NZ Transport Agency’s Contract procedures manual SM021
Part A – Appendix XXV
PQM guidelines
PQM simple
Introduction
PQM simple is a formula-based
based evaluation. It distinguishes the difference in quality between tenderers by translating the non-price
non
attribute grades to an SQP. The SQP is defined as ‘the amount that the tendering authority is prepared to pay to secure a higherhigher
quality tender relative to the lowest quality tender’.
PQM simple is available for use for in both PW and PS contracts. The same steps and guidelines apply for both contract types. The
price weighting is limited as follows:
•
PW price weights of 50% – 30% are permitted
•
PS price weights of 20% – 30% are permitted.
Pre-tender preparations
Prior to issuing the RFT, the project manager should investigate and assign weightings to the non-price
non price attributes and the price.
Once these and the estimate have been established, the SQP that will be obtained for a specific grade margin should be analysed
analys
for sensitivity. For example if the non-price
price attribute grade margin between two tenders is 10% and this results in a SQP of $10,000,
does this represent the additional amount that the client is willing to pay to secure such a tender? Care should be taken to ensure
this sensitivity is understood and is appropriate, particularly where a very high weighting is placed on the non-price
no
attributes.
Dependent on the size and complexity of the contract, the tendering authority may wish to associate this SQP with an analysis of the
risks. Where the SQP determined in too high/low, the non-price
non
and the price weightings should be revised to ensure a suitable SQP
will be obtained. The non-price
price and price weightings may not be altered after the close of tenders.
Contract estimate
For PQM simple, the base estimate must be included in the RFT to add transparency to the evaluation process.
proce Tenderers should be
encouraged to comment on the accuracy of the base estimate through the contracts-nominated
contracts nominated probity auditor.
The evaluation estimate used in the calculation shall not include amounts fixed by the tendering authority (e.g.
(
provisional sums).
SQP sanity check
Under PQM a ‘sanity check’ must be completed on the calculated SQPs and ATPs before the opening of the price envelope. The
TET must satisfy itself that the relevant differences between tenderer’s SQPs are realistic and represent the difference in price that
the tendering authority is prepared to pay. If the TET is not satisfied with the SQP as calculated, they may replace the SQP with an
adjusted figure but must clearly record all changes and provide justification for each change. Such adjustments should be used to
refine the SQP determined through the non--price attribute assessment.
The SQP and ATP may not be altered once the price envelope is opened. After deducting the SQP and ATP values from the
submitted tender prices, the supplier
plier with the lowest adjusted evaluation price is the preferred supplier.
ATPs
Each alternative tender is to be separately evaluated and an ATP determined for each. ATP is defined as ‘the difference in price
pr that
the tendering authority is prepared to pay for the product offered by an alternative tender compared to the minimum standard product
specified in the RFT’.
Example calculation using PQM simple
For a PW contract with the following basic data: Base estimate (minus provisional sums) = $100,000.00; price weight = 70%; nonprice attributes = relevant experience (10%), resources (5%) and methodology (15%).
Weighting
Non-price attribute
Tender A
Alternative A
Tender B
Tender C
10%
Relevant experience
90
90
80
70
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Part A – Appendix XXIII
5%
Resources
90
90
80
70
15%
Methodology
90
95
80
70
27.00
27.75
24.00
21.00
6.00
6.75
3.00
0.00
$8571.43 **
$9642.86
$4285.71
$0.00
$0.00
$5000.00
$0.00
$0.00
SQP + ATP
$8571.43
$14642.86
$4285.71
$0.00
Tender price ***
$90000.00
$97000.00
$92000.00
$87000.00
Adjusted evaluation price
$81428.57
$82375.14
$87714.29
$87000.00
NPA weighted sum
70%
Price
Non-price attribute weighted sum margin *
Supplier quality premium
ATP
Preferred tenderer
*Weighted sum margin = deduct the lowest non-price attribute weighted sum from each of the non-price attribute weighted sums.
** For example, tender A SQP = Evaluation estimate x (weighted sum margin / price weight)
= 100,000.00 x 6.00 / 70
= $8571.43
***Remove any amount fixed by the tendering authority from the submitted tender prices.
Tender A has the lowest adjusted evaluation price, and is therefore the preferred tenderer. Note that the ATP and SQP remain
final once the price envelope has been opened. Adjustments are not permitted once the price envelopes are opened. The detailed
ATP evaluations and calculations must be separately documented.
PQM Special
Introduction
This method of tender evaluation is suitable for complex projects or projects where many significant risks have been identified that
could impact on the successful outcome of the project. It distinguishes higher quality suppliers by calculating SQPs from a value
determined in a risk-based assessment. The basic process is summarised as follows.
Pre-tender preparations
Prior to issuing the RFT, the tendering authority must investigate the choice of non-price attributes and their weightings. The
minimum quality threshold for the non-price attribute grades are then set considering factors such as the complexity of the project,
the short listing process (if any) etc. Suppliers failing to reach this minimum quality threshold for any one NPA will be deemed nonconforming and rejected. The maximum risk consequence (MRC) must also be determined, as described below.
Theoretically, a tenderer with a perfect non-price attribute grade of 100 will be able to successfully deliver a contract with the highest
possible quality and the least possible risk, producing maximum benefits and savings for the Client. These “maximum benefits and
savings” are represented by a figure termed the MRC. The MRC is the total of the worst case scenario related costs associated with
each risk. The risks included in this assessment are generally sourced from the risk register (based on NZTA’s Risk management
process manual (AC/Man/2)), and should all be risks that the supplier has an ability to influence.
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The tendering authority must investigate and assign a maximum value to each risk. The sum of each risk’s maximum costs forms the
MRC. The MRC equals the SQP for a 100% range. An example is provided as follows.
Risk
SQP for a 10% NPA range*
Environmental Issues
$0.2
Third Party/Stakeholder
$0.1
Traffic management
$0.3
Quality control
$0.3
Safety
$0.1
Design
$0.2
Project management
$0.2
Total SQP for a 10% non-price attribute range
$1.4 million
* Note the corresponding MRC = SQP for a 100% NPA range = $1.4 million x 10 = $14 million.
To ascertain the worst case value of each risk, consider items such as:
additional full time staff to manage the crisis
extra legal fees, time delay costs and traffic delay costs
serious accidents involving the public or workers
poor quality of work will require extra construction or maintenance
poor public relations will require extra consultation and communication.
Once the MRC has been determined, the tendering authority must analyse the sensitivity of the SQPs obtained for specific grade
margins. For example, the difference in non-price attribute grades between two tenders is 10% and the resultant SQP is $1.4 million,
does this represent the amount that the client is willing to pay to secure such a tender? If it does not, revisit the risks and the
associated worst case values until an appropriate SQP is obtained. The MRC cannot be altered following the close of tenders.
The process also requires that tender evaluation marking forms consider the risks identified in this analysis and be aligned
with these risks, e.g. given that traffic management has been assigned a $0.3 million value for the worst-case scenario, 21% of the
MRC, specific references to traffic management should be added to the relevant experience, track record, technical skills and
methodology non-price attributes, and their combined weighting should approximate 21%.
No limitation is placed on the size of the MRC under the PQM special tender evaluation method.
The RFT for PQM special is required to disclose: the risks, SQP for a nominal 10% range in non-price attributes for each risk, and
the total for a nominal 10% range in non-price attribute (as shown in the above table). This disclosure will help convey the specific
risk issues that the Client wishes a supplier to focus on in their tender submission.
SQP calculation
PQM special translates non-price attribute grades to a SQP-based on a predetermined risk value as shown below.
Risk value ($)
SQP deducted from
B’s tender price
SQP deducted from
A’s tender price
MRC
A
B
$C
NPA grade (%)
0%
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C
B
A
100%
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NZ Transport Agency’s Contract procedures manual SM021
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Using the non-price attribute grade, the corresponding risk value is calculated based on the MRC, as determined prior to the close of
tenders. The SQP is then calculated by using the lowest risk value as the zero benchmark.
SQP ‘sanity check’
A ‘sanity check’ of each tender’s SQP must be undertaken to confirm that the SQP is reasonable and representative. A detailed
check may be done by going through the list of risks given in the RFT. For each tender, examine how well each tenderer handles
each risk in their tender submission, allocate an appropriate risk value, and compare the resultant SQP with the SQP from the nonprice attribute evaluation.
If the TET is not satisfied with the SQP as calculated, they may replace the SQP with an adjusted figure but must clearly record all
changes and provide justification for each change. Such adjustments should be used to refine the SQP determined through the nonprice attribute assessment. The SQP for each tenderer must be finalised before the opening of the price envelope.
Example calculation using PQM special
For a physical works contract with the following basic data: non-price attribute = track record (30%), resources (20%), methodology
(50%); and the predetermined MRC is $15 million.
Weighting
Non-price attribute
Tender A
Tender B
Tender C
30%
Track Record
80
80
50
20%
Resources
80
90
70
50%
Methodology
90
80
70
85.0
82.0
64.0
$12.75M
$12.3M
$9.6M
Non-price attribute weighted sum (%)
Risk value ($)*
Lowest risk value ($)
$9.6M
SQP ($)
$3.15M
$2.7M
$0.00
$30.0
$29.0
$28.0
$26.85M
$26.3M
$28.0M
Tender price **
Adjusted evaluation price
* Risk value ($) for tender A = non-price attribute grade x MRC /100 = 85 x $15 million /100
Preferred tenderer
= $12.75 million
**Remove any amount fixed by the tendering authority from the submitted tender prices.
Note that $3.15 million is the maximum differential price that the client is willing to pay to secure the highest quality tender (A)
compared with the lowest quality tender (C).
Alternative tenders are evaluated in the same way as that shown in the example calculation for PQM simple.
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