The Construction Leadership Council (CLC) has recommended that clients move away from comparing contractor’s bid prices against each other.
In a report published this morning (24 February), the industry body set out a series of actions public clients should take to avoid “confusing, time-consuming and costly” procurement practices.
The CLC intervention comes on the day that the Procurement Act 2023 comes into force.
The report said the most common method for assessing bid prices is a relative price evaluation model, where one price is compared against the others – instead of an absolute price evaluation model, which typically marks against a pre-set price.
The commonly used model often sees bids ranked according to price, with the lowest price receiving the most points, or sees bids marked according to the mean average of price submissions.
However, the group warned that relative price evaluation models had been “criticised by practitioners, academics and bidders alike for producing irrational or unexpected results”, with government guidance already advising they “should be treated with caution”.
The CLC said the approach means a price outcome cannot be predicted prior to the evaluation stage, and it also creates less transparency for bidders, as the price criterion is only established after bids are submitted.
Relative price evaluation models also mean procurement can be impacted by an abnormally low-priced or non-compliant bid, which can “skew the final scores in a disproportionate manner”.
The CLC suggested that where a relative price evaluation model is adopted, it could be applied to pricing sub-criteria instead of a single lump sum figure, which “may reduce the race to the bottom impact of a lowest bid model”.
The CLC therefore recommended using an absolute price evaluation model that either judges bids against a pre-established price calculated using a “Should-Cost Model”, or simply evaluates on “the price and quality of the individual bid itself”.
Elsewhere in the report the body noted that evaluation of a bid’s price and quality typically take place separately, but suggested that quality evaluators could benefit from considering bid prices.
It said that members of a panel assessing the quality offered by a bid could then “see whether the price and quality proposals are appropriate and aligned”.
The CLC also warned clients that they should avoid including too many quality measures in tenders, to avoid deterring bids and diluting the individual measures.
“This may lead to a more accurate score which reflects the deliverability of the proposed technical/quality solution, or which identifies whether a technical proposal is unrealistic in light of the proposed price,” the report added.
The Procurement Act 2023, a new National Procurement Policy Statement and a raft of other guidance, including to maximise spending with SMEs, come into force today (24 February).
A foreword to the report, co-written by Transport for London director for engineering and asset strategy Isabel Coman and Electrical Contractors’ Association chief executive Steve Bratt, welcomed the new procurement rules, but stressed that “culture and behaviour will have to change too”.
They said: “Public procurers already had a good deal of discretion in deciding how to design and evaluate procurements; this has increased now the new system is in play. Getting the evaluation stage right is arguably the key to success and, at the moment, there are a number of issues that recur.
“In many cases, avoidable errors with technical design, fear of challenge, and poor inherited practice, are stopping procurements from achieving all that they might.”
