Evaluating a supplier's offer
Your school can make sure that you buy from the best supplier available by knowing how to evaluate offers.
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- Establish an evaluation panel
- Set the criteria
- Confirm the purchasing method
- Conduct the evaluation
- Conduct due diligence
- Make a recommendation
- More information
Establish an evaluation panel
If the purchase is low-cost or simple, your school's buyer can evaluate offers made and present a recommendation to the board (or another delegated authority).
More expensive or complex purchases should select an evaluation panel.
An evaluation panel should have 3 to 5 members. Panel members should include:
- someone with expertise of the product (such as an ICT teacher for IT hardware purchases)
- a financial expert (for assessing pricing)
- a person with legal knowledge (if possible).
Declaring conflicts of interest
Any panel member with a conflict of interest must declare that conflict of interest and manage it appropriately.
If the purchase is worth $50,000 or more after GST is added (either immediately or over a 12 month period), all panel members will need to sign a conflict of interest declaration.
Non-disclosure agreement
As the buyer (this includes your panel members), you must all agree to the terms of the purchase’s non-disclosure agreement (if one is in effect).
Set the criteria
Mandatory conditions
Mandatory conditions relate to the submission of an offer by the supplier to your school. Conditions must be emphasised to suppliers before they make their offers.
Mandatory conditions are:
- yes/no conditions – it is clear if they have been met
- pass/fail conditions – a supplier can be rejected for failing to meet the condition.
You can choose to allow suppliers to make minor adjustments to their offer in order to meet a mandatory condition.
For example, you might say: "The supplier must submit 3 copies of the proposal."
Pre-conditions
Pre-conditions must be passed in order for the offer to proceed to being evaluated further.
Preconditions conditions are:
- yes/no conditions – it is clear if they have been met
- pass/fail conditions – a supplier can be rejected for failing to meet the condition.
To avoid ruling out good suppliers, your school could require that a supplier who does not meet a pre-condition at the time that they make their offer meets it before the time the contract begins.
For example, you might say: "The supplier has professional indemnity insurance or must have it prior to contract start date".
Qualitative criteria
Suppliers who meet your mandatory and pre- conditions can proceed to being evaluated against qualitative criteria.
Is the offer fit for purpose?
Identify the supplier’s:
- understanding of your requirements and promise to meet/exceed them
- quality of services.
Can the supplier deliver on their offer?
Identify the supplier’s:
- size, number of employees and geographic coverage
- current commitments and availability to deliver them on time
- track record on delivering similar services
- willingness to cooperate with your school and acceptance of your requirements
- awards, licenses, accreditations, or those of their staff members.
Is the offer good value for money?
Identify the:
- immediate purchase price
- total cost of across the whole contract
- potential for a variation in pricing (which may unexpectedly increase cost in the future).
Confirm the purchasing method
Lowest price model
This is a very simple method and is used when price is the most important factor.
It is most useful when buying goods, particularly if suppliers are offering the exact same product.
- Shortlist all offers that meet your mandatory conditions, pre-conditions and qualitative criteria.
- Rank the shortlisted offers in order of price. The most preferred offer is that which costs the least.
Weighted model
This is a commonly used model and accounts for the suppliers’ varied ability to meet qualitative criteria.
The qualitative criteria used in the model might be those listed above, or different criteria may be chosen that focus on more specific topics.
For example, price may be used as a criteria in the model or it may be considered separately.
Step 1: Define the rating scale
This scale could be 0-5, though a 0-10 scale (0 being unacceptable and 10 being excellent) may be needed, to allow for greater differentiation between scores.
Step 2: Rank qualitative criteria in order of importance
For example:
- Fit for purpose
- Supplier’s ability to deliver
- Value for money.
Step 3: Decide on a percent weighting for each criteria
This this should total 100%. More important criteria are assigned a higher percentage.
For example:
- Fit for purpose 40%
- Supplier’s ability to deliver 30%
- Value for money 30%
Step 4: Score the offers
Score all offers against each criteria using your rating scale to find their raw scores.
Example (using 0-10 scale):
- Fit for purpose: 7
- Supplier’s ability to deliver: 8
- Value for money: 7
- Total raw score: 22
Step 5
Apply your weightings from step 3 to each raw score from step 4. The resulting scores will be added together to establish a final score for the offer in step 6.
Multiply each raw score out of 10 by the weighted % of its criteria.
Example: fit for purpose
- 7 (raw score achieved) ÷ 10 (maximum raw score) = 0.7
- 0.7 x 40 (weighted % for criteria) = 28
- This offer’s fit for purpose score is 28
Example: supplier’s ability to deliver
- 8 (raw score achieved) ÷ 10 (maximum raw score) = 0.8
- 0.8 x 30 (weighted % for criteria) = 24
- This offer’s supplier’s ability to deliver score is 24
Example: value for money
- 7 (raw score achieved) ÷ 10 (maximum raw score) = 0.7
- 0.7 x 30 (weighted % for criteria) = 21
- This offer’s value for money score is 21
Step 6
Add the scores established in step 5 for each criteria to form a total weighted score out of 100 for the offer.
Example: This offer’s total weighted score is 73 out of a 100 (28 + 24 + 21 = 73).
The offer with the highest total weighted score is the best offer.
Other tips for a weighted model
When price is a weighted criteria, it is important to ensure that the level of weighting is appropriate. If the quality of service is important, the weighting for price should be low. For lower-risk products and services, where price is the most important factor, the price weighting may be set higher.
The lowest priced offer should always receive the maximum score possible for the price criteria. All other offers should then receive a lower score for the price criteria, with their score reduced from the maximum available in proportion to their variation from the cheapest price offered.
For example, if the lowest price offered is $100,000, that offer scores 10/10. An offer made for $120,000 will then be scored 8.3/10. This results from dividing the best price offered by the price of the offer being evaluated (100,000 ÷ 120,000 = 0.83) and then multiplying this by 10 (0.83 x 10 = 8.3).
Note: the price scoring formula will only be applied to offers determined by the evaluation panel to be acceptable for qualitative non-price criteria.
Conduct the evaluation
Once you have received all proposals and before evaluation begins, it is good practice to sign a conflict of interest declaration.
This confirms that everyone involved in the buying process either:
- has no conflict of interest, or
- has a conflict of interest, but it has been declared and will be properly managed.
The buyer can then complete their evaluation of the offers by following their process.
It may be useful to interview suppliers or ask each to make a presentation to better understand their offers during the evaluation process.
This process will identify the best supplier. You should now do final due diligence checks.
Tracking scoring in spreadsheets
The two Workbooks below can be used when you are completing a weighted model evaluation. They account for the raw score given for an answer, and also the weighting/importance that you assigned to that answer.
Each individual evaluator can use the Individual Workbook and, afterwards, if you have multiple evaluators, all evaluators’ scoring can be combined in the Consolidated Workbook to see the group’s preferred supplier.
Conduct due diligence
Before awarding a contract to the identified supplier, you need to do due diligence. This is a process where you will:
- check the supplier’s accreditation and staff’s qualifications (if relevant)
- research the supplier online, reading any reviews and media reports (if possible)
- contact 2 of each supplier’s referees (these should be current or recent customers)
- ask other local schools if they have worked with the supplier and for their opinions.
Due diligence should always be conducted for higher value purchases.
Your school should always inform suppliers of the actions that will be taken during due diligence checks.
You should document all of the findings from the checks.
When issues are found, decide how serious they are.
- If the issues are not serious, decide if they can be prevented from impacting your school.
- If the issues are serious, the supplier should not be awarded the contract.
In this case, your school should conduct due diligence checks on the next best supplier identified.
Due diligence checklist
To ensure that you ask the right questions, use the due diligence checklist.
Make a recommendation
After completing the evaluation process, your school’s buyer can make a final recommendation to the board.
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