Whether you are soliciting a particular type of service for the first time or looking to replace an existing vendor, your evaluation of proposals should be a robust process that considers all the factors unique to you and positions you to obtain optimum value from the contract. Here is a step by step guide to walk you through the process of evaluating proposals.

For illustrative purposes only, let's assume you need an auditor. Here is what you do once you receive the proposals:

• Confirm that minimum requirements have been met

If you outlined baseline requirements in your Request For Proposal (RFP), you could save a lot of time in your evaluation by performing an initial high level review to weed out the proposals which do not make the cut.

An example of a baseline requirement could be that 'any firm submitting a proposal should be a member in good standing with the AICPA or the applicable body in your case. This first step is essential to creating a shortlist of offerors whose proposals will go through an in-depth evaluation. It will focus the efforts of the evaluation team on the proposals which have a realistic chance of selection.

The Corporate Information volume of the proposal is a good starting point for this exercise as it presents general high-level information about the offeror, however, it should not be considered in isolation.

• Assemble the evaluation team 

Your evaluation team should include:

• An odd number of individuals who can reach a decision based on a clear majority vote
• Where possible a non-voting advisor(s) with experience in dealing with auditors or the particular area for which you are seeking a vendor who can share useful insights and lessons learned during consensus discussions
• Individuals with the relevant technical background in accounting, audit, and any other relevant areas and the appropriate level of understanding of the unique requirements of your business
• Individuals who have certified the fact that they do not have personal, relational, or financial interests either directly or indirectly with the offerors.

The evaluation criteria outlined in the RFP is really the basis for evaluating the proposals. Offerors craft their proposals to suit the requirements outlined in the RFP, therefore a poorly designed RFP may impact your overall ability to select a suitable vendor.

The evaluation team needs to get familiar with the RFP and in particular the requirements and evaluation criteria. This will enable them to identify the objective criteria against which each proposal will be measured. Evaluation criteria typically cover Technical approach, Capabilities, Experience, and Project team composition.

3. Review the technical volume

• Examine each proposal

It is imperative to review each proposal in its entirety before beginning the evaluation to have a holistic view of the different aspects of the offer. For example, in reviewing the section on capabilities of the offeror, it will be helpful to know if there is also a section or aspect of the proposal which supports their claim i.e. where they discuss any tools, software used to enhance their capabilities.

If you allowed potential offerors to ask questions prior to submitting their proposals, ensure you review the entire list of questions and the answers provided. This will provide context for any deviations from the RFP requirements by offerors.

• Assess each proposal against the predetermined criteria. 

Too often, proposal evaluators are tempted to compare proposals against each other rather than against the established criteria. The danger with this is the proposal against which all others are measured becomes the standard and any errors in judgment in reviewing the ‘standard’ proposal are reflected in subsequent evaluations.

This bias can be avoided if evaluators familiarize themselves with the RFP, Questions & Answers, and all other documentation that accompanied the RFP.

• Determine Scoring Matrix

Identify baseline scores and agree on an incremental score. You can think of the baseline score as the average starting score which levels the playing field and gives all the offerors a fair chance. The baseline score assumes that the offeror can meet the basic requirements of the contract. You can also think of the incremental score as the number by which you increase or lower the scores of each offeror to reflect their strengths and weaknesses.

For example, assuming a baseline score of 70 (out of 100) and an incremental score of 5, an offeror with 4 strengths and 3 weakness will end up with an overall score of 75 {70 + (5*4) - (5*3)}. 

Generally, the higher the baseline score, the lower the incremental score needs to be. If your baseline score is 80 and you maintain an incremental score of 5, then offerors are only a net of 4 strengths aways from scoring 100. In such a case, you may want to lower the incremental score to 3 to give room for scoring. 

Further, if you operate in an environment where procurement activities can be probed and are subject to litigation, this helps you avoid the situation where an extremely high scoring offeror was not awarded the contract.

• Identify Strengths and Weaknesses

Scores should be assigned only for unique strengths or weaknesses. For example, all audit teams usually perform a high-level review of IT General Controls to gain comfort over the integrity of the systems which support financial reporting. This can usually be performed by experienced auditors with an above-average knowledge of financial systems without necessarily needing to have highly specialized IT skills. However, if an offeror were to have on their team an IT auditor to specifically test ITGCs, then this can be a strength. 

Conversely, if an offeror does not propose the use of a quality review partner when this is required and proposed by all other offerors, this can be considered a weakness. 

In general, scores should also be assigned on a consistent basis so that scores are not awarded for strengths common to all offerors and deducted for weaknesses common to all offerors.

Below is a guide for determining scores that can be modified to suit your specific needs. It is based on a baseline score of 70 and an incremental score of 5 (as discussed above).

Scoring should be done for each sub-factor defined in the technical proposal. Sub-factors which are typically required in the RFP are e.g. technical approach, capabilities, experience etc. The sub-factor scores should then be averaged to arrive at the overall technical score.

4. Document technical review results

For each offeror, document the strengths and weaknesses identified which support the scores. This is necessary as it serves as a record or reference point for the final award decision especially if such a decision is called into question through a probe or audit in the future.

The documentation must be factually supported i.e. can be traced to or inferred from information in the proposal. This helps to ensure that biases or prior experiences with the offerors do not cloud the judgment of the evaluators. Past experience with the offers can be considered separately when evaluating past performance.

The documentation should also include any clarifications or additional information needed from the offeror necessary to make a decision.

5. Consensus meeting

The evaluators should meet and openly discuss their scores for each offeror and the basis for their scores. The purpose of this meeting will be to reach a consensus on the most suitable offeror.

Depending on the size of your business, the meeting should ideally be moderated by a neutral party preferably within the procurement function who can skillfully guide the discussion towards a consensus.

It is not unusual for evaluators to update their scores at this stage based on additional insights gained during the discussion. Where additional information is needed from the offerors to reach a consensus, the meeting can be adjourned and a request can be made to the shortlisted offerors to either provide the information in an updated proposal or meet the evaluation team together with the moderator and directly answer their questions.

A consensus reached at this stage will only be based on the technical volume of the proposal. Other considerations such as past performance on similar scope of work and pricing will need to be considered before a final decision is made.

6. Review and confirm past performance volume

The procurement function should ideally survey the references provided by the offerors in the proposal in respect of their past experience or performance relevant to the statement of work. 

The purpose of soliciting this feedback is to corroborate the information presented by the offerors in the past experience volume of the proposal. 

The feedback can also provide additional insights around key factors that may not be apparent in the RFP e.g. how the offeror manages cost to prevent overruns; how well they manage deadlines and or more importantly the overall perceived value that the offerors’ brought to the business.

You can use the scoring matrix to assign scores for unique strengths and weaknesses identified and arrive at an overall average score for past performance.

7. Review pricing or financial volume

Having narrowed down the list of offerors to only a few viable ones based on technical proposition and past performance, the final determining factor will be the price. This will of course be benchmarked by the budgetary allocation.

The goal here is not to pay the lowest price but rather the price that offers the most value considering all other factors. Sometimes this might mean creating some wiggle room within the budget allocation, or negotiating the terms to arrive at a price that is acceptable to both parties.  

Having considered all the relevant information - technical proposal, past performance, financial proposal and corporate information, you should be able to narrow down the short list of viable few offerors if the best choice is still not clear at this stage and make a final decision.