Procurement Group – Tender Evaluations

Constructing Excellence

 

 

At the Procurement Group on 17th January, Ann Bentley introduced the emerging work on Tender Evaluation linked to the Value Toolkit. The Value Toolkit aims to drive better social, environmental and economic outcomes through value-based decision-making.

At the project tender stage there is often a focus on inputs (money, hours, materials etc.) but not on outcomes and value. This can lead to an over-simplification of complex processes and create a siloed environment with limited collaboration, which doesn’t create the outcomes and value desired by the client. The work Ann is leading on Tender Evaluations aims to help clients understand and evaluate the trade-offs that need to be made to deliver the best outcome.

The work is aligned with the Construction Playbook commitment on Evaluating Bids and Contract Awards: ‘We will drive wider value through public works projects and programmes. Encouraging the market to compete on price alone can create false economies and unhealthy markets and should be avoided.’

The work builds on the White Paper: Price Evaluation Models for the Housing Sector, published in 2020 by Trowers & Hamlins. Four evaluation models are being considered:

– Balanced price / quality model with thresholds
– Optimum Pricing
– Price / Quality Ratio
– Life Cycle Costing

The team are looking at how the Value Toolkit can set performance ranges by outcome and how this can be incorporated into tender evaluation. They are keen to understand how tendering parties are likely to react, whether it is open to gaming and other issues. There should be some case studies on these approaches available in summer 2022.

The group welcomed the move to performance ranges rather than minimum compliant standard. This re-enforces and builds on the recommendations of Constructing the Gold Standard, which advocates an outcome based approach. The Value Toolkit helps chose the units against which value will be measured and therefore defined the acceptable performance range.

At the pioneering stage using the Toolkit is relatively simple, as clients can legally do what they like and combined with digitally enabled design, lots of options can be considered quickly. When it gets to the tender stage evaluation needs to be done in a legally compliant way.

Participants were keen for clients to understand risk and how current procurement approaches can be seen as less risky by clients, but in reality disguise and hide risk and stop clients from getting the outcomes and value they need. This approach encourages clients to consider those trade-offs up-front rather than pushing it down the line when it ends up costing more time, effort and cost.

Once the decision has been made on value and how it is going to be measured that needs to be enshrined in the contract and managed as part of the contract. Too often promises are made at the tender stage that are not realised in delivery with little consequence. Clients also need to recognise that delivering things like social value can cost money and is more than a tick box exercise.

Participants were keen for clients not to overlook the costs of running a business effectively and doing all of the correct things in terms of skills development, wellbeing and wider social value initiatives. This may make some businesses seem more expensive at the tender stage in terms of day rates etc but they are able to bring greater value to the project. This is not always understood by clients.

The issue of bidding costs and complexity for suppliers was discussed and this is something that clients need to be very aware of.

As there is significant movement towards collaborative procurement at present the CE procurement group will undertake to carry out an exercise to map those initiatives, how they relate to each other and how they can be used to communicate better ways of working with clients. If you have any insight or input please get in touch.

Dates of next meetings:

CE Procurement Group – Procuring for MMC – 23rd February @ 2:00 pm – 4:00 pm GMT

CE Procurement Group – Building Safety Programme 23rd March @ 2:00 pm – 4:00 pm GMT

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