The price/commercial evaluation of tenders should be completed by the buyer.
To enable an easier comparison, you should include a price schedule (or use the commercial envelope if PCS-Tender is being used). This should include a breakdown of the product/service areas for tenderers to complete.
The evaluation should identify and compare all the costs and benefits which can be quantified in monetary terms.
In order to achieve the Most Economically Advantageous Tender (MEAT) you can select from several costing models to support your procurement exercise. This ensures that the evaluation is more than simply a “price for price” comparison.
Higher value or complex procurements may require the use of investment appraisal techniques (such as discounted cash flow calculations). The use of life-cycle costing is deemed best practice for the majority of goods and services procurement exercises. In all cases the data to be provided by tenderers and the method for price evaluation should be defined within the Invitation to Tender (ITT) documentation.
Where life-cycle costing has been detailed in the specification; the evaluation must take into account all of the identifiable costs attributable to a product or service from:
- its acquisition
- through use,
- maintenance and
- end of life (recycling/disposal).
These could be direct costs like scheduled maintenance and energy used through the life of a road sweeping vehicle. This also includes less apparent external environmental costs such as the cost of emissions of greenhouse gases based on the energy use of the road sweeper.
The use of life-cycle costing can support your organisation in meeting the requirements of the Sustainable Procurement Duty.
Focuses on social and environmental impact rather than cost.
Lifecycle impacts help the user identify and assess impacts. For example, it may help to focus attention on the disposal phase before the procurement is carried out. This would allow your organisation to build end-of-life management requirements into its performance clauses for successful contractors and its own internal management procedures.
Every product and service has a ‘life cycle’ or number of stages it goes through:
- the extraction and sourcing of raw materials, such as mining
- to the transportation of sub-assemblies and parts, often through a global supply chain
- to the use of products or works
- to the delivery of services
- to the re-use, recycling, remanufacture; and
- to the final disposal of materials.
You should consider a whole life costing approach. This takes account of all costs from cradle to grave (acquisition, operation, ownership and disposal costs). These could be direct costs like scheduled maintenance and the energy used through the life of a road sweeping vehicle. This also includes less apparent external environmental costs such as the cost of emissions of greenhouse gas based on the energy use of the road sweeping vehicle.
The use of Life-Cycle costing can support your Organisation in meeting the requirements of the Sustainable Procurement Duty.
Price/financial evaluation criteria should include:
- Whole life cost comparisons
- Quantifiable financial benefits arising from the technical evaluation (e.g. speed, fuel or electricity consumption, coverage, shelf life etc.)
- Fixed or variable pricing
- Cost of components, spare parts, consumables and servicing
- Risk analysis and financial appraisal (for major contracts of strategic importance, especially those of an innovative nature).
You may find the Supplier Cost Drivers Checklist useful when developing a pricing schedule.