Bid Evaluation

Bid evaluation decides on the preferred supplier for meeting the customer's requirements. Deciding on a particular supplier is not an easy task, especially if we are working in a matrix environment where the procurement role is more of a support role. There are then several steps to complete the bid evaluations.

4.1 Types of Bid Evaluations

As discussed earlier, just as there are types of bidding methods (i.e., single-part and two-part bids), bid-evaluation steps depend on the bidding method. Who will evaluate the bidder's offer is based on the following bidding methods:

4.1.1 Evaluations of Single-Part Bids

The buying organization has asked for single-part bids from the bidder, which are techno-commercial offers that comprise technical, commercial, and price parts in a single envelope or email. This offers all the details in one go. Normally, such quotations ask for requirements with less technical complexity, although following a bidding method depends on the organization. Many private organizations ask for single-part bids to speed up the decision process, and this involves a high level of transparency in the procurement process, whereas for public organizations, fair evaluation is more important, since public money is involved; such offers are for simple project requirements with almost no technicalities. Figure 4.1 shows the flow for a single-part bidding process.

4.1.2 Evaluations of Two-Part Bids

Buying organizations first evaluate the technical and commercial bids with respect to the customer requirements or project requirements. Based on the technical bids evaluation of the bidders, only qualified bidders will be evaluated for price bids. So, for example, the buying organization needs to buy transformers for the project. First the transformer offers are evaluated for the technical and commercial part, and upon completion of technical and commercial evaluations, they are then evaluated on a technical comparative sheet. The commercial comparative sheet is generated and will be the output for opening up price bids. Suppose three bidders have submitted offers and only two have been qualified for meeting the technical and commercial requirements; then only these two qualified bidders will be considered as qualified bidders, and their bids will be opened for price and subsequent comparison. Disqualified bidders will not be considered for comparison on opening price bids. Figure 4.2 shows the flow for the two-part bidding process.

4.2 Technical Comparative

As described previously (and shown in Figure 4.2), technical evaluation is the criteria for decision making about the order award. The technical comparative is the output of the technical evaluation activity, which is supposed to be performed by a technical expert who is aware of the project requirements.

The expert performing the technical evaluation would require a list of project requirements, the supplier offer, and the tools to make a technical comparative sheet. The tool often used is spreadsheets, like Microsoft Excel.

Although we can have more qualified bidders on commercial evaluations, the technical comparative will become an important tool to make a judicious decision. A sample technical comparative sheet is depicted in Figure 4.4.

4.3 Commercial Comparative

As described earlier, the process flow of commercial evaluation is the criteria for decision making rather than the order award. The commercial comparative is the output of commercial evaluation activity, which is supposed to be performed by a commercial expert who is aware of the project's commercial requirements.

The expert performing the commercial evaluations would require a list of project commercial requirements, supplier offers, and tools to make a commercial comparative sheet (refer to Figure 4.5). The tools often used to make such comparatives are a spreadsheet like Microsoft Excel, or less often, enterprise resource planning (ERP).

4.4 Decision Making

Outputs of the technical and commercial evaluation will become inputs for making the decision. Although it is good to have the best technically equipped supplier getting the order, that is not always the case, and the reason is simple. During the technical evaluation, the technical expert will make the best attempt to make the recommendation for the best supplier, but when it comes to deciding the order award, the procurement team has an altogether different target, which is to select the supplier with lowest-priced offers. Since technical and commercial comparatives will become inputs for opening the price bids of the technically qualified bidders only, there might be a chance that the lowest-priced offers have not been recommended technically for the project.