Marketing Court Approved For Assessing Quality
Contracting authorities carrying out public procurements have
been criticised for emphasising the lowest price as the selection
criteria in invitations to tender. In the evaluation of tenders,
quality has often received less attention than intended.
In construction field, the solution proposed for resolving the
contradiction between price and quality has been standardisation,
i.e. taking into account the standard deviation of the quality
scores and price scores given to tenders. The mechanism is based on
a statistical study ordered by the Association of Finnish
Architects' Offices (ATL), the Finnish Association of
Architects (SAFA), the Finnish Association of Civil Engineers (RIL)
and the Finnish Association of Consulting Firms (SKOL) in 2007.
Attorneys at law Borenius Ltd assessed the compatibility of the
system with the Finnish Act on Public Contracts in context of the
study.
The Market Court has approved the said standardisation in matter
MAO 460/11, and the matter has not been appealed to the Supreme
Administrative Court. In the said matter, the real estate
corporation had notified tenderers that it will use a mathematical
formula accordant with standardisation. The Market Court stated
that the Act on Public Contracts does not contain provisions on the
use of a certain mathematical formula in the evaluation of tenders.
Therefore, since the use of the said scoring process was not
discriminating or unequal towards the tenderers, the use of the
calculation method was allowed.
Standardisation has already been used in public work contracts and
consulting procurement in the field of construction with good
results. However, the method can also be applied to other public
service contracts in a similar way. We hope that the Market
Court's recent decision encourages for its part to take the
quality more efficiently into account in public procurement and
that it leads to more efficient use of public funds.
Standardisation in brief
By rescaling the proportion between the price and quality at the
stage of evaluating the tenders, a price/quality ratio originally
intended in the tender can be achieved.
The standardisation is done so that the mean value of the
competitive bidding (μ) is subtracted from each tender
(x), and the remainder is divided by the dispersion of the tenders
(s). The obtained result (z) is the comparison value for each
tender which can be compared in relation to the other tenders. The
formula of the mechanism is as follows:
In writing the model can be expressed as follows: (value of the
tender - mean value of tenders) / (dispersion of tenders). The
calculation is performed for each tender with respect to both the
quality scores and the price scores obtained in the evaluation of
tenders.
The disproportionately large influence of the price on the final
result of the procurement can be reduced by standardisation. It
shall be born in mind, however, that since the model is of a
mathematical nature, the model is the most suitable for procurement
which include as many comparable tenders as possible. Thus,
standardisation should not be applied to procurement in which four
or less tenders are received as a result of the competitive
bidding. It is possible to inform the tenderers in the invitation
to tender of an alternative selection method in cases where fewer
than four tenders are received.
Standardisation as a new procurement practice
Particularly in innovative or more demanding service procurement,
it is important to ensure that the emphasis of quality is
maintained as an essential part of the evaluation instead of a
tenderer winning the procurement with a low price regardless of the
quality of the tender.
The study ordered by the operators in the field of construction
assessed the effect of the standardisation on the final result of
150 public procurement already carried out. The standardisation
performed retrospectively changed the final result of the
procurement in 37 % of the cases. In addition, the order of the
tenderers changed in 72 % of the cases. Thus, it is clear that the
standardisation affects the results of public procurement, and in
over a third of the cases, a different supplier would have been
selected as the winner compared to direct comparison.
It is important that contracting authorities notify in the
invitation to tender of the selection criteria and the evaluation
mechanism they will use. The same applies to the details according
to which the evaluation of quality is made. In that case the
tenderers will at the time of submitting their tender know which
details affect the evaluation of tenders and how the winner of the
procurement will be selected.
An extensive presentation of the standardisation, as well as an
excel sheet in which the values of an individual competitive
bidding can be entered, are available on the web site of the
Association of Finnish Architects' Offices (ATL) (in Finnish):
http://www.atl.fi/index.php?id=245
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
