1 Bid Evaluation - Goods Objective Secure goods/services at most economical cost Price only one factor Other optional factors Time of delivery/completion Terms of payment Technical merits, capacity, productivity Operating cost Maintenance cost Efficiency

2 Evaluation Methodology Commercial Features Price Adjust basic price for features, options, etc. to make bid prices comparable Delivery point Add local transportation

3 Time of delivery Evaluate loss or gain by late delivery Warranty Evaluate variation Payment terms Evaluate variations at specified interest rate Evaluation Methodology Commercial Features (cont.)

4 Evaluation Methodology Technical Features Operating cost Fuel Training Maintenance cost Standardisation Resale value /depreciated cost Life cycle cost Ownership cost Capacity Productivity

5 Evaluation Methodology Minimum Technical Specifications PASS/FAIL CRITERIA Minimum requirement Below minimum: rejected Responsive = evaluated Maximum requirement Range parameters (MAX <>min)

6 Life Cycle Cost Methods Cost to own and operate item during its useful life Initial purchase price Adjusted for extras, delivery, variations in payment term, etc. Value for adjustments added to bid price Operating cost during life of item Fuel, spare parts, maintenance (x years) Annual cost discounted to NPV Ownership cost during life of item Economical useful life (x years) Resale or scrap value discounted to NPV

7 Life Cycle Cost Methods (contd) Efficiency cost method Capitalize differences in efficiency in operation of items. i.e. boiler, turbine, transformer, etc. during life Productivity cost method Determine life cycle cost per unit of output for comparison purposes Annual cost of ownership of plant divided by total unit output of plant

8 Evaluation Methodology Merit Point System Allocate weights to different technical features Establish relationship between quality and price Select bid with Highest no. of points or Lowest price per point Advantage: simple Disadvantage: subjective assignment of points

9 Evaluation Methodology Merit Point System (cont.) Point weightages typical Equipment price65-70 Spare parts Technical features After sales service Standardization Total 100 Bidding documents Specifies point weightage

10 Evaluation Methodology Multiple Lots Lots include all items Incomplete lots > 10% rejected < 10% price to be adjusted Evaluation of each lot (1, 2, …) from each bidder (a, b, c, …) Cost of all combinations of lots A(1) + b(2) + c(3) A(1+2) + b(3) A(1+2+3) Lowest evaluated cost combination