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Illustrative examples for evaluation of bids based on different schemes - YouTube
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namaskar and welcome to this module on
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principles of construction management
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and this is lecture number four in this
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module and we will do
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illustrative examples for evaluation of
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bids
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based on different schemes
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so now to start the discussion
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let us consider a project whose
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estimated cost is let us say
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rupees 100 000
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and the details of the financial bids
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submitted by four bidders
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is as follows
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we have bidders a b c and d
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and they bid 95 87 64 and 76 000 rupees
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now if the rules of the game were to be
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that award to the lowest bidder that is
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the simplest of rules that is the so
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called
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l one criteria
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there is no discussion
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sixty four is the lowest
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the bidder is c
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the project is awarded to bidder c
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now the situation need not be all that
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simple
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if we now consider a situation
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where for the same project let us say
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about 100 000 rupees
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the details of technical bids and their
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financial bids are available to us
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what we are saying is
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that there is
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a technical bid
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and based on
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some criteria
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we are not getting into that criteria
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and this evaluation here in this
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lecture but at some point of time
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perhaps we will
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let us say that we have been able to
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evaluate the four bidders at 80 75 45
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and 60
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out of 100
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and the financial bid given by these
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bidders is
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this
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now what could be the options
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the options could be
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that the bid should be evaluated in a
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manner
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that the technical score must be more
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than 50.
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so basically what we are saying is that
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a person or a bidder should have at
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least 50 points
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out of 100
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in the technical score
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and for only technically qualified
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bidders cost will be the only criteria
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to select the contractor
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now if this was the rule
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then
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bidder c gets disqualified
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because this number
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is less than fifty so this goes out of
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the consideration all together
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and among those that survive that is a b
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and d
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we can arrange them
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in the order of
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cost
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and we find that b is the lowest
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followed by
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d
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and
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followed by a
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so in this case
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the decision is again
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simple
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b is awarded the job
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so what we have done here
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is said that
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there is a threshold technical score
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beyond which
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everybody is equal so we are not trying
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to differentiate between
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d which scored 60 points and a which
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scored 80 points on the technical bit
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now if we want incorporate this
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we will have to
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give a weightage to the technical scores
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and the financial scores so that is what
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is done here in an alternative scenario
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where we say that the technical score
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must be more than 50 which is the same
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condition as
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the last one
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and we have said that the job is awarded
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to the bidder with the highest
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composite score
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evaluated by considering
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equal weightage to technical and
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financial bids it is easier said than
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done
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because
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what we have is information like this of
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course
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without getting into the details as to
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how these
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points or marks were arrived at we have
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an even bigger problem of converting
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this
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to some kind of marks
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how do we convert the quoted prices
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which is the financial bids
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into marks so that we can arrive at a
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composite score now one alternative or a
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possibility could be
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that award hundred marks to the lowest
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bidder
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and
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relative to that allocate marks to the
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others proportionately
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if we do that exercise of course
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c gets eliminated in the first round
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because of
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this 45 being less than 50. as far as
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the others are concerned
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b
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which is the
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lowest bid financially is awarded 100
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points
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and
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for a
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this score is 87.76
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arrived at by saying that ok this was
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110 this was the lowest bidder and
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with this
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simple
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linear equation we get
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87.76 and similarly we can get
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97.96 marks for d
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so if we do that
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then what we have is
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this is our technical score and this is
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our financial score we can calculate the
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composite score by giving an equal
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weightage to these and we get these
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numbers
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remember that in this case we have used
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a 50 50 criteria that is the technical
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bid and the financial bid are equally
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weighted now if this happens
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then the highest composite score is
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87.5 and with this score bidder b
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wins the bit
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now of course there is no sacrosanct
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reason why the weightage of the
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technical bid and the financial bid
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should be fifty fifty there can always
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be a situation
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where the weightage is 80 percent to
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technical and 20 percent to the
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financial
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now if that kind of a scenario is
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operated
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then the composite score which is
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calculated becomes something like this
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and
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here
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bidder a
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becomes the winner of the project
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so it is obvious that if we increase the
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weightage of the technical bid
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bidder d
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which scored the lowest as far as the
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technical bid is concerned
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gets more and more disadvantaged
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and bidder a which is
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the technically most sound
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becomes in an advantageous position
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in this example
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if we consider the technical and
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financial bids of four bidders
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as given here in this table
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and these marks being evaluated out of
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hundred based on some criteria
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the rules of the game being the
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following
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there is case one technical marks are
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not considered
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job will be awarded to the lowest bidder
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that was the simplest case that we
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discussed right in the beginning of this
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discussion
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and case 2
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is technical score must be more than 50
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which is exactly what we talked about
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and the job is awarded to the bidder
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with the highest composite score with an
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equal weightage
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so nothing has changed from the kind of
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discussion that we have done
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except that
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this condition gets added
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in both cases the call may be cancelled
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if the award price deviates more than 20
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percent from the estimated cost now
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somebody will say why this kind of a
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clause is required
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one of the simplest of reasons that i
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can give you for this is
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that you will recall
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that there is an approval which has been
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taken based on
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some estimates
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for spending a certain amount of money
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on a certain project
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if the
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award price
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deviates
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too much from that especially on the
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higher side
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then
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fresh approvals must be sought before
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the bid is
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awarded and the work is actually taken
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up
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there have to be reasons
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for that there has to be a justification
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which has to be provided to the kind of
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authorities which approved the project
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in the first place
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and so on
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as far as the deviation on the lower
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side is concerned we will talk about it
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at the end of this class today now if
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this rule was to be operated
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then
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in case one
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the technical marks are not being
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considered
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bidder c gets the job being the lowest
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bid because this part does not really
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matter
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this guy here is 101
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it is the lowest and we should check
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that
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the award price which is 101 000
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is within the allowable deviation of 20
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percent from the estimated cost of 100
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000
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now coming to case 2
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the situation becomes more complicated
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because
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bidder c gets disqualified
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not having secured 50 percent marks in
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the technical bid
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and
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its clear that
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this guy has quoted 135 this is 125 and
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this is 130 so no matter who gets the
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job the award value will be
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more than the allowed deviation of 20
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percent from the estimated cost
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and therefore
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the result is cancel the call
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and go for a fresh process now
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if the situation
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on the financial bids was to change
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marginally
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and these were the numbers that we were
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dealing with instead of the numbers in
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the previous table
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so this here just lists the
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conditions that we are applying
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and now we come to evaluation of these
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bids
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bidder c gets disqualified having a
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lower technical score
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now
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here is a situation where
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d
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is a potential bidder
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with 115 points which is within the 120
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allowed by the 20 percent deviation but
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the question is
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will d get the job
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given the fact that
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there is a 50 50 weightage being applied
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to
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the technical bid and the financial bid
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now if we carry out the calculations and
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determine the composite scores this is
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what we get
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bidder b has the highest score but the
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bid value
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is
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125 the technical score is 83
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and his value is 125 and this is in
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excess
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of
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the maximum deviation allowed which
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allows you to go up to 120
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and therefore the call has to be
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cancelled
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so with this discussion here
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i think we have covered several examples
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where we try to give different
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weightages to technical and financial
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bids
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try to evaluate the
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bids based on different criteria
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and also invoke the principle that the
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final
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award value should be
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within a certain
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range of the estimated value
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so having said all that
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let us look at this
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table once again
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which is the financial bid
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for
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4 bidders for a project which was
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estimated to be 100 000 that is the
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numbers that we have been working with
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in an earlier example as well the
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question that we must ask ourselves
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as per the criteria indeed the project
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has to be awarded to c because this guy
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is indeed the lowest bidder
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but please also remember that the bid is
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64 compared to an estimated cost of
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100.
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the question we must ask ourselves
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is it appropriate
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to award the job
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without considering the technical
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aspects of the bidder at all
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or
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whether we should
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award the job to the lowest bidder
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regardless of
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how
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much lower it is compared to the
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estimated cost
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the issue really is
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what is the client looking for
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when we are trying to identify a bidder
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or identify a contractor
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to do a particular project
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the issue is
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we are looking for a technically
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sound bidder who will carry out the
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project at a reasonable cost
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one
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term
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or parameter we have not invoked at all
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is quality
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and that is something which i would
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leave
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to you to think about
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is the client not concerned about the
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quality of the work we are talking of
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technical
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merit or technical performance of
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bidders
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how are we ensuring the quality of the
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job that the
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bidder will do
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is it being completely ignored
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in fact the condition of disqualifying a
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bidder if the technical score is too low
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is an outcome of this principle the
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inherent
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thought process here is that
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for a bidder
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which is technically not
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competent or has a low score
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it is difficult to believe that
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the bidder will be able to do a quality
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job and that is why we fix a threshold
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that at least so much should be the
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score for the bidder to be considered
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for the opening of the
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financial bid
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similarly
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a bid which is too much lower than the
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estimate can also be looked upon with
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suspicion now the question is can we
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have a clause for disqualifying a bidder
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if the bid value is lower than 80
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percent or some such number of the
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estimated cost
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please remember
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that this discussion that we have had
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today is not necessarily something which
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is followed in a ward of jobs but
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the principle or the issue which i
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wanted to highlight through this
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discussion today
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was to draw your attention to the
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importance of carrying out
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a proper technical evaluation of the
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bids independent of the financial
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evaluation
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and
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trying to see
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whether
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or how
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the
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technical marks or the marks obtained
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for the technical performance or
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technical competence how they can be
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incorporated in our system of evaluation
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of bids
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having said all that we must also
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remember that no matter what we do
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if we want to evaluate the bidders for
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technical performance
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the exact procedure as to how the marks
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will be awarded should be declared up
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front
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it should be part of the conditions of
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the contract so that the bidders really
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know that these are the parameters on
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which the technical evaluation will be
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done
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and no
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change should be made after the game has
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started so it is clear from some of the
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examples that we did that depending on
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the weightages that we assigned
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the whole call could be cancelled bidder
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one could get the job bidder two could
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get the job
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and we cannot just have a situation
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where this is left to the whims and
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fancies of the client
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the whole thing is just too serious to
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risk that therefore
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in this day and age when we are talking
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of transparency accountability
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and so on it is very very important that
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these conditions are
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announced up front
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and
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followed in letter and spirit as far as
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the evaluation of bids is concerned
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so with this we come to an end of our
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discussion today
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we will see you in the next class thank
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you
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you
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