Competitions awarded based on factors other than lowest price are typically referred to as “Best Value.” These competitions are straightforward to document, as long as you’re aware of the risk areas! In this webinar, we will talk through the essential elements required for an adequate and well-documented competition. We will use SpendLogic to illustrate concepts, but the information can be applied to any documentation process.
Hi, welcome back to another YouTube webinar here. I’m Patrick Mathern with SpendLogic. I’m the founder of the company. And I am here to talk to you today about Best Value Competitions. So, the first thing that I’m going to do, I’m going to walk through some different types of competition, and then I’m going to get into the essentials of best value. I’m going to walk you through some examples here on the screen, and I’m going to get into SpendLogic and show you exactly how we deal with some of the shortfalls that people run into a lot of times.
These shortfalls are what result in DCMA findings in CPSRs. So, let’s get right into it. And actually, for anybody that has not come to one of these before, if you provide any questions or anything in the chat box, I’ll check on those at the end. If you can’t get through to the chat box, you can send us emails anytime at [email protected].
So, first of all, at SpendLogic, what is it? Who are we? What do we do? Think of us as software that basically is TurboTax for price analysis, commercial item determinations, and source justifications.
You provide information, we provide a format and a completed report at the end. So, that’s really who we are. We do tools, services, as well as training on any of those items. So, if you have anything in that area that you need help with, we’d be more than happy to take that on. Again, reach out to us at [email protected]. So, what we provide in SpendLogic for competition is the ability to compete on a single part or multiple parts.
You can have as many suppliers and bidders as you’d like. You can have low-price or best value, and it can be items, or services, or a mix if you want to do multiple awards. If you can think of a way to compete it, then we can support it. And really the value that you’re going to get out of SpendLogic is making sure that you avoid a lot of the pitfalls that people face and the findings that they face in CPSRs.
So, if you use SpendLogic, you know, like a lot of our clients are finding, you’re going to get through your CPSR with few or no findings whatsoever in the areas that we cover. So, of the types of competition, really there’s two that we typically talk about in government contracting. You’ve got low price, technically acceptable.
That’s where you award to whoever came in the cheapest or the lowest price, I shouldn’t say cheapest, I’d suppose, and you have best value. So, best value is when you are awarding on something other than price. So, price needs to be taken into account, and it should be a “substantial factor” in the determination, but it’s not the only factor.
Maybe you’ve got quality, you’ve got past delivery, maybe you have a supplier scorecard that you want to take into consideration. That’s really what we’re talking about today. So, anytime that you do a competition, that isn’t just given to the lowest price bidder, you’re talking about “best value.” So, here’s the basics of best value, okay? I’m going to try to really condense the methodology for those of you that aren’t familiar with it into some very simple steps, overly simple, I would say.
So, basically, you’re awarding using factors other than price. And what you see on the screen behind me is a pie chart, okay? And in this particular best value award, this is how we’ve decided to split up the award. So, basically, if an award is based on 100% or a pie as 100%, my award criteria, in this case, I’ve said 50% of the award criteria is going to be based on price, okay?
The next 25% are schedule. I’m going counterclockwise. No, I’m going clockwise here. Technical capabilities are the next, 20%, and then delivery ratings factor in also at a weight of about 5%. These are called your weights. These are how you’re going to weight your scoring. So, the next thing that you do is you assign bidders points for each of those areas.
So, in this particular case, I’ve got Acme Co., and these are the points that I awarded to them. I’m going to get into the details of what these points mean, you know, when I show you the system itself. But, you know, suffice it to say, for now, these are the awarded points for each of these areas. My technical evaluation team looked at it and said, “Okay, for price, they get an eight, schedule, they scored six, technical capabilities, they get a five, and delivery ratings, they get an eight.”
So, these are 0 to 10 scale points that they get. The last thing that we do, and we do this for each and every bidder, is we multiply the first pie chart of the weights, the percentages, times the score that we gave them, and then we add them up and get a total score. So, what you see on the screen, the numbers for each of these pieces of the pie represents the points that we gave them times that score from the very beginning.
And, hopefully, if you add those up, you get a total score of 6.1. That’s what Acme Co. scored in this particular case. You would then compare all of your bidders, the total scores after you’ve added them all up, you compare those across the board, and whoever got the highest score should theoretically get the award.
That’s best value in a nutshell. Not overly complex, but it does take a little bit of work, and there are some pitfalls that you need to be aware of. We’re going to go through those. So, some common mistakes that you’re going to see in best value that typically lead to some sort of a finding in the CPSR. So, first of all, if you haven’t watched our LPTA video, go ahead to our website and check it out. All of the shortfalls that are found there also apply here.
So, there’s a whole bunch of things, just very block-and-tackle-type stuff related to competition that need to be included. You know, make sure that you call it a competition. It’s in the RFQ that you announce it as such, you know. There’s certain things that we cover in that video. Go check that out if you have time. Also, really specific to best value are the other two. Number one, price is not a significant factor.
So, for whatever reason, in the best value criteria, they either didn’t include price as a factor, they solely awarded it based on schedule or other considerations, or number two, I guess number three, in this case, they game the system so that the incumbent wins. And there’s lots of ways, as you can imagine, to game the system for a best value, and it’s very, very common.
In fact, we worked with a client recently that doesn’t allow any best value awards across the company because they had such a problem with gaming the system amongst their buyers. That’s also not a great way to go. And actually, now that they work with us at SpendLogic, they’ve actually allowed those to happen again. But gaming the system is a real issue.
If your incumbent is always winning, even though they have a higher price, your CPSR team is going to see through it and figure out, you know, how you’re gaming the system and give you a finding for that. So, here’s some steps that you can take today. Now, this is outside of SpendLogic, you know. You can use SpendLogic or not.
You can implement these no matter what system you use. So, first of all, you can require that price is greater than or equal to 20% of the score weight. So, in the FAR, it notes that price must be a “significant factor” in award, okay? And across the industry this has, you know, been tested through CPSRs, using a weight of 20% or greater is going to get you past that stress test of, you know, is it a significant factor?
Anything less than 20% is going to cause scrutiny. I would even say, you know, if you can bump that to 30% or 40%, the higher you get, the better off you’re going to be. So, you know, requiring that price is a “significant factor” is going to get you a long ways. Number two, use an objective calculation approach to price. And this is really important, right?
So, what we’ve seen in some cases is the lowest price and our clients gets a score of 10, so they get all the points. And anybody that has a little bit higher price or whatever gets a range from zero to nine. And, you know, it doesn’t seem like there’s a lot of logic into the space between. So, if one of my bidders is twice as expensive, in theory, they should get twice the number of points.
Just make sure that you use some sort of a calculation that takes that into account. SpendLogic automates that so that you don’t have to think through that. We’ve got a special algorithm that we use that makes sure that, you know, the bidders are awarded points based on how far apart they are, not just the highest bid gets 0, lowest bid gets 10, and everybody else gets 5.
We have a very objective approach to scoring price and best value. Steps to take today regarding gaming the system. Number one, set forth your categories in your RFP. So, you don’t have to show the weights of those categories, you know, the weights that are included in your pie, but you should show, in descending order, what is most important versus what’s least important.
That’s going to help ensure that your buyers have some sort of a system ahead of time that they don’t change the rankings after the fact to make sure that somebody else is going to win. If in a CPSR you can show that you had the priority rankings for your scoring criteria set out in the RFP, it gives you a lot more ammunition to have those conversations down the road should the higher-price incumbent actually win.
Next, use a narrow scoring criteria. So, 0 to 10, I say is ideal, okay? Here is how this goes. Remember back to the pie chart where you had to identify the number of points, you had to assign points. I think price was eight in one of them. If you have a 0 to 100 scale, which we see, using a 0 to 100 scale has a lot of very fine differentiating points in there.
And what we see is buyers that assign, you know, the incumbent 67 points while the other, you know, somebody else that has something very, very similar, one of the other bidders, maybe they get 43. Our first question to those buyers when we’re reviewing packages is always, okay, you gave the incumbent 67, why didn’t they get 68?
Or why didn’t they get, you know, 66 or 62? What is it that made you choose that particular number? When you have a 0 to 100 scale, that becomes very difficult. In fact, I would say it’s impossible. I know that a lot of people prefer that 0 to 100 because they think of it as percentages and whatnot, but being able to identify the objective evidence that led to a certain score is nearly impossible for a 0 to 100.
So, right off the bat, if you can use a 0 to 10 scoring scale, you’re going to get a lot further ahead than you are today. And last but not least, require an explanation. So, just as I implied with that 67 score, give me an explanation. How did you use 67? If you have a 0 to 10 with criteria identified for each of those scores, it’s going to make this a lot easier to do.
And SpendLogic requires them to put in an explanation as to why the score was chosen that they did. We give some canned responses and things as well, but really that’s a very easy way to make sure that they don’t game the system. Require that they “tell the story.” If you’re involved in CPSRs, you know that telling the story is really the name of the game.
So, that’s it kind of in a nutshell as far as outside of SpendLogic. What I want to do is bring up a SpendLogic window and show you specifically how we do this in the system itself. Again, it’s not required for you to use SpendLogic in order to be successful in a CPSR, but we do have a lot of success in CPSRs. We just had another client go through CPSR, very successful, didn’t have any questions on price analysis, and this particular client had pages and pages prior to working with SpendLogic.
So, it’s definitely an improvement from what most companies are using. Okay, I’m going to go ahead and drag this over so you can see it. Okay, I’m signed into SpendLogic here, and I have a competitive analysis that I started previously.
I’m going to go ahead and pick it up. I believe this is what we did a couple of weeks ago in the low-price video. So, if you haven’t watched that, go ahead and check it out. And I’m going to go ahead and change this now. It’s all been set forth. I’ve already filled in all of my bidders. But if I go into the competition itself, into my Award Criteria, I can now change it to say, instead of a low price, I want to award this on best value, okay?
I’m still going to award it to a single bidder, so it’s a single award. But now I’m going to go ahead and start inputting my scoring criteria. This is not present in LPTA because everything is based on low-priced. So, in this particular case, we have the first criteria is always going to be price. As noted prior, if I try to put something in that’s less than 20% so that I get a “significant impact” on award, it’s going to tell me I have to input something between 20 and 100.
SpendLogic has a lot of these guardrails built in for compliance purposes. So, you know, it saves people from doing something that’s going to hurt them in a CPSR before they actually even do it. So, in this particular case, for simplicity’s sake, I’m going to say that price is worth 50%, and I’m going to add some more scoring criteria.
I can choose Delivery, Quantity, Lead Time, these are hard-coded into the system, or I can choose Other, So, I’ll go with Quality, and I’ll say that that’s worth 25% of the weight. And last but not least, I will show you, let’s say Other, just so you can see what it is. I can type in anything that I want.
This is not a great example, but let me just say Proposal Quality, okay, 25%. This is actually something companies use every once in a while. Don’t know if it’s the best for a best value, but it’s what came to mind first, and I’m not thinking very quickly here today. So, I’m going to use Other and I’m going to use Proposal Quality.
You can see that that showed up here on the screen when I typed it in. So, now I have 100% weights. My pie always has to be 100%. And when I go in, I’ve already input all of my pricing and things. Again, this is a repeat of what I did last time, and I’m just updating it for best value. So, now you see that I’ve got red on my screen for the best value score. In this case, if I click on that red, I have the Scoring Criteria, my two bidders, one of them is Acme.
Let me go back here. So, I’ve got two bidders, Acme Metals and Bacme, so it’s Acme with a B, and then I have 2 part numbers that I’ve input here, abc1234 and Z2 test part number. So, if I click on Acme, it shows me, first of all, that price score has been calculated by SpendLogic. I’ll show you that in the report when we’re finished up here.
Like I noted previously, it does math in the background to make sure that the scores are equally distributed and weighted based on how far apart they are from each other. Moving down the list, if I get to the Quality Score, I’m going to have the opportunity to assign a score. So, let’s say my score is 5.
This particular demo module is set up with a supplier scorecard that corresponds to specific scores in the system. So, in this case, my supplier scorecard for quality, if they’re between 90% and 91.99%, they get a score of 5.
And my rationale would be this is taken from the supplier scorecard, okay? This is just an example of what can be done, and we can change the weightings and change, you know, the way that these scores are set, or, you know, how they correlate to scores and percentages. This is just an example of one way it could be done. As far as Proposal Quality Score goes, when I drop this down, I see that I have a 0 to 10 scale, and this defaults to our typical scoring criteria.
The middle of the scores, 5, is Satisfactory. So, if they hit everything that we had in the RFP and they didn’t leave anything out, then they automatically would get a 5, okay? If you wanted to go above 5 or below 5, then you can get into some of the different levels of improvements or degradations.
So, you can see that 5 is Satisfactory. I also have Satisfactory plus or minus for very slight variations. Next, I have Good for 7, 8, 9. Again, plus and minus for variations. And then top of it is 10. All right. So, if I choose, for instance, 8, Good, then I would just need to provide rationale.
So, met all criteria, and provided additional price history data for other customers. I’m making this up, okay? But you can see that whatever is input by the buyer for their rationale is going to be spit out actually in the written report at the end.
When I click Next, oh, of course, I didn’t include everything on the previous page. But as I continue through, it’s going to provide the opportunity to go to the next bidder and do the same thing. So, Quality, again, I’ll give it a 5, and I’ll use supplier scorecard, oops, and then Proposal Quality Score, I’m going to give it a 5 for Satisfactory. Met RFQ requirements.
Okay. I’m going to click Yes. I’m going to get that same alert. It’s because I skipped a step previously that I really don’t want to go back and do it at this point. It’s from the prior demo. Based on this, it’s going to show me who the winner is, okay? My best value score of 8.25 points is Acme.
And in this particular case, they are actually higher price on one item and lower price on another, but the total score is, oh, let’s see. It’s the same. Bid total is the same, but they had a higher score on some of the award criteria, so they got more points in this particular case. Let’s see if it’ll let me go through here.
Okay, so when I click Next, I can provide an Award Summary. This is particularly useful if I’m awarding to… Let’s say Acme was actually more expensive than Bacme. If I wanted to provide a little award summary or a business case, you know, additional information as to why it makes sense to award to the higher price bidder, then I would have the opportunity to do that.
In this case, I’m just going to skip it. My Risk Check shows that I don’t have any warnings. If I had something in there where I had really old data or I used a citation that was, you know, questionable, then it would show up on the screen and give me opportunity to fix that prior to sending it to compliance. And now I can download my report. So, if I download it, I’ll bring it up on the screen.
Okay. Now you can see the completed report. So, as I go through this, I’m not going to spend a whole lot of time on it, but you can see that there’s a lot of information here that we did not plug in. But it also has a repeat of the table, so you’ve got your bidders’ table in there.
It’s got some notes as far as, you know, what was done for each of the line items. But the real magic is in here in the best value calculations. So, it’s going to show how the best value was calculated. It has your inputs, it has your weights. These are the scores that you provided.
These are the pie weights, and then the total score, and it adds it up for you. And then my conclusion shows who I awarded it to. As noted, I can split the award between multiple bidders. If I wanted to, I can override it if there’s a shortage of capacity. There’s lots of different ways to do it. So, really, you know, SpendLogic does a lot of the things that I just talked about.
It keeps you out of the DCMA sites during a CPSR and makes sure that you’re doing best value in a way that is going to be aligned with the requirements of the FAR and with DFARS. So, just to conclude, thank you for watching. I appreciate you taking time out of your day.
If you have any questions for us that you weren’t able to get into the chat box, go ahead and reach out to us at [email protected] any time. If you have cost or price analysis work that you need to outsource, we’re happy to do that for you. If you need a demo license of SpendLogic, go ahead to spendlogic.com and you can click the button.
It’s free, free for you to use forever. Once you decide to grow and bring other users in from throughout your company, then that’s when our pay model kicks in, and we can help you with that as you grow. Don’t forget to click Subscribe, and hopefully, I will see you back here again in the very short future. Thank you all, and talk to you soon. Thanks.