Value for money

Much more is involved in tendering than simply issuing the invitation, receiving bids, and choosing the one with the lowest price.

The main objective of the tendering process is to ensure the ‘best fit’ supplier is selected to provide goods or services which offer the best value for money.

Such a supplier is likely to be technically competent, financially sound, and someone you can enjoy a professional relationship with throughout the project.

After all, as we will see in the next module, things don’t always go as planned!

Beyond price, typical criteria used to evaluate tenders include:

Understanding of need

How well does the tenderer’s proposal address the procurement statement of work?

Overall or life-cycle cost

What is the total cost of ownership of the proposed deliverable?

Technical capability

Does the tenderer have, or can the tenderer be reasonably expected to acquire, the technical skills and knowledge needed?

Risk

How much risk is embedded in the statement of work, how much risk will be assigned to the selected tenderer, and how does the tenderer mitigate risk?

Management approach

Does the tenderer have, or can the tenderer be reasonably expected to develop, management processes and procedures to ensure a successful project?

Technical approach

Do the tenderer’s technical proposed methods, techniques, solutions, and services meet the quality requirements?

Warranties and guarantees

What does the tenderer propose to warrant for the final product, and through what time?

Financial capacity

Does the tenderer have, or can the tenderer reasonably be expected to obtain the necessary financial resources?

Production capacity and interest

Does the tenderer have the capacity and interest to meet potential future requirements?

Business size and type

Does the tenderer’s enterprise meet a stipulated category of business (such as small-to-medium enterprise or Indigenous-owned)?

Past performance

What has been our past experience with selected tenderers? Can the tenderer provide references from previous customers?

Intellectual property or proprietary rights

Does the tenderer assert intellectual property or other rights over their output? In other words, will we fully own the deliverable?

At the end of the evaluation process, you need to make a business case for one alternative (tenderer) over the others!

The best-practice principles of business case development apply whether you are inviting tenders or tendering for work yourself.

Given that many projects are, in their entirety, procurements, the value of linking the tender process to business case good practices cannot be overstated.

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Conflicts of interest

A conflict of interest occurs when a decision-maker (or someone making recommendations to them) has a personal interest in one of the tenderers succeeding.

The conflict exists because at all times during the process, the selecting organization’s interest should be paramount.

A conflict of interest might arise if the procurement decision-maker is:

• A current or recent employee of a tendering business
• A consultant to a tendering business
• A shareholder in or owner of a tendering business, or
• A partner, relative, or close friend of someone listed above.

A clear conflict of interest also arises if a decision-maker accepts a gratuity, gift, or other incentive from a tenderer, even if the gift is apparently unrelated to the tender.

Similarly, if a decision-maker shares confidential information with a tenderer that could help them with their bid – information other tenderers would not ordinarily have access to – a conflict exists.

Notably, the perception of a conflict of interest is just as damaging to the integrity of the procurement process as an actual conflict.

Therefore, at any time a conflict might exist (whether the conflict is real or not), the decision-maker must declare the conflict to their superiors.

The organization can then decide to limit that person’s involvement in the tender evaluation or exclude them altogether.

There may also be legal / criminal consequences for failing to declare a conflict of interest

Conflicts of interest can seriously jeopardise organisations’ ability to achieve genuine value for money in procurement, and cause significant harm to the reputation of all involved.

For that reason, you should always err on the side of caution in your management of them.