Tuesday, April 30, 2013

What is the Appropriate Weighting of Price in the Selection Process?

The allocation of evaluation criteria points between qualifications and price in government issued Requests for Proposals (RFPs) is sometimes a hotly disputed issue.  

California dispute:  The California High-Speed Rail Authority, which is planning to award a Design Build contract for the construction of the first 28 miles of track for the 200 miles per hour train, finds itself embroiled in a controversy over its evaluation and selection process for a contractor.

Original selection process:  The original two step selection process, approved by the Authority's board, called for shortlisting only the top three firms from a Request for Qualifications (RFQ) based on their technical approach and qualifications to build the project, estimated at $1.2 billion.  From there, an RFP was to be issued only to the finalist firms and a selection would be based on the combination of price and technical scores.  However, the Authority changed the process and issued the RFP to all five contractors who had responded to the RFQ.  

Weighting price and qualifications:  The RFP issued by the Authority assigned 30 points to the technical evaluation from the RFQ, and 70 points to the price in response to the RFP.  On such a technical and complex Design-Build project, the high number points assigned to price has drawn criticism.  It turns the Design-Build process back into almost a low bid scenario.  The best practice for Design-Build projects is to weight qualifications higher than price.

Selection results:  It turns out that the firm ranked lowest for qualifications and technical approach had the lowest price.  By adding the technical and price points together, they were the highest ranked firm.  Without the earlier change opening the RFP process to all five firms, the joint venture of Tutor Perini-Zachry-Parsons would not have moved to the RFP stage.  Tutor Perini ranked dead last on the technical evaluation with only 20.55 points, compared with the highest ranked firm that received 27.71 points.  However, Tutor Perini came in with the lowest price of $985 million, giving them the full 70 points for price, and the highest number of points overall for both the technical and price components.  Below is a chart with the scores for all the firms.

Lessons learned:  While the California High-Speed Rail Authority project is a Design-Build process, it illustrates the importance of developing a good evaluation process for all RFQs and RFPs for services, consulting, and alternative methods of construction (Design-Build and Construction Manager at Risk).
  • Think through the selection process carefully up front, including evaluating likely proposers and how the process and point allocation may impact the end result.
  • Based on the particular procurement, evaluate the appropriate allocation of points between qualifications/technical merit and price.  Refer to a previous blog posting I've written on some principles to consider in making this decision.
  • Don't change the selection process mid-stream through the procurement.  This can lead to protests and delays for the project.

Mike Purdy's Public Contracting Blog 
© 2013 by Michael E. Purdy Associates, LLC 

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