Achieving a realistic and robust balance between cost and quality is essential to the successful selection of project team members. Clients should look beyond only cost comparisons and examine the value-adding proposals of potential team members, such as their project-specific experience and competences, their understanding of the Client's goals and objectives and the whole-life cost impact of their proposals, in order that the Client's investment in the project can be optimised.
The 2018 post-Grenfell Housing Forum report 'Stopping Building Failures' noted that 'On housing programmes, the financial elements of the bid will include the construction costs, overheads and profits, costs of staff transferring as a result of TUPE (particularly on repairs and maintenance programmes), and the cost of any social value proposals including apprenticeship opportunities. However, there are other financial elements that can be evaluated including discount cost savings over the lifetime of the contract and life-cycle costs'.
The former Office of Government Commerce included among its critical factors for success the 'award of contract on the basis of best value for money over the whole life of the facility, not just lowest tender price'. Evaluation by reference to balanced criteria is more demanding than a straightforward comparison of prices, but the bidders' method statements and qualitative submissions provide valuable information that create the foundations for reliable commercial relationships.
CIRIA suggested in 'Selecting Contractors by Value' that qualitative selection criteria should assess a wide range of capabilities and proposals including:
■ 'Technical knowledge and skills - experience in engineering specialist elements; appropriate design capacity
■ A number of management skills: ... managing time ... managing cost ... managing value ... managing quality ... managing risk ... managing health and safety
■ Effective internal organisation - clear communications; sound administration; empowered staff
■ Collaborative culture - record of "partnering"; positive lead from the top; client focus
■ Appropriate human resources - qualified and enthusiastic personnel available to do the job
■ Supply chain management - sound dealing with subcontractors/suppliers; established relationships
■ Financial resources - sound balances and cash flow; reliable references
■ Generally - a sound, relevant and demonstrable track record'.
A persistent concern remains that financial evaluation will inevitably dominate a selection procedure and will tempt bidders to undercut each other's prices regardless of other criteria. Overcoming this problem requires the Client and its advisers to make clear their priorities in a way that bidders respond to, for example by evaluating quality first and then evaluating cost, taking the benchmark price from the highest quality bid. The Housing Forum in 'Stopping Building Failures' suggests other evaluation models 'that seek to protect the contracting authority and the bidders from an unrealistic pricing risk':
■ 'The optimum pricing model in which the contracting authority sets out the optimum price which it considers appropriate for the contract, based on market research. The tenderer is then incentivised to make the effort to reach the optimum price without undercutting it. The tenderer closest to the optimum price receives the highest mark. This should protect against abnormally low bids but arguably curbs the potential for truly innovative approaches'
■ 'The fixed price model where the contracting authority fixes the price for the contract and then undertakes a value for money evaluation on the non-price element of the contract's delivery, such as the quality and experience of the team, choice of materials, health and safety standards, liaison with residents, or environmental and social aspects of the project. By fixing the price and considering alternative value for money proposals, the contracting authority will again be neutralising the effect of any abnormally low bids on the overall evaluation'.
■ The Trowers & Hamlins December 2020 White Paper 'Price evaluation models for the housing sector' considers the recommendations of a working group looking at alternative pricing models and how they can be used in the housing sector to secure sustainable outcomes. The Paper provides helpful comparisons between alternative methods of evaluating bidders' tender price submissions in an endeavour to discourage a 'race to the bottom' and encourage the submission of bids that demonstrate sustainable value across the life of a contract, rather than artificial savings at the point of procurement.
In addition to balanced evaluation criteria, Clients and their teams can use other structured approaches to achieve an improved and sustainable balance between the priorities, needs and aspirations of stakeholders, together with the resources needed to achieve best value. These include 'Value Management' which can be applied early in the procurement process as part of a strategic opportunity to identify and agree Client objectives and value drivers.
Value Management is described in RICS guidance as delivering optimum whole life cost without detriment to safety, quality, performance and reliability. It includes reviews undertaken in a series of structured workshops, using tools for value benchmarking and profiling and weighted evaluation matrices. The Construction Innovation Hub's Value Toolkit complements Value Management in focusing on 'Value Definition', an agreed 'Delivery Model' and systems of 'Procuring for Value' and 'Ongoing Measurement'. The Toolkit recognises that each project or programme has its own unique value profile by reference to the relative importance of four value categories:
■ Natural (air, climate, water, land, resource use, biodiversity)
■ Social (influence and consultation, equality and diversity, networks and connections)
■ Human (employment, skills and knowledge, health, experience)
■ Produced (lifecycle cost, return, production, resilience).