disposal costs
Testing Your Evaluation Model
Each bid evaluation will have a bespoke formula that identifies the ratio of price to quality, which can be pursued in several ways and is ultimately up to the discretion of the procuring organisation. However, this model or formula should always be tested first before use.
The procuring organisation can carry out tests on dummy bids or low bids, with the scores given analysed to determine whether the results are in line with what’s expected.
Also, this model must be disclosed to bidders within the procurement documents in an understandable manner to all. In the Bid evaluation guidance note, it states:
The department must disclose the evaluation methodology, including the evaluation criteria and their weightings (including sub-criteria) to bidders in the procurement documents.
To find out more information on improving bid evaluation, you can read the Bid evaluation guidance note, which details each requirement for proper bid evaluation.
Ensuring Due Diligence
In the UK Government’s ‘The Sourcing Playbook’, it states:
We have a responsibility to assure ourselves of the solvency and competency of suppliers that bid for our contracts. In return, we shall prepare accurate specifications for suppliers to bid against and offer a fair deal.
This means any procurement and evaluation process must be carried out in a fair manner that serves to safeguard the delivery of public services. Overall, public sector organisations are determining the capacity to satisfy the requirements of a contract, meaning evaluation should be rigorous, proportional and unbiased.
Contract evaluation is no walk in the park. It requires a deep understanding of your needs, contextual issues and the bid itself. Developing the right evaluation process takes time. It’s also worth sourcing the advice and insight of experts within the field.
To get practical advice on bid evaluation and other procurement or public sector insights, alongside policy updates and more from the Crown Commercial Service and Government Commercial Function, come to the Public Sector Show, being held in June 2022.
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Jessica Kimbell, GovNet