Development of Criteria for Tender Evaluation

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8th Feb 2020 Transportation Reference this

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Tender Evaluation
 

Evaluating the criteria necessary to efficiently procure goods, services, and negotiated terms is a critical undertaking implemented by Pacific Hydro that has a direct impact on the overall success of the Keyneton Wind Farm project. According to ITS (2008) when establishing effective criteria, the factors relevant to the selection of a vendor must be clearly identified and then prioritised according to their importance in satisfying the needs in the procurement. Together, the proper identification and weighting of the evaluation criteria along with consensus on the meanings of the criteria will form and evaluation plan that will provide a common standard to judge the merit of competing proposals. Considering the scale and complexity of the project a detailed evaluation plan was established by Pacific Hydro outlining how the tender process would be evaluated, how decisions would be made, and how scores were determined. The stages of the procurement process employed by Pacific Hydro included:

-          Establishment of the procurement team

-          Development of tender and evaluation criteria

-          Pre-qualification assessment

-          Invitation to tender

-          Submission of tenders from prequalified vendors

-          Tender evaluations

-          Vendor shortlist

-          Negotiation phase

-          Signing of contract

One of Pacific Hydro’s key objectives during the procurement phase is ensuring the best possible value for money has been obtained for the project. Value for money is based on the principle of accepting a reasonably priced tender from an organisation that will provide the best overall outcome, it is not a requirement that this is the lowest price tender (DTMR 2014). Implementing both price and non-price criteria during the tender evaluation process will have a number of benefits, including:

-          Allowing vendors previous performance and other related factors relevant to the specifics of the project to be included in their assessment during pre-qualifications.

-          The weighting of other criteria rather than simply cost will allow Pacific Hydro to contain elements that complement the requirements of the project, ultimately attracting a higher level of quality contractors equipped to successfully deliver the projects objectives.

2. Pre-qualification
 

The purpose of pre-qualification is to ensure that only companies with the appropriate technical and managerial capabilities, financial capacities, and experience necessary to undertake the work are approved to submit tenders. A company may apply for pre-qualification in any category at any time, with the various levels reflecting the complexity and value of contracts that a company will be permitted to tender for (GSA 2018). Pacific Hydro’s aim is to facilitate, but not replace, tender assessments for the Keyneton Wind Farm Project and to afford protection to contractors against over-commitment. Tender advertisements will specify the minimum prequalification classes applicable to that tender, only contractors prequalified at the specified class(es) or higher will be eligible to tender (GNSW 2019). Prior to vendors tendering, it is a mandatory requirement that companies tendering are to complete a pre-qualification application to outline their qualifications and nominate the work packages they intend to express interest in. Examples of the pre-qualification process based on a set of criteria applied by Pacific Hydro (2017) for assessment is included in Table #:
 

 

Requirement

Definition

1

Team

The name, position and experience of key personnel engaging in the project

2

Capability

Relevant experience in Australian wind energy projects the company has participated in and the services and equipment  provided. Summary of measures used to ensure successful implementation and any contactable references

3

Subcontract arrangements

List of the components to be subcontracted and the names of such companies being subcontracted to

4

Technical Support

Types of support that could be provided including, but not limited to, design, optimisation, scheduling and maintenance

5

Standards

Detailed list of the company’s compliance with International and Australian standards, registrations and licenses, confirmation all products and suppliers follow national and state legislative requirements and are certified by statutory authorities and OH&S regulators.

6

Health, Safety and Environment

Details of the company’s health, safety, and environmental policies, management systems, and the number of lost time injuries over the last 36 months.

7

Industrial Relations

Company’s process for managing industrial relations in South Australia and the amount of lost time in the last two years.

8

Insurances

Details of insurance coverage, including as a minimum:

  • Public Liability insurance ($20 million cover)
  • Motor Vehicle insurance as required by law for compulsory third party ($20 million cover)
  • Subcontract Work insurance
  • Professional Indemnity insurance ($20 million cover)
  • Workers’ Compensation and Employee Liability insurance

Pre-qualification of contractors on large complex projects such as the Keyneton Wind Farm Project has become the standard procedure in sourcing additional expertise specific to the project’s requirements. Shortlisting allows for the most qualified contractors and suppliers available and willing to contribute are eligible to participate in a closed tender competition. Furthermore, participants from previous Pacific Hydro with a positive performance record are automatically approved to participate in future tender bids, whereas poor performers will no longer be deemed eligible.

3. Selection Criteria
 

Selection criteria are intended to assess the competence of the tendering organisations to achieve the required project outcome and are used to rate each of the tenders. All relevant information requested in the tender documents and provided with the tender is used in the tender evaluations (DTF 2018). Applying a comprehensive selection process that represents the values of the Keyneton Wind Farm Project along with a scoring method for both price and non-price criteria will ultimately result in the successful selection of vendors focused on delivering the best value to Pacific Hydro. Pacific Hydro established six criteria to be assessed during the tender evaluation: price, technical, service delivery, quality, environment, and social value. The below figure breakdowns the criteria and the assigned weightings for each based according to its value to the project so that all tenders are accurately and fairly reviewed.

 TENDER SELECTION CRITERIA

 

Overall Weighting

Category

Category Weighting

Element

Element Weighting

PRICE

Price

40%

Cost

40%

QUALITY

Technical

20%

Capabilities

10%

Resources

10%

Service Delivery

15%

Communication

5%

Risk Management

5%

Innovation

2.5%

Reliability

2.5%

Quality

10%

Performance

7%

Continuous Improvements

3%

Environment

10%

Policies & Procedures

6%

Targets

4%

Social Value

5%

Community Support

2.5%

Local Opportunities

2.5%

The development of an applicable weighted scoring matrix to measure the nominated price and non-price criteria ensures a standardised approach is adopted by the Pacific Hydro procurement team, and any potential biases are either minimised or completely eliminated. Figure # illustrates the process of how the weighting of the selected criteria is measured in order to identify the most suitable tenderer. For each vendor the individual criterion is firstly given a score ranging from 1-10, the score is then weighted in accordance to the pre-determined weightings. The weighted score is formulated by multiplying the score by the weighting, for example: Score = 8 x Weight = 50% = Weighted Score 4. Once all of the weighted criteria calculations have been completed for each vendor the scores are combined to give the final rating, the highest price and no-price criteria total score is selected to move forward into negotiations with Pacific Hydro.

Criterion

Weighted Score (%)

Vendor Rating (1-10)

A

B

C

Price

Cost

40%

Technical

Capabilities

Resources

10%

10%

Service Delivery

Communication

Risk Management

Innovation

Reliability

5%

5%

25%

25%

Quality

Performance

Continuous Improvements­

7%

3%

Environment

Policies & Procedures

Targets

6%

4%

Social Value

Community Support

Local Opportunities

2.5%

2.5%

Total

100%

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