Monday, September 20, 2010

Evaluating Price as a Criterion in RFPs

One of the distinguishing features of using a Request for Proposals (RFP) as a selection tool is that the evaluation criteria include price, qualifications/experience, and the proposer's approach to the project.  This is different from a bid, where selection is based just on the price.
Spectrum of Evaluation Methods:  There are three basic models that are often used in assigning points to the price component of a proposal:
  • Subjective Evaluation:  Under this model, evaluators of the proposals assign points to the price component based on their subjective assessment.  This may result in different evaluators assigning different points.  For example, a proposal with the second lowest price may receive 25 points (out of 30 points possible) from one evaluator, and only 20 points from another evaluator.  This subjective method opens the public agency up for criticism and possible protests because of the subjective nature of the scoring.
  • Pre-Determined Points Based on Percentage From the Low Price:  Under this model, the low price would receive all of the points possible for price.  Any proposal price within certain percentages of the low price would receive a pre-determined number of points less than the total possible.  A disadvantage of this approach is that otherwise very qualified firms may end up receiving very few or no points, especially if the low proposer has submitted an extremely low price.  The following chart illustrates how this approach works:
  • Points for Price Based on Percentage:  Under this model, which is, I think, the most equitable and objective one, a proposer's score for their price is assigned based on the percentage difference the price is from the low price.  Thus, to use a simple illustration, if the low price is 50% lower than the second low price, the second low price would be assigned 50% of the total points possible for the price component of the evaluation criteria.  The following chart illustrates this method:
I am interested in your comments on these methods, or any others that you may use, and what your experience has been with these methods of assigning points to the price component of proposals under an RFP process.  Please contact me with your comments.

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