The Bidder Selection CriteriaMuhammad Zeeshan Ali, PMP, PMI-ACP
Once I was discussing the bidding process with a Technical Consultant who had been involved in technical evaluation of many projects. His feedback, based on his experience was:
“You already know which vendor has the capability to successfully and efficiently complete a project but as consultants, we can choose someone and have to go through a process. There are often occasions when we award the contract to some bidder and mid-way through the project, it is realized that they are not capable of completing this project but by that time we are totally stuck”.
Selecting the right vendor is very important and in order to make sure that it goes to the right bidder needs to effectively define the selection criteria. For a layman, it might seem that a technical proposal is only about the best proposed technical solution. But the fact is that claiming to be able to complete a project is one thing while actually being able to do it is totally different. So the bidder selection criteria has to ensure that the selected bidder is capable of doing what it is claiming in the bid proposal. The bidder should be equipped both financially and resource wise in order to successfully complete the project.
So, apart from the proposed technical solution, what other elements in RFP (Request for Proposal) play an important role in the right selection?
One element is how many relevant projects the bidder has previously completed and secondly what was the worth and magnitude of those projects. The relevant projects make sure that the more experienced bidder, in the relevant domain, should be given preference. Worth and magnitude of the projects determines that those bidders with largest projects should get the preference.
Another element is to make sure that the bidder with substantial worth is awarded the project. This is important for large scale projects. The company size and yearly financial turn-over is evaluated. An important evaluation is about the proposed team for the project. The relevant qualification and experience is evaluated to make sure the best team gets the maximum chance of awarding the project.
Some weightage is also given to the proposed strategy as well as project execution methodology. Also a good RFP requires a reasonable list of documentation and sometimes even requires a Risk Management plan as the part of the bid proposal. Generally the bidders, at a specific stage, are requested to make a presentation, along with their proposals and this presentation is also evaluated.
To safeguard the interest of the Sponsor/Customer, there are some elements which are made part of RFP. “Performance Security” which is generally 10-15% of the bid cost, is added, to ensure the delivery meets the required quality. The “Performance Security” is different from the “Bid Security” but both are returned back to the bidder at the completion of a certain milestone. In similar manner, a “Penalty” clause is added in the contract related to financial penalty due to the delay in the delivery. This is generally defined as a fine amount per day for each day after the elapse of the agreed timeline.
So there is a question that all this means that a startup or small company doesn’t have any realistic chances of winning a bid? Also does this mean that such invitations for proposals are limited for large companies? Well, the new or small companies do have an option to bid as Joint Venture (JV) with some substantial size organization. This means that they will perform part of the work on the project and rest will be done by the other company.
It is important to have such conditions. Although it looks unfair to small companies to have a minimum level of chance, the thing to understand here is that even if they are awarded the project, it is likely to fail because of lack of resources and finances. It is not possible to work with a project without having any level of backup which these small companies clearly lack.
Logically that is the whole point in having such requirements and clauses in the proposals. What is the point in awarding a project at high risk? It is not feasible to change the vendor half-way through the project so it is better to carefully select one at the start.
Another unfortunate observation is that some bidders, especially newcomers, believe that the whole effort is about getting the project. Once it starts, then the sponsor cannot do much because in case the project is assigned to someone else, there will be a lot of waste in terms of time and money. So they believe that the sponsor is “struck” with them and ultimately have to agree to the terms. This is an unprofessional concept. Such companies do get blacklisted and as far as the project is concerned, there are always some other companies who have the ability to take on the project onwards and even repair the damage.