Procurement Division Evaluation by Best Value for Money Methodology 1
Best Value for Money • Best value principle as per UN Financial Regulations & Rules: 5.12 – Due consideration when exercising the procurement function • Move from a principle to a method to apply best value in procurement • Best value in procurement is a practice used world wide in public and international procurement operations • Best value method involves all procurement stakeholders – Requisitioner – Procurement Staff – LCC – HCC – Contract Approving Authority 2
Best Value for Money • Requisition must describe the goods and/or service in terms of functionality, deliverable, business solution – No specification or “how to do it” – Must be outcome based • Procurement under best value for money method is based on pre-established criteria for evaluation with weighted scores assigned to technical and commercial evaluation • Information about criteria is communicated to the vendors at the solicitation phase • Range assigned to technical evaluation varies from 40- 50-60% and 60-50-40% is assigned to financial / commercial evaluation – Allocation is determined by market structure, objectives to achieve, professional judgment and risk assessment 3
Best Value for Money • After receipt of proposal, technical evaluation is conducted by a team of staff from the requisitioning office(s) • Based on the pre-established criteria, technical offers are rated with points assigned to each category of criteria • The best technical offer receives the highest score 4
Best Value for Money • For example, technical evaluation of specific equipment may include evaluation criteria such as: - Pass or Fail (ISO certification) - Delivery lead time (15 points) - Fuel consumption rate (20 points) - Warranty conditions (15 points) - Noise level (10 points) - Power capacity output (15 points) - Global support for spare parts (25 points) • Total = 100 pts and will count for 60% of the overall evaluation 5
Best Value for Money • Financial evaluation is conducted by the Procurement Division upon completion of technical evaluation • Lowest priced offer is given the maximum number of points. All other financial and commercial elements receive points in inverse proportion • Total = 100 pts and will count for 40% of the overall evaluation 6
Best Value for Money • For example, in the scenario below, company A offering the second lowest price is the best value based on the combination of technical and financial evaluation having the highest total score Technical Evaluation (60%) Commercial Evaluation (40%) Total Score Score (A) Adjusted Score (B) Price (C) Score (D) (B) + (D) A 90.0 54.0 $230,000 38.3 92.3 B 70.0 42.0 $280,000 31.4 73.4 C 85.0 51.0 $220,000 40.0 91.0 D 88.0 52.8 $240,000 36.7 89.5 7
Best Value for Money Statistic • In 2004 and 2005, a total of 117 tenders were processed under the best value for money evaluation method for a total contract value of $738 million - Corrigendum to paragraph 66 of A/60/846/Add.5 will be issued • 117 tenders represents approximately 13% of total number of tenders issued in 2004 and 2005 • Note of caution: – Difference in contract award value and actual expenses (system contract) • Certain contract value do not expense 100% 8
Conclusion • Best value for money is a principle set in FR&R • Best value for money, for the procurement function, is an evaluation methodology based on a systematic and transparent process which maximizes the business solution for the Organization 9
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