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Performance Contracting for Construction
Best Value Awards
If the Best Value award methodology is chosen, the following sections provide examples of RFP section L - Instructions, Conditions and Notices to Offerors - and section M - Evaluation Criteria. Although the Best Value Award process is found primarily in design-build contracts, this methodology can prove very valuable in non design-build projects to select the contractor as well as to stimulate innovation and allow flexibility in approach. For example innovation can be proposed in the implementation of the Traffic Management Plan, or in the types of materials used in the construction or in the scheduling. More guidelines and comprehensive examples of the Best Value Award process are presented in Best-Value Procurement Methods For Highway Construction Projects; NCHRP Project 10-61.
Use of the Best Value process depends upon the project, the selection criteria used for the project, and the decision factors that are used when a project is considered for implementation. Figure 1 outlines the Best Value process. When making a determination about a Best Value project, an Owner Agency should first consider and identify the potential benefits that a Best Value process would offer as applicable to the specific project. Some examples of these benefits are flexibility, improved insight into the contractor's proposed approach, cost, time, quality, improved safety and durability. The Agency should also consider if the project under consideration would be best served by a Best Value type of contract (i.e. fostering innovation, project complexity, or other agency specific factors). If an agency determines that the Best Value would be beneficial, the evaluation criteria upon which the proposal will be assessed should also align with the project goals.
For each of the appropriate parameters, the relevant evaluation criteria are selected. There will always be a cost parameter with evaluation criteria in the final set. If the schedule is fixed by the agency, then no schedule parameter will be selected, but if the contractor is allowed to propose some element of the schedule, then it will also be included. Next, the type of Best Value award is selected based on project characteristics.
The Owner Agency must then decide what selection method it will use to evaluate the proposals. One of the most flexible methods to determine the score is by using weighted averages which assign scores and weights to each evaluation criteria to ultimately determine the contractor proposal that provides the Best Value solution to the agency. This method also allows the Owner Agency the ability to most completely control the relationship between the mathematical outcome and the project's requirements.
Another selection method is the Cost-Technical Tradeoff type of evaluation which uses qualitative and quantitative methods to compare the technical scores and price scores for Offerors. It also takes into consideration the incremental differences in the scores' value to the agency in order to make the award.
Once the evaluation is completed, the evaluation panel would compute the scores and award the project to the Offeror that best satisfied the formula's objective decision criterion. The procurement process could include the opportunity for discussions and final proposals, if permitted by enabling legislation and deemed advisable by the procuring agency.
The Owner Agency may also consider implementing a two step Best Value process which may assist in drawing a larger pool of bidders, and allow for the submission of alternate technical proposals. Under this method, the Owner Agency screens and pre-qualifies Contractors to develop a short list of qualified candidates. After the Agency has short-listed the candidates, the cost, approach, and schedule would be evaluated and scored.
Best Value Considerations
While considering using a Best Value process, the Owner Agency should also consider the benefits and challenges to implementation. The Best Value process can foster innovation much more quickly than the conventional Low Bid process. In addition, in order to get the most from this contracting type, the Owner Agency and the selected Contractor should commit to entering into a partnering arrangement (mutually designed and agreed upon) to foster trust and work cooperatively to solve problems and issues throughout the life of the contract. Such partnering relationships can also result in enhanced performance. Finally, the Best Value process has the potential to improve performance and the value of the construction process over the long term. One challenge of implementation is to keep the selection criteria as objective as possible so that the Owner Agency can determine (and defend) which Offeror presents the Best Value to the Agency.
Figure 8 outlines a Best Value process, and points out where example materials are being offered in this Guide.
Lessons Learned from Real-World Performance Contracts
The following Best Value lessons have been learned from real-world performance contracts:
To assist in accelerating the development of Owner Agency materials, draft templates and RFP sections are provided below. If using Best Value, the Owner Agency will need to go through FHWA's SEP-14 process. We have provided guidance and sample materials for the SEP-14 process in a separate section of the framework.
SAMPLE RFP SECTION L - INSTRUCTIONS, CONDITIONS AND NOTICES TO OFFERORS
L.1 CONTRACT AWARD
L.1.1 Most Advantageous to the Owner Agency
The Owner Agency intends to award a contract resulting from this solicitation to the responsible Offeror whose offer conforming to the solicitation shall be most advantageous to the Owner Agency with regard to cost or price, technical and other factors, specified elsewhere in this solicitation considered.
L.1.2 Initial Offers
The Owner Agency may award contracts on the basis of initial offers received, without discussion. Therefore, each initial offer shall contain the Offeror's best terms from a standpoint of cost or price, technical and other factors.
L.2 PROPOSAL FORM, ORGANIZATION AND CONTENT
L.2.1 Offerors shall note that this is a request for proposals and not an invitation for bids (IFB). Award shall not be made solely on price (see Section M) and the Owner Agency reserves the right to hold discussions and seek clarifications prior to award.
L.2.2 A Pre-Proposal Conference shall be held for the purpose of answering any questions relative to the RFP and the scope of services on date at location at time. All interested bidders must attend.
L.2.3 One original and 10 copies of the written proposals shall be submitted in three parts, titled "Technical Proposal", "Staffing/Management/Quality Management/Past Performance/Facilities and Equipment Proposal" and "Price Proposal". Proposals shall be typewritten in 12 point font size on 8.5" by 11" bond paper. Telephonic and telegraphic proposals shall not be accepted. Each proposal shall be submitted in a sealed box conspicuously marked: "Proposal in Response to Solicitation No. (insert solicitation number, Title and name of Offeror)."
L.2.4 Offerors are directed to the specific proposal evaluation criteria found in Section M of this solicitation, EVALUATION FACTORS FOR AWARD. The Offeror shall respond to each factor in a way that shall allow the Owner Agency to evaluate the Offeror's response. The Offeror shall submit information in a clear, concise, factual and logical manner providing a comprehensive description of program services and service delivery. The information requested below for the technical proposal shall facilitate evaluation and Best Value source selection for all proposals. The technical proposal must contain sufficient detail to provide a clear and concise representation of the requirements in the statement of work.
L.2.5 Technical Proposal (not to exceed XX pages)
L.2.6 Staffing/Management/Quality Management/Past Performance /Facilities and Equipment/Schedule Proposal (not to exceed XX pages)
L.2.7 Price Proposal
The price proposal must consist solely of the documents contained in Section B, including pricing data. Offerors may, however, include a narrative describing or explaining their price proposal, and this narrative must not exceed ten pages. This narrative shall describe how the proposed approach meets the cost savings performance goal(s) of this project.
L.3 PROPOSAL SUBMISSION DATE AND TIME, AND LATE SUBMISSIONS, LATE MODIFICATIONS, AND LATE WITHDRAWALS
L.3.1 Proposal Submission
Proposals must be submitted no later than XX p.m. local time on date. Proposals, modifications to proposals, or requests for withdrawals that are received in the designated Owner Agency's office after the exact local time specified above, are "late" and shall be considered only if they are received before the award is made and one (1) or more of the following circumstances apply:
L.3.2 Withdrawal or Modification of Proposals
An Offeror may modify or withdraw its proposal upon written, telegraphic notice, or facsimile transmission if received at the location designated in the solicitation for submission of proposals, but not later than the closing date for receipt of proposals.
The only acceptable evidence to establish the date of a late proposal, late modification or late withdrawal sent either by registered or certified mail shall be a U.S. or Canadian Postal Service postmark on the wrapper or on the original receipt from the U.S. or Canadian Postal Service. If neither postmark shows a legible date, the proposal, modification or request for withdrawal shall be deemed to have been mailed late. When the postmark shows the date but not the hour, the time is presumed to be the last minute of the date shown. If no date is shown on the postmark, the proposal shall be considered late unless the Offeror can furnish evidence from the postal authorities of timely mailing.
L.3.4 Late Submissions.
A late proposal, late request for modification or late request for withdrawal shall not be considered, except as provided in this section.
L.3.5 Late Modifications.
A late modification of a successful proposal, which makes its terms more favorable to the Owner Agency, shall be considered at any time it is received and may be accepted.L.3.6 Late Submissions.
A late proposal, late modification or late request for withdrawal of an offer that is not considered shall be held unopened, unless opened for identification, until after award and then retained with unsuccessful offers resulting from this solicitation.
L.4 HAND DELIVERY OR MAILING OF PROPOSALS
DELIVER OR MAIL TO
Office of Contracting and Procurement
L.5 EXPLANATION TO PROSPECTIVE OFFERORS
L.5.1 If a prospective Offeror has any questions relative to this solicitation, the prospective Offeror shall submit the question in writing to the Contracting Officer. The prospective Offeror shall submit questions no later than 15 calendar days prior to the closing date and time indicated for this solicitation. The Owner Agency shall not consider any questions received less than 15 calendar days before the date set for submission of proposal. The Owner Agency shall furnish responses within 7 days to all the other prospective Offerors. An amendment to the solicitation shall be issued if that information is necessary in submitting offers, or if the lack of it would be prejudicial to any other prospective Offerors. Oral explanations or instructions given before the award of the contract shall not be binding.
L.5.2 Offerors are expected to thoroughly and completely examine this solicitation and all of its attachments, enclosures, and source documents. Failure to do so shall be at the Offeror's risk.
L.6 FAILURE TO SUBMIT OFFERS
Recipients of this solicitation not responding with an offer should not return this solicitation. Instead, they shall advise the Office of Contracting by letter or postcard whether they want to receive future solicitations for similar requirements. It is also requested that such recipients advise the Contracting Officer, of the reason for not submitting a proposal in response to this solicitation. If a recipient does not submit an offer and does not notify the Contracting Officer that future solicitations are desired, the recipient's name may be removed from the applicable mailing list.
Any actual or prospective Offeror, or contractor who is aggrieved in connection with the solicitation or award of a contract, must file with the Owner Agency's Contract Appeals Board (Board) a protest no later than 10 business days after the basis of protest is known or should have been known, whichever is earlier. A protest based on alleged improprieties in a solicitation which are apparent prior to proposal opening or the time set for receipt of initial proposals shall be filed with the Board prior to proposal opening or the time set for receipt of initial proposals. In procurements in which proposals are requested, alleged improprieties which do not exist in the initial solicitation, but which are subsequently incorporated into the solicitation, must be protested no later than the next closing time for receipt of proposals following the incorporation. The protest shall be filed in writing, with the Contract Appeals Board. The aggrieved person shall also mail a copy of the protest to the Contracting Officer for the solicitation.
L.8 SIGNING OF OFFERS
The Contractor shall sign the offer and print or type its name on the Solicitation, Offer and Award form of this solicitation. Erasures or other changes must be initialed by the person signing the offer. Offers signed by an agent shall be accompanied by evidence of that agent's authority, unless that evidence has been previously furnished to the Contracting Officer.
L.9 UNNECESSARILY ELABORATE PROPOSALS
Unnecessarily elaborate brochures or other presentations beyond those sufficient to present a complete and effective response to this solicitation are not desired and may be construed as an indication of the Offeror's lack of cost consciousness. Elaborate artwork, expensive paper and bindings, and expensive visual and other presentation aids are neither necessary nor desired.
L.10 RETENTION OF PROPOSALS
All proposal documents shall be the property of the Owner Agency and retained by the Owner Agency, and therefore shall not be returned to the Offerors.
L.11 PROPOSAL PRICES
The Owner Agency will offer a stipend of $XX to unsuccessful qualified bidders whose proposal is deemed technically adequate.
L.12 ACKNOWLEDGMENT OF AMENDMENTS
The Offeror shall acknowledge receipt of any amendment to this solicitation (a) by signing and returning the amendment; (b) by identifying the amendment number and date in the space provided for this purpose in Section A of the solicitation cover sheet; or (c) by letter or telegram including mailgrams. The Owner Agency must receive the acknowledgment by the date and time specified for receipt of offers. Offerors' failure to acknowledge an amendment may result in rejection of the offer.
L.13 ACCEPTANCE PERIOD
The Offeror agrees that its offer remains valid for a period of 90 days from the solicitation's closing date.
L.14 BEST AND FINAL OFFERS (Note: Only consider using this section if the Owner Agency is legally allowed to use best and final offers. Also, this may only be applicable for projects that allow alternate proposals.)
If, subsequent to receiving original proposals, negotiations are conducted, all technically acceptable Offerors within the competitive range shall be so notified and shall be provided an opportunity to submit written best and final offers at the designated date and time. Best and Final Offers shall be subject to the Late Submissions, Late Modifications and Late Withdrawals of Proposals provision of the solicitation. After receipt of best and final offers, no discussions shall be reopened unless the Contracting Officer determines that it is clearly in the Government's best interest to do so, e.g., it is clear that information available at that time is inadequate to reasonably justify Contractor selection and award based on the best and final offers received. If discussions are reopened, the Contracting Officer shall issue an additional request for best and final offers to all technically acceptable Offerors still within the competitive range.
L.15 LEGAL STATUS OF OFFEROR
Each proposal must provide the following information:
L.15.1 Name, Address, Telephone Number, Federal tax identification number and DUNS Number of Offeror;
L.15.2 State, license, registration or certification if required by law to obtain such license, registration or certification. If the Offeror is a corporation or partnership and does not provide a copy of its license, registration or certification to transact business in the State, the offer shall certify its intent to obtain the necessary license, registration or certification prior to contract award or its exemption from such requirements; and
L.15.3 If the Offeror is a partnership or joint venture, names of general partners or joint ventures, and copies of any joint venture or teaming agreements.
L.15.4 The Owner Agency reserves the right to request additional information regarding the Offeror's organizational status.
L.16 STANDARDS OF RESPONSIBILITY
The prospective Contractor must demonstrate to the satisfaction of the Owner Agency the capability in all respects to perform fully the contract requirements, therefore, the prospective Contractor must submit the documentation listed below, within five (5) days of the request by the Owner Agency:
L.16.1 Furnish evidence of adequate financial resources, credit or the ability to obtain such resources as required during the performance of the contract.
L.16.2 Furnish evidence of the ability to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments.
L.16.3 Furnish evidence of the necessary organization, experience, accounting and operational control, technical skills or the ability to obtain them.
L.16.4 Furnish evidence of compliance with the applicable State licensing, tax laws and regulations.
L.16.5 Furnish evidence of a satisfactory performance record, record of integrity and business ethics.
L.16.6 Furnish evidence of the necessary production, construction and technical equipment and facilities or the ability to obtain them.
L.16.7 If the prospective Contractor fails to supply the information requested, the Contracting Officer shall make the determination of responsibility or non-responsibility based upon available information. If the available information is insufficient to make a determination of responsibility, the Contracting Officer shall determine the prospective Contractor to be unacceptable.
L.17 KEY PERSONNEL
L.17.1 The Owner Agency considers the following positions to be key personnel for this contract (Owner Agency may choose applicable positions to include):
L.17.2 The Offeror shall set forth in its proposal the names and reporting relationships of the key personnel the Offeror shall use to perform the work under the proposed contract. Their resumes shall be included. The hours that each shall devote to the contract shall be provided in total and broken down by task. Proposed key staff must remain in place for at least one year following the award of the contract or written approval for replacements must be received from the Owner Agency.
L.17.3 The proposed project manager must have at least 10 years of management experience in construction projects. The proposed project manager must have successfully managed 2 contracts (or government programs) of similar size and scope. (Note for L.17.3, L.17.4, L.17.5: instead of using 2 contracts of similar size, the Agency may consider requiring that potential Offerors provide proof of relevant experience in their field of work.)
L.17.4 The proposed construction superintendent must have at least 8 years of experience as a construction superintendent, and must have successfully managed 2 contracts (or government programs) of similar size and scope.
L.17.5 The proposed quality management engineer must have at least 8 years of experience in construction projects, and must have successfully managed 2 contracts (or government programs) of similar size and scope.
L.17.6 The proposed work zone safety engineer must have at least 5 years of experience in construction as a work zone safety engineer.
EXAMPLE RFP SECTION M - EVALUATION FACTORS
M.1 EVALUATION FOR AWARD
The contract shall be awarded to the responsible Offeror whose offer is technically acceptable to The Owner Agency, and offers the Best Value to the Locale (i.e. State, county) as determined by the total overall score from the evaluation criteria specified below.
M.2 TECHNICAL RATING
The Technical Rating Scale is as follows:
For example, if a factor has a point evaluation of 0 to 20 points, and (using the appropriate Rating Scale) the Owner Agency evaluates as "good" the part of the proposal applicable to the factor, the score for the factor is 16 (4/5 of 20).
M.3 EVALUATION STANDARDS
The Owner Agency will only evaluate an Offeror's Price Proposal if The Owner Agency's proposal evaluation panel finds that Offeror to be technically acceptable. The Offeror must meet a minimum rating/score of X to be considered technically acceptable. The Owner Agency shall check those Price Proposals for price reasonableness.
M. 4 EVALUATION CRITERIA
The Owner Agency will evaluate proposals based on the following technical evaluation factors:
The Owner Agency will rate the technical proposals based upon the extent to which Offerors describe, in clear and concise language how they will complete the construction, meet the performance goals, and demonstrate an understanding of issues relating to the construction covered by this RFP. Offerors shall refer to section L of this RFP for instructions regarding the format of technical proposals.
The Owner Agency will use the following criteria in evaluating proposals (note - categories are listed in descending order of importance):
M.4.2 STAFFING/ MANAGEMENT/QUALITY MANAGEMENT/ PAST PERFORMANCE
The Owner Agency will rate the staffing/management/quality management/past performance proposal based upon the extent to which Offerors describe, in clear and concise language their past performance, management, staffing and Quality Management plans related to the construction covered by this RFP. Offerors shall refer to section L of this RFP for instructions regarding the format of past performance proposals.
The Owner Agency will use the following criteria in evaluating proposals (note - categories are listed in descending order of importance):
M.4.3 PRICE CRITERIA
The price evaluation shall be objective. The Offeror with the lowest price shall receive the maximum price points. All other proposals shall receive a proportionately lower total score. The following formula shall be used to determine each Offeror's evaluated price score:
Total Evaluated Price for lowest price proposal/Total Evaluated Price of proposal being evaluated x weight = evaluated price score
M.4.4 TOTAL (100 Points)
EXAMPLE RFP - MDOT M-115 PILOT PROJECT- EVALUATION FACTORS, SCORING AND AWARD
"The Selection Team will use the following criteria for each factor in evaluating proposals.
A.1.) Open to Traffic: The Contractor provides the necessary Open to Traffic date as outlined on the provided form in Appendix C, and includes supplemental information/description that demonstrates the type and level of effort required to ensure success in achieving the goal.
Open to Traffic (max 20 points): 0 points: August 2nd, 2008 (Baseline), 1-5 points: August 1st - July 15th, 2008, 6-20 points: July 14th - July 2nd, 2008
A.2.) Construction and Cleanup Completion: The Contractor provides the necessary day(s) after open to traffic as outlined on the provided form in Appendix C, and includes supplemental information/description that demonstrates the type and level of effort required to ensure success in achieving the goal.
Construction and Cleanup Completion (max 5 points): 0 points: 15 days after open to traffic (Baseline), 1-5 points: 14 - 5 days after open to traffic
A.3.) Pavement Performance Goal: The Contractor provides the necessary years for pavement performance warranty as outlined on the provided form in Appendix C, and includes supplemental information/description that demonstrates the type and level of effort required to ensure success in achieving the goal. A detailed description will be included if different than the enclosed Log of Project, and may include the proposed type of work to be performed, proposed pavements (excluding concrete), proposed pavement section, etc.
Pavement Performance Goal (max 50 points): 0 points: 5 year pavement warranty (Baseline), 15 points: 6 year pavement warranty, 30 points: 7 year pavement warranty, 50 points: 8 year pavement warranty
A.4.) Develop and provide a "Worker Safety Plan" as it relates to the goal of Worker Safety During Construction: The Contractor's plan demonstrates experience, knowledge, and understanding of key worker safety issues for the project, and the implications of good or poor worker protection. The plan should be clear, concise, and have a high probability for success for completing the project goal.
Develop and provide a "Worker Safety Plan" as it relatesto the goal of Worker Safety During Construction (max 5 points): 0 points: A generic "Worker Safety Plan" is provided with no/few specifics on how the plan will be followed to achieve the goal, 1-2 points: An adequate general "Worker Safety Plan" is provided with some specifics on how the plan will be followed to achieve the goal, 3-5 points: A clearly defined "Worker Safety Plan" is provided with a detailed description of how the plan will be followed to achieve the goal.
A.5.) Develop and provide a "Work Zone Safety Plan" as it relates to the goal of Work Zone Crashes: The Contractor's plan demonstrates experience, knowledge, and understanding of key safety issues concerning work zone safety. The plan should also describe the Contractor's ability to respond to emergency circumstances and how non-vehicle incidents will be addressed. The plan should be clear, concise, and have a high probability for success for completing the project goal.
Develop and provide a "Work Zone Safety Plan" as it relates to the goal of Work Zone Crashes (max 10 points): 0 points: A generic "Work Zone Safety Plan" is provided with no/few specifics on how the plan will be followed to achieve the goal, 1-5 points: An adequate general "Work Zone Safety Plan" is provided with some specifics on how the plan will be followed to achieve the goal, 6-10 points: A clearly defined "Work Zone Safety Plan" is provided with a detailed description of how the plan will be followed to achieve the goal.
A.6.) Develop and provide a "Reducing Motorist Delay Plan" as it relates to the goal of Motorist Delay: The Contractor's plan demonstrates experience, knowledge, and understanding of key motorist delay issues for the project, and the implications of a good or poorly designed and maintained work zone. The plan should also describe any proposed changes to the Special Provision for Maintaining Traffic, including staging, as well as proven traffic engineering tools and analysis to manage motorist delay. The plan should be clear, concise, and have a high probability for success for completing the project goal.
Develop and provide a "Reducing Motorist Delay Plan" as it relates to the goal of Motorist Delay (max 30 points): 0 points: A generic "Reducing Motorist Delay Plan" is provided with no/few specifics on how the plan will be followed to achieve the goal, 1-15 points: An adequate general "Reducing Motorist Delay Plan" is provided with some specifics on how the plan will be followed to achieve the goal, 16-30 points: A clearly defined "Reducing Motorist Delay Plan" is provided with a detailed description of how the plan will be followed to achieve the goal including proven traffic engineering tools and analysis to manage motorist delay.
B.1.) Describe innovations that will be incorporated into the project including, but not limited to, Road Construction, Bridge Construction, Delay Reduction, and Materials: The Contractor demonstrates the necessary, knowledge, and understanding in using proposed innovative techniques, processes, or materials related to construction, including whether the Contractor's potential use of innovation is likely to enhance the ability to meet the goals set forth in this document. The description should be clear, concise, and demonstrate a high probability for success for completing the construction project goals. This could include work methods that will speed construction while reducing congestion, functional efficiency and flexibility, traffic management and protection, reduction in user costs and impact, etc.
Describe innovations that will be incorporated into the project including, but not limited to, Road Construction, Bridge Construction, Delay Reduction, and Materials (max 30 points): 0 points: Innovations that most likely can't be used and provide no value, 1-15 points: innovations that could be used in the project and provide some value, 16-30 points: Innovations that are usable in the project and provide significant value.
The Contractor's Responses to Evaluation Factors A.1., A.2., and A.3. shall include whole numbers only, were required. If the Contractor's response includes a fraction or decimal, it will be rounded up to the nearest whole number, which will be used for both scoring and, if the Contractor is awarded the project, in the approved contract.
Scoring the Evaluation Factors: The Contractor's Proposal Package will be given to the Selection Team for review and scoring. The score, based on a maximum of 150 points, will be determined on consensus scoring between all of the Selection Team Members. Evaluation Factors A.1. and A.2. may require interpolation to determine the point value for the score and, if needed, will be rounded to the nearest hundredths. If the Contractor receives a score of zero (0) points for any factor, it is equivalent to what MDOT would normally expect for a standard construction project.
Derivation of Cost Multiplier: The Selection Team Members will take the score for each qualifying Contractor and derive the "Cost Multiplier" thru linear interpolation, rounded to the nearest ten thousandths. Cost multipliers associated with available points scored is shown below in "Cost Multiplier Table."
Best Value Computations: Once the "Cost Multiplier" is determined by the Selection Team for each qualifying Contractor Proposal Package, the Contractor's score, sealed Bid, and associated "Cost Multiplier" will be provided to Finance. Finance will apply the appropriate "Cost Multiplier" to each Contractor's Bid to determine the Best Value, rounded to the nearest hundredths.
Award: The contract shall be awarded to the Contractor whose offer is technically acceptable, and provides the lowest Best Value dollar amount. However, the value of the contract to be paid will be the Contractor's Lump Sum Bid."3
Alternate Evaluation Methodologies
In addition to the method presented above, there are alternate evaluation methodologies for Best Value proposals as presented in the draft NCHRP Report 10-61, Best-Value Procurement Methods for Highway Construction Projects. Some are outlined in the following paragraphs.
Quantitative Cost-Technical Tradeoff
The Quantitative Cost-Technical Tradeoff involves calculating the technical score and the price score increment and then examining the difference between the incremental advantages of each. The increment in the technical score is calculated by dividing highest technical score by the next highest technical score less one multiplied by 100%. The increment in price score is calculated dividing highest price score by the next highest price score less one multiplied by 100%. The award is made to the Offeror with the lowest price, unless the higher priced offers can be justified through a higher technical value. This justification is made by determining if the added increment of price is offset by an added increment in technical score. A generic algorithm and example are shown in Figure 9 below.
In the example above, the difference between the low and second low price proposals is 8%; the difference in the weighted scores should be greater than 8% to justify expending the additional increment of cost. In this case it is 33%. Therefore, an increase of 8% in price is warranted by the 33% increase in proposal technical score indicating that Proposal #2 is a better value than Proposal #1. This is not the case when comparing Proposal #2 to Proposal #3 where the 2% increase in cost is not justified by the 1% increase in technical score. Thus, the best-value in this example would be Proposal #2.
Qualitative Cost-Technical Tradeoff
The Qualitative Cost-Technical Tradeoff is used by many Federal agencies under the Federal Acquisitions Regulation. This method relies primarily on the judgment of the selection official and not on the evaluation ratings and scores (Army, 2001). The final decision consists of an evaluation, comparative analysis, and tradeoff process that often require subjectivity and judgment on the part of the selecting official. The flow chart below depicts the qualitative cost technical tradeoff algorithm as described in the Army Source Selection Guide (Army, 2001). The tradeoff analysis is not conducted solely with the ratings and scores alone. The selection official must analyze the differences between the competing proposals and make a rational decision based on the facts and circumstances of the specific acquisition. Two selection officials may not necessarily make the same conclusion, but both must satisfy the following criteria shown in Figure. 10.
Important points of the decision guide are that they represent the selection officials' rational and independent judgment, be based on a comparative analysis of the proposal, and be consistent with the solicitation evaluation factors and sub-factors.
2Adapted from: Best-Value Procurement Methods for Highway Construction Projects Preliminary (Draft Final Report); Scott, Sidney; Molenaar, Keith; Gransberg, Douglas; Smith, Nancy; Transportation Research Board National Cooperative Highway Research Program NCHRP 10-61; pp. 131-144.
3Michigan Department of Transportation RFP -84169, Highways for LIFE Project.