RICS draft code of practice - Procurement of facility management

Procurement of facility management code of practice

3 Planning

This section covers the period between the DO obtaining internal approval to procure facility services and the start of the procurement process. Adequate preparation for this is essential. The following aspects are covered:

  • strategic factors that should be considered as part of procurement planning
    • the project planning activities that need to be undertaken
    • how to assess market trends, identify potential bidders and evaluate market interest and
    • what procurement strategy to use to attract market interest and maximise competition.

3.1 Strategic factors

DOs embarking on a procurement process should have an FM strategy. The RICS Strategic FM guidance note should be consulted as part of developing a strategy.

Once an FM strategy is in place, it should inform the following factors in pre-procurement planning.

3.1.1 Scope of services

In planning a procurement process it is important to have a defined scope of the services that are to be included. Often a high-level scope has already been determined as part of a facility strategy or approval for a re-procurement process. Scope now needs to be confirmed and stated to enable pre-procurement planning.

3.1.2 Baseline

It is important to understand and quantify the baseline of the current costs and services that are being procured to assist with evaluating bids and value for money assessments. Providing a full and accurate baseline at the outset will help to prevent issues arising later in the process. The service requirements, fixed and variable costs and non-financial factors such as service quality, performance, customer satisfaction, etc. should be determined and mapped to the scope.

In some procurement processes, there are changes in the clients' business or property portfolio between establishing a baseline and completing a procurement process. To provide a meaningful comparison, baselines can be adjusted to reflect changes that drive cost or performance, e.g. acquisitions or disposals of buildings or changes in legislation such as relevant employment law.

3.1.3 Vision

Before embarking on a procurement process it is helpful to produce a vision document. This vision can be used to inform bidders about what the DO is hoping to achieve and can act as a reference point for testing the desired outcomes. The document could include:

  • the future vision for the real estate/workplace
    • what the DO is hoping to achieve
    • what the services will look like post-mobilisation and transition
    • the level of integration
    • the responsiveness
    • the level of customer satisfaction
    • partnership working and
    • transparency of cost.

3.1.4 Strategy

DOs should understand the corporate strategy when planning a procurement process. Check that the procurement process supports that strategy and does not obstruct it. The DO should ensure that what is procured is flexible enough to respond to changes and the contract reflects known changes and/or has mechanisms for dealing with change.

3.1.5 Business case

It is likely that a business case was produced and approved before the procurement process could proceed to the planning stage. It is advisable to revisit that business case to ensure the detailed scope was covered and the issues and expected benefits are being addressed. If no business case was produced, the DO should consider writing one at this stage and getting it approved to underpin the rationale of the procurement process.

3.1.6 Stakeholder communication

Before starting a procurement process it is important to plan stakeholder communications. Stakeholder support will be essential throughout the process and there are often specific requirements for sign-off before awarding a contract.

The DO should identify and list the stakeholders, note their areas of interest/concern and allocate an owner to each key stakeholder. A stakeholder communication plan should be updated at different stages of the procurement process as stakeholders and their issues and concerns might change. Delays can be caused by stakeholders not being informed or available at critical stages of the procurement process. This can be avoided with proper planning. If undertaking a procurement process in more than one language, care should be taken with translating information for stakeholders to ensure that it is understood.

3.2 Project planning

3.2.1 Ethics

RICS is a member of the International Ethics Standards coalition and RICS members are required to follow these standards.

The RICS Rules of Conduct and the RICS Conflicts of Interest professional statement (1st edition, March 2017) set out mandatory requirements for RICS members. In line with these documents, DOs should act ethically throughout a procurement process including ensuring that incumbent contractors, subcontractors and people who are impacted are treated fairly. This includes the requirement to follow applicable legislation concerning anti-bribery and corruption, employment and modern slavery.

3.2.2 Project governance

Project governance takes a more strategic, high-level view than project management. Governance can help the project to stay on track to deliver the strategy, be used to approve or make decisions, allocate resources, be the recipient of and review project reports and communicate with senior stakeholders. A typical governance structure for an FM procurement project is a project steering board, which may meet weekly or once every two weeks.

A steering board would typically include senior project sponsors with at least one at board level and representatives from each of the different territories involved.

3.2.3 Project reporting

Regular project reporting is important to track progress and highlight issues. A typical reporting structure will involve weekly dashboard reports and more in-depth monthly reports. Typical contents of a weekly dashboard report are:

  • last week's activities/achievements
    • next week's planned activities
    • new or changed significant risks and issues and
    • progress status of milestones due within the next month (using red/amber/green).

A more detailed monthly report is often submitted to the project steering group with the following contents:

  • activities/achievements since the last steering group meeting
    • next month's planned activities
    • updated risks and issues log
    • progress status of all key milestones (red/amber/green) and
    • overall project status and progress.

A weekly dashboard report can form the agenda for a weekly project team meeting and the monthly report can serve the same purpose for a monthly steering committee meeting.

3.2.4 Team

When planning a procurement process, it is important to recognise the various roles that will be required in the team and identify individuals to fill those roles. The person or persons who will be managing the contract for the DO should ideally have roles in the procurement team. Typically, a procurement process will have the following roles for the duration of the process, some of which may be filled by the same person, particularly for smaller scale procurement processes.

  • A project sponsor - a senior leader who represents the project at board level, provides leadership and project governance and will often sign off decisions.
  • A project manager - a senior manager who provides day-to-day management of the project, coordinates the activities of others and leads the team. A project manager may be supported by a project coordinator or administrator depending on the scale and complexity of the project.
  • A procurement lead - an experienced procurement professional who knows the market for the services being procured, manages the tender process, ensures that the stated procurement process is followed in a fair and transparent manner and who owns communications with bidders during the process.
  • A technical lead - a property or FM professional who understands the technical requirements of the services being procured and the premises in which the services will be delivered.
  • A financial lead - a finance person who understands the costs, budgets and affordability of the services being procured, and is capable of leading financial analysis.
  • A commercial lead - a commercial manager who understands the commercial issues relating to the procurement, e.g. indexation, risk pricing, continuous improvement.
  • A legal lead - a lawyer who advises the project on legal issues and the terms and conditions of the contract. Typically, an in-house legal adviser, an external lawyer or sometimes both are required. In some territories, an experienced qualified procurement professional may be able to undertake much of this role, particularly where standard contracts and terms are being used and the risks involved have been assessed as low. In such cases, legal advice should be sought for any significant deviations from the standard terms or where there is any doubt about terms.
  • An HR lead - a manager from HR to advise the procurement process on the implications for people, particularly where employees may transfer to a new employer, be made redundant or have their terms and conditions of employment changed.
  • An IT lead - a manager who can advise on the systems, interfaces and access to the client systems that bidders will require as part of their solution.
  • Any other specialist advisers that may be necessary given the scope, e.g. pensions, insurance, health and safety, environmental, etc.

For procurements covering regions or global procurements, it may be necessary to have regional or territory leads and/or replicate the roles above in each region or territory. In such circumstances a particular territory should lead the procurement process. In some cases, language skills should be a key consideration in the make-up of the procurement team.

The time commitments required from each of these roles can vary throughout the project with some being full-time, some part-time and some ad-hoc, depending on the phase of the project.

How the team will work together and communicate should also be considered. It may be appropriate to co-locate most of the team to a 'project room' or a defined area; weekly meetings or calls and dashboard reporting can be established (see section 3.2.3). Communications and reporting are important when working on a regional or global procurement given that the team will likely be geographically dispersed across different time zones and may speak different languages. It is also advisable to establish various protocols, including:

  • an email distribution list to ensure that no one is missed out of communications
  • a central repository for project files
  • a file naming convention, standard document templates and styles
  • a digital tool to aid communications and collaboration
  • language and translation protocols (if required) and
  • a holiday and absences tracker.

3.2.5 Data

The availability of accurate, up-to-date and comprehensive data to inform bidders about the DO, the services to be provided, the assets involved and the premises in which services are to be delivered is key. The DO should provide enough data to:

  • allow bidders to understand the DO's requirements
  • enable a solution to be developed
  • accurately cost their service inputs
  • assess commercial risk and
  • ensure that bidders are being evaluated comparably.

Discussing with bidders what data they need can be helpful. Different sets of data are required for different services. It is advisable to provide bidders with as much data as possible. The DO should be open if data is out-of-date or inaccurate, agree assumptions if appropriate (and what will happen when assumptions are firmed up) and ask all bidders what additional data they require. Other than in exceptional circumstances data should be provided to all bidders so as not give any bidder an advantage.

The owner of the data should give their consent before any documentation is issued to bidders. The DO should issue non-disclosure agreements (NDAs) to all bidders or similar confidentiality agreements that are enforceable in the territory and have signed copies returned to ensure the bidders are aware that any data provided is confidential. Legal advisers should include wording to this effect in the tender documentation.

DOs should use consistent formats and measures when working across regions or globally, e.g. imperial or metric. Unless dictated by local laws it does not matter which is used but it should be consistent and made clear to bidders to avoid confusion.

Often bidders need to undertake site surveys during the procurement process to fully understand the requirements. These should be organised to allow access to all areas in scope and include a mechanism for technical questions. In very large-scale procurement exercises, representative sample sites might be used to reduce the costs of bidding by restricting the number of locations to be visited. Specific mechanisms for this are required and briefly described in section 4.3.4.

For repairs and maintenance services, condition surveys and asset registers are essential, since they provide bidders with a basis for accurate costing and risk analysis. A condition survey is particularly important if the bidder is taking a financial risk on repairs, e.g. with an inclusive repairs element. An asset register is important to ensure all assets that need to be maintained are known for pricing purposes.

Ideally, DOs will have up-to-date condition surveys and asset registers that bidders can rely on. In practice this is rarely the case and a strategy to fill any gaps in condition and asset data should be developed and implemented. Options include the following.

  • The DO undertakes or commissions condition surveys and asset verification surveys before launching or during the procurement process. If not completed before final pricing, a mechanism to adjust the price should be agreed. RICS recommends this option as best practice as it removes the most uncertainty and the DO owns the survey data.
  • The winning bidder undertakes or commissions full condition surveys and asset verification surveys during the mobilisation period and the price adjustment is made once completed. Where this is done DOs should ensure that the terms and conditions agreed allow the DO to own the resulting data.
  • Bidders price on available information and undertake due diligence during the first year of the contract and agree price adjustments accordingly.

Access to data should be controlled where it is confidential to either the DO or bidders, and this is usually done via a 'data room' - a virtual room on a database, often provided as part of a procurement system. However, there is sometimes still a requirement to provide a physical data room, particularly where there are a lot of floor plans or operations and maintenance (O&M) manuals that are not available in digital formats.

Emailing information to bidders should be avoided and even when data is being provided in response to questions from bidders, the data should be added to the data room and the response should reference or link to this. This ensures all bidders have access to the same information at the same time and the data room is considered the single source of true information.

3.2.6 Objectives

The DO should have clearly stated objectives that reflect or support the organisation's strategy as discussed in section 3.1.4. Is the objective cost reduction, is it improved service performance or is it trying to solve another problem? The SMART model in Figure 1 can be used to assess objectives.

Figure 1: Objectives

An example of an objective that is not SMART is: The objective is to cut costs.

A SMART alternative would be: The objective is to reduce the costs of the in-scope facility services by 10% of the 2018/19 financial year baseline before the end of the 2019/20financial year.

Most projects will have objectives that can be ranked in order of importance. Procurement of facility services projects typically have cost reduction and performance improvement objectives alongside objectives to bring in more innovation, transform service delivery and deliver social and environmental objectives. Another common objective is to have the new service arrangements in place by a certain date and care needs to be taken that the time allowed is realistic. It may be better to amend an objective in recognition of the actual time required for a robust procurement process.

The objectives should be agreed with the project sponsor and stakeholders before beginning the procurement, and should form the framework around which the evaluation criteria are determined. As such they should be shared with bidders so that they know what the DO is trying to achieve rather than guessing. An exception to this should be savings targets. While it is advisable to inform bidders that an objective is to deliver savings, it typically puts DOs in a stronger commercial position not to disclose what the savings target is. In some cases, this target should be disclosed but only as part of a commercial strategy.

3.3 Market analysis

Before launching a procurement process the DO should understand the market in which it is seeking to procure services, analyse the current market trends and identify the bidders who could meet its requirements.

 

Figure 2: Market segmentation

3.3.1 Market trends

The first step of any analysis of market trends is to understand what the market is. For example, a listed company seeking to buy services to cover territory worth tens of millions of dollars per year will be buying facility services from a different market than a local privately owned company wishing to buy a facility service for a small number of buildings in one location. DOs may choose to procure some services from regional or national markets and other services from local markets. The market can be segmented as illustrated in Figure 2.

Despite this categorisation there are some overlaps. For example, many global or regional suppliers will be interested in larger national opportunities. Many national suppliers will also bid for local contracts in competition against local suppliers if the value is significant. In most cases suppliers will work with specialist subcontractors rather than self-delivering all services. DOs should have visibility of the self-delivery/subcontracted split of services before tender evaluation and contracting as care needs to be taken that services are not subcontracted where better value would be achieved from direct procurement of the services.

Sources of information on market trends include:

  • local trade press
  • industry conferences and industry organisations (e.g. IFMA)
  • local associations and
  • published papers on the market available online.

For regional and local markets, networking with other buyers of services and ascertaining how they have found the market is a worthwhile activity. Market research can also be commissioned from consultants and market research providers.

The DO should also analyse how market trends and segmentation can impact the procurement process. If the DO's strategy is contrary to current trends, there may be more interest and better value from the market if the procurement process can be adapted to take advantage of trends. Alternatively, the DO may need to invest more time interacting with potential bidders to ensure that they understand what the strategy is.

Figure 3: Potential suppliers

3.3.2 Potential bidders

An important step in any procurement process is to identify potential bidders. Which bidders in the market place can meet the DO's requirements in the locations it needs them to? Figure 3 illustrates some key questions to consider when selecting bidders.

Once a list of potential bidders have been identified, more detailed market research and due diligence on these companies can be done, including researching their current contracts, recent wins, losses, financial strength, geographical spread, infrastructure, references, etc. In addition to industry resources mentioned in section 3.3.1, company websites, published accounts and annual reports are good sources of information on individual companies.

DOs may wish to document this research as part of a formal pre-qualification process before selecting bidders. This can include requiring bidders to submit information for evaluation in addition to any market research.

DOs may be able, or even be mandated, to use an existing government or public-sector framework contract, in which case the selection of potential bidders has already been undertaken.

3.3.3 Soft market testing

If a DO's requirements are unusual, complex or of a significant value, undertaking a programme of pre-procurement engagement, including informal bidder meetings and/or more formal soft market testing, may be a worthwhile investment.

The purpose of pre-procurement engagement is twofold.

1 Marketing the opportunity - the FM market is very competitive and opportunities often have significant bid costs for bidders. If a bidder is considering bidding for opportunities X, Y and Z they may not have the resources (business development team and/or budget) to bid for all three. Suppliers will 'qualify' opportunities by considering which are best suited to their experience and which they are most likely to win.

If a supplier does not have a relationship with a DO, does not understand its requirements and if senior individuals have never met with counterparts in the DO, they are likely to invest in other opportunities where they feel they have a higher chance of winning the bid. Taking time to meet with potential bidders, establishing relationships, understanding their capabilities and explaining the requirements can get a DO on a bidder's pipeline and make the opportunity more attractive.

DOs should be mindful of the costs of bidding for regional and global procurements that by their scale and nature can have very high bidding costs. In being invited to tender, suppliers are being asked to make a significant investment in time and cost, which they may be reluctant to do unless they have established a relationship with the DO and fully understood the requirements and the process.

2 Understanding the market's response - soft market testing is a consultative process: DOs want to learn how bidders view the opportunity, the process, the timeline, how they might deliver it, what benefits may be delivered and importantly any issues or concerns they may have. For example, if significant supplier investment is needed to meet requirements, but the DO is proposing a short contract term, a bidder will likely explain why a longer term would be required for them to recoup their investment. If consistent messages are delivered on the opportunity or the terms being proposed, it may be advisable to address these issues before proceeding.

3.3.4 Confidentiality

To get the maximum benefit from pre-procurement engagement it is important to prepare and confidentiality is paramount. Typically, DOs should require bidders to sign NDAs before receiving information and attending meetings. Some bidders may require these to be two-way. What is and is not confidential should be agreed with the owner of the data and independent legal advice sought where there are any concerns.

Care should be taken with any incumbent suppliers, particularly if it has been decided to exclude them from the procurement process (e.g. due to poor performance). It is extremely difficult to keep procurement processes confidential and there is always a high risk of leaks. The risks and impact of this should be assessed and mitigation actions considered. It is often better for the DO to be open with an incumbent, inform them of the process, explain why they are excluded and remind them of their contractual obligations until the services have been handed over or terminated.

Many procurement projects will also impact DO employees, so it may be advisable to create a project code name and, in some circumstances, require project team members to sign some form of confidentiality agreement after consultation with HR.

3.3.5 Written brief

Bidders may not be familiar with a DO nor understand how the business operates or the challenges it faces. The DO should prepare a written brief, which can be further developed as part of the procurement documentation to be issued at a later stage. It can also be helpful for the DO to make bidders aware of the issues it wishes to discuss by circulating an agenda and/or a list of questions before the meeting to give bidders time to prepare.

Bidders value the opportunity to participate in soft market testing and typically view it as an opportunity to promote their business as well as assessing their likelihood of winning. Pre-procurement engagement can also encourage smaller companies to bid as they are typically more selective about which opportunities they bid for due to the high cost of bidding. To have a meaningful two-way discussion rather than a sales meeting, it can be helpful for the bidder to give a brief presentation about their company at the start of the agenda.

3.3.6 Transparency

It is important to be transparent with the market and not give one bidder an advantage over other bidders who did not participate in the soft market testing. This is particularly the case in the government and public sector and a DO should consult with its procurement and legal departments before embarking on a soft market testing exercise, which should be carefully managed under the applicable procurement directives. Care should also be taken regarding any anti-bribery or corruption legislation, for example, concerning accepting hospitality. The RICS professional statement Countering bribery and corruption, money laundering and terrorist financing, 1st edition should be consulted.

3.4 Procurement strategy

DOs should develop a procurement strategy to obtain stakeholder approval and senior sponsorship, direct the procurement process and make some key decisions.

3.4.1 Route to market

Routes to market will be different for the government, public and private sectors. Government or public-sector buyers are required to follow any procurement directives as defined by government. This may involve publishing a tender in a government tendering publication or using a framework contract.

Most private-sector buyers invite a small number of bidders to tender having made a pre-selection from the market. Similar principles to those used in selecting participants for soft market testing should be applied (see 3.3.3). DOs may wish to refine a list of potential bidders further by using the results of soft market testing: asking bidders to deliver presentations, undertaking more detailed research on bidders or conducting a qualification exercise. This could be via a request for information (RFI) requiring a written submission to be evaluated.

Some private-sector organisations advertise opportunities in the FM press or national press. This is unusual but can be beneficial if DOs are unsure which companies to invite or want to be sure that the entire market is aware of the opportunity.

Typically, DOs will issue a request for proposal (RFP) providing bidders with information on the procurement process, the services required and the terms and conditions. Depending on the circumstances, RFPs can vary greatly in terms of content and different styles of RFPs are used in different territories. DOs should ensure that RFPs are clearly written, set out the process to be followed and the outcomes required and contain all the details that bidders will need (or links to the sources of further information) to submit a response.

3.4.2 Project plan

DOs should develop a realistic project plan setting out the key activities and milestones with timescales, dependencies and dates. The starting point should be the date services need to begin (e.g. the termination date of an existing contract or the handover date of a new building), working backwards from this date to ensure enough time is allowed. Close attention should be paid to setting out all the key activities, allowing realistic timescales and identifying interdependencies.

The time that bidders will need should also be considered. For example, DOs should allow enough time for bidders to develop solutions and get internal approval of bids. It can be helpful to build in contingency time as activities often take longer than envisaged. If undertaking a public-sector procurement process DOs should be sure to reflect the mandatory timescales included in the applicable regulations, e.g. the mandatory standstill period.

The process of procuring FM services can take anything from a few months to over a year depending on the scale and complexity of the process. It is important to be realistic as better long-term results can be achieved by following a robust process as opposed to a quick one.

When a project plan is completed it should be shared with bidders so they can plan resources and their own activities. If there are sensitive activities or milestones included (e.g. dates of board meetings), they should be removed and an edited version released to bidders.

As the procurement process progresses, the project plan should be updated regularly as milestones are achieved. Milestones may move due to activities taking longer than envisaged.

3.4.3 Risks

There are inherent risks to any procurement process. Risks should be identified before starting the procurement process and captured in a risk register. See Figure 4 for what should be included as a minimum for each risk.

More complex risk registers can be developed that include fields such as early warning signs, level of risk after mitigation actions, etc.

A key consideration with a risk register is to keep it live. Risk registers should be updated regularly. Some risks will go away at different stages of a procurement process and new risks will emerge, or the likelihood or level of impact will change. It is important to remember that not all risks can be mitigated or managed away. Typically, DOs should accept some level of risk and invest in managing it. When a risk happens, it ceases to be a risk and becomes an issue and should then be managed as such.

Figure 4: Risks

Figure 5: Communication plans

 

3.4.4. Communications plans

It is critically important to manage stakeholders during a procurement process and a communications plan is key to this. It should set out and cover the considerations outlined in Figure 5.

As with risk registers, a communications plan will change during the procurement process and should be updated regularly as stakeholders and the issues and messages change.

3.4.5 Submission requirements

Submissions are made by a number of bidders. What these submissions should look like, how they are structured and what they should include is a key part of the planning process. There should be clear submission requirements that link to the evaluation criteria; if there is something the DO wishes to evaluate, for example staff training, there needs to be a submission to evaluate, e.g. a staff training plan.

Submissions received often form a schedule to the contract, which can be a good way of incorporating commitments from bidders into a legal agreement and making them binding. While designing submission requirements, the format of response should be considered, for example, requesting narrative answers with clear commitments set out. Where submissions received do not form part of the contract, another method should be used to capture commitments and make them binding, otherwise submissions can be seen as 'sales documents', with no legal standing.

Submissions can contain narrative, whereby bidders produce a written response to a specific question. It is a good idea to have an appropriate word or page limit, a spreadsheet where bidders include financial information or a mark-up of the client's document, e.g. a copy of the contract showing in tracked changes the terms that the bidder is seeking to remove, modify or add.

Questions asked should be clear and unambiguous. In some cases, questions will be 'closed' and have yes/no answers, e.g. 'have you had any contracts terminated for poor performance during the last three years?'

In most cases, however, the question will be 'open' and should be designed to elicit information from the bidder to enable the DO to assess whether they meet the requirements. Such questions are typically expressed as the following.

  • What is your approach to...?
  • How will you...?
  • Provide a methodology for...
  • What is your strategy for...?
  • Please provide your...

In some cases, it can be helpful for the DO to provide guidance on what should be included in an answer, e.g. 'your answer must include reference to...'.

DOs may also consider asking bidders to provide evidence of achievements on other contracts in the form of case studies and details of their internal processes to support statements they have made in their answer. For example, if a bidder claims they will introduce innovative cleaning techniques that will reduce costs by 10%, this could be illustrated by actual examples where this has been achieved previously and details on the processes used in the innovative cleaning techniques.

Asking clear questions related to requirements that allow bidders to state their approach and solution will make evaluation more straightforward and will minimise the need to go back to bidders with clarification questions.

DOs should also ask bidders to accept terms and conditions, or to indicate terms and conditions they wish to discuss. This can avoid situations where terms that buyers thought were agreed come up for discussion after the contract is awarded.

For financial questions where prices need to be included, DOs should be clear about what they want. A DO may want to see prices for a range of services over each year of the proposed contract or may wish to see prices for individual buildings. In addition, a DO may require visibility of profit, overheads, indexation and mark-ups and a schedule of rates. DOs should think about the financial information they need and use this to develop pricing templates for bidders to complete as this will make the task of evaluating prices easier. Completed templates can be used to compare bid prices to baseline costs. DOs should also ask bidders narrative questions about their approach to pricing to understand how they have priced the requirements.

DOs should request bidders to state any assumptions, caps, exclusions or any other parameters they have used in developing their solution.

The language requirements of the DO's procurement documentation and the submission requirements is an important consideration. Within a territory, the official language of the country should be used unless it is common business practice to use English or another language for business transactions. For regional or global procurements it is common practice to use English, however DOs should consider if it is necessary or beneficial to translate documents into other languages. For example, in the Middle East it is common to submit tenders in both English and Arabic.

When translating tender submissions or other documents DOs should take care to avoid mistranslations that may inadvertently result in a non-compliant bid or an incorrect score. The best safeguards against this are either to make the bidder responsible for the translation or to submit a translation of the bidder's submission back to them for approval. DOs should be clear which currency or currencies should be used in the financials submissions and should state relevant exchange rates to be used to avoid inconsistencies between bidders, which can skew prices.

3.4.6 Evaluation methodology

An important part of any procurement strategy is the evaluation criteria and methodology. DOs should be clear about what they are going to evaluate, how it will be evaluated and its relative importance. This should be transparent, agreed by all the key stakeholders, shared with bidders and remain unchanged throughout the procurement process.

A typical evaluation methodology will involve scoring submission requirements and converting these scores into percentage points so that a bid can score somewhere between 0% and 100%. The 100 percentage points are spread across the important factors used to evaluate the bids, e.g. the price, quality of technical solution, etc. The more important a factor the higher the number of points (or higher weighting) it should receive. When developing the evaluation methodology DOs should refer back to the objectives and ensure that the scoring and weighting reflects the intent of the objectives. DOs should allow for differentiation between bidders, focusing weighting on the most important objectives.

For example, if a DO is buying purely on price, 100% of the weighting would be allocated to price; if sustainability was important, it might be allocated 20% of the weighting. In FM it is rare for evaluation methodologies to be based only on price (lowest price) as typically most of the services are not commoditised and differential quality can have a big impact on price. However, there are instances where service quality being equal to price becomes the determining factor.

A combination of price and quality is often referred to as the most economically advantageous tender (MEAT). In effect, it is a balance of price against quality (e.g. 30% price, 70% quality).

It is good practice for DOs to have a clear scoring matrix for narrative submissions. Typically, this is 0-5 or 0-10, where the lowest number represents a description such as 'the answer is unacceptable and not capable of meeting requirements' and the highest number represents a description such as 'the answer meets all the requirements to a very high standard and would deliver many benefits'. The numbers between represent different levels, e.g. meets some of the requirements, meets most of the requirements, etc.

The method of evaluating price is more complex. One common method is where prices are typically ranked against each other and a proportion of the percentage points awarded depending on the difference in price. This means that if the two lowest prices are close to each other, the points awarded are also close. In the private sector, price evaluation can be more subjective and in all cases price and quality should be considered together to make an objective assessment of value for money, e.g. in some cases the quality benefit delivered by a higher cost is worth the additional expense.

For example, if Bidder A had a price of $100,000 and Bidder B a price of $80,000, Bidder B would be awarded full points, e.g. 50 points, and Bidder A 40 points (80÷100×50). DOs should ensure that the bids are commercially viable and be mindful of the danger of bidders deliberately under-pricing their bids to secure the work.