Evaluating a supplier's offer
Learn how to select the best offer made by suppliers.
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Recommended
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By having an effective method of evaluating offers, schools can ensure that they buy from the best supplier available.
- Establish an evaluation panel
- Set the evaluation criteria
- Confirm the evaluation method
- Conduct the evaluation
- Conduct due diligence
- Make a recommendation
- Further information
Establish an evaluation panel
With a low-cost or simple purchase, a single person can evaluate the offers made to their school and present their recommendation to the board (or other delegated authority).
For more expensive or complex purchases, an evaluation panel should be selected. This panel should have 3-5 members.
Some panel members should have expertise directly related to the product (such as an ICT teacher for IT hardware purchases). A financial expert (for assessing pricing) and a person with legal knowledge should also be present, if possible.
Declaring conflicts of interest
If a panel member has a conflict of interest, it must be declared and managed appropriately.
If the purchase is worth a value of $50,000 or more after GST is added (either immediately, or over a 12 month period), all panel members should sign a conflict of interest declaration.
Learn more about Conflicts of interest.
Conflict of interest declaration and management plan [DOCX, 48 KB]
Non-disclosure agreement
The buyer(s) including all panel members, must all agree to the terms of the purchase’s non-disclosure agreement (if one is in effect).
Set the evaluation criteria
Mandatory conditions
Mandatory conditions relate to the submission of the offer by the supplier to the school. They must be emphasised to suppliers before they make their offers.
- They are yes/no conditions. It is clear if they have been met.
- They are pass/fail conditions. A supplier can be rejected for not passing.
Schools can choose to allow suppliers to make minor adjustments to their offer in order to meet a mandatory condition.
Example: The supplier must submit three copies of the proposal.
Pre-conditions
Pre-conditions must be passed by an offer in order for it to proceed to being evaluated further.
- They are yes/no conditions. It is clear if they have been met.
- They are pass/fail conditions. A supplier can be rejected for not passing.
To avoid ruling out good suppliers, schools might 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.
Example: The supplier has professional indemnity insurance, or must have it prior to contract start date.
Qualitative criteria
Suppliers who meet a school’s mandatory and pre-conditions can proceed to being evaluated against qualitative criteria.
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Is the offer fit for purpose?
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Judge the supplier’s:
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Can the supplier deliver on their offer?
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Judge the supplier’s:
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Is the offer good value for money?
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Judge the:
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Confirm the evaluation 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.
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1
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Shortlist all offers that meet your mandatory conditions, pre-conditions and qualitative criteria.
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Rank the shortlisted offers in order of price.
The most preferred offer is that which costs the least.
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Weighted model
This is the most commonly used model and accounts for the suppliers’ varied ability to meet qualitative criteria.
The qualitative criteria used in the model might be the three referred to above. However, a greater number of criteria may be chosen, which focus on more specific topics.
Price might be used as a criteria in the model, or it may be considered separately.
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1
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Confirm 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.
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2
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Rank each qualitative criteria in order of its importance to your school.
Example:
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3
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Decide on a percent weighting for each criteria, adding to a total of 100%. More important criteria are assigned a higher percentage.
Example:
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4
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Score all offers against each criteria using your rating scale to find their raw scores.
Example (using 0-10 scale):
Total raw score, 22
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5
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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 ten by the weighted % of its criteria.
Example: Fit for purpose 1) 7 (raw score achieved) ÷ 10 (maximum raw score) = 0.7.
Example: Supplier’s ability to deliver 1) 8 (raw score achieved) ÷ 10 (maximum raw score) = 0.8.
Example: Value for money 1) 7 (raw score achieved) ÷ 10 (maximum raw score) = 0.7.
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6
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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.
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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 all proposals are received and before evaluation begins, it is good practice for the school’s buyer(s) to sign conflict of interest declarations.
This is to confirm that everyone responsible for buying either has no conflict of interest, or if they have one, it is declared and correctly managed.
Learn more about Conflicts of interest.
The buyer(s) 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 then identify the best supplier(s), who are to be taken forward to the final due diligence checks.
Conduct due diligence
Before awarding a contract to the identified supplier(s):
- check the supplier’s accreditation and staff’s qualifications (if relevant)
- research the supplier online, reading any reviews and media reports (if possible)
- contact two 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.
This process is referred to as due diligence and it is recommended that it is always completed for higher value purchases.
Schools should always inform suppliers of the actions that will be taken during due diligence checks.
All of the findings from the checks should documented.
When issues are found, decide how serious they are.
- If they are not serious, decide if they can be prevented from impacting the school.
- If they are serious, the supplier should not be awarded the contract. In this case, schools should conduct due diligence checks on the next best supplier identified.
Due diligence checklist
To ensure that the right questions are being asked, use the due diligence checklist below.
Due diligence checklist [DOCX, 52 KB]
Make a recommendation
After completing the evaluation process, the school’s buyer(s) can make their final recommendation to their board.
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