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Construction Good-To-Knows: Basics of Price v Quality  

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Our Clients frequently ask us about the ratio of Price to Quality when setting out tenders.  This seemingly innocent question is the cause of much debate and can lead to much confusion and over-complication in marking schemes.  This article aims to demystify and simplify the topic to provide a good starting point for thinking about Price v Quality.  

The Starting Point  

We all know that the best value is not necessarily the cheapest, and so, the aim of any procurement process is to determine “the most economically advantageous tender” or the “MEAT”.  This involves scoring price and quality, and a good starting point for the ratio between them is BSI’s Code of Practice for Construction procurement policies, strategies and procedures (BS 8534:2011) which in respect of construction work includes a table of indicative ranges as follows: 

Type of project  Consultants  Contractors 
Feasibility Studies   80/20 to 90/10   
Innovative Projects   70/30 to 85/15  20/80 to 40/60 
Complex Projects   60/40 to 80/20  15/85 to 35/65 
Straightforward Projects   30/70 to 60/40  10/90 to 25/75 
Repeat Projects   10/90 to 30/70  5/95 to 10/90 

 

This leaves a few unanswered questions, firstly how to select which range applies to a given project and secondly, once you have the ratio how to allocate the points to various different questions. 

Moving on – What’s it worth to you?  

At the stage when the quality criteria of a tender are being finalised, we should hopefully have a good idea of the estimated cost.  This means we can proportion a value to each point that will be awarded, for a €10m project with an 80/20 cost/quality split the quality aspect is worth a rough equivalent value of €2.5m.  Approximately, this means that a project scoring full quality marks will have the overall best score, up to a price of around €2.5m more than a project which scores no quality marks.  So, the question then becomes what would you pay €2.5m more for?  These are the things that should be asked for in the quality criteria.  

If the answer is nothing, but you have a number of minimum things you want the Contractor to have, then those should be pass/fail criteria and the quality aspect reduced or removed.  Accordingly, simple projects like those for replacing fixtures or maintenance, place a lower emphasis on quality and a higher emphasis on cost.  This is only logical, as these types of projects do not require extensive consideration of technical factors, the experience of staff or innovation.   

The answer might be different where a project requires more technical input, has aesthetic elements or other potential benefits such as increased efficiency.  For example, you might be willing to accept a higher price if it meant that the maintenance would be lower, or the building provided cheaper to run.  The benefits may not necessarily be financial, you may be willing to accept a higher price for example if other goals of your organisation are achieved, like for example lower carbon solutions or community engagement.   

Using this logic, you can then allocate the overall ratio and then refine the allocation to particular questions in the criteria to align with the goals of the project or contracting authority be they financial or otherwise.    

What can Quigg Golden do for you?  

Clearly, this is just a starting point, and there is a lot more to consider when considering quality criteria.  Quigg Golden are public procurement experts.  We often collaborate with public sector bodies to allow them to buy works, goods and services in a manner that achieves value for money and complies with EU and national law.  Our legal experience allows us to deliver added value through our ability to draft bespoke contracts or amend standard contract forms and advise on both procurement and contractual matters.  

We understand that in an era of increasing budgetary restrictions that value for money needs to be at the heart of all public procurement processes and we can be instrumental in developing public procurement solutions that address economic concerns in the short and long term – advising on how to proportion your quality/price ratio is only a small part of the services we are able to provide.  We can be proactive in ensuring that all tender and contract documentation is drafted to a high standard, and we can react quickly if any legal issues arise either pre- or post-award of contract. 

Should you have any questions on the contents of this article, or if our services are of interest, please do not hesitate to contact us.  

 

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