Financial evaluation of bids

Financial evaluation of bids is the assessment of the financial or price information in submitted bids against the financial criteria and methodology stated in the solicitation. It determines the evaluated price or financial score that, often together with technical results, is used to select the successful bid or the best overall value.

The term describes a stage of the procurement process, not a type of contract. Related terms include financial proposal, evaluated price, price evaluation, technical evaluation, best value, best overall value and value for money. Buyers in Canada and at NATO both apply the concept, and both expect the method to be stated in the solicitation.

How CanadaBuys describes financial evaluation

CanadaBuys states that federal bids are normally evaluated for technical merit and overall best value. It also states that financial information is assessed separately from technical information, which preserves fairness between bidders. The details are set out on the CanadaBuys page on how bids are evaluated and selected.

CanadaBuys identifies solicitations that use mandatory technical criteria, point-rated technical criteria, or both. The financial result can then feed a best-overall-value calculation. One method it names is the "lowest evaluated price per point", which divides the bid price by the technical points the bid achieved. Under that method, the bid with the lowest result is the one that ranks best.

The two-envelope process

Indigenous Services Canada describes a typical two-envelope process in its tendering guidance. The technical and financial proposals are submitted together but evaluated separately. The technical proposal is assessed first. The financial proposal is considered only after the technically acceptable proposals have been identified.

This sequence means a bid that does not clear the technical stage does not move on to price evaluation. Price is not used to make up for a technical shortfall.

Financial evaluation in NATO solicitations

NATO requires formalized procedures for evaluating bids or proposals, designed to ensure objectivity and nondiscrimination. Its procurement procedure also requires procurement authorities to specify the evaluation methodology and criteria in the solicitation. NATO states on its procurement opportunities page that bids are evaluated case by case by the relevant NATO procuring body.

NATO solicitations commonly identify a separate Financial Proposal. A NATO Joint Warfare Centre solicitation, IFIB-ACT-JWC-24-116, states that its financial evaluation is based on the prices offered in the Financial Proposal. The same solicitation evaluates offers using a weighted value-for-money methodology, so price is one component of the overall result.

What it means for a supplier bidding on Canadian public contracts

Submit the financial proposal exactly as the solicitation requires. That covers pricing information, forms, currency and any other cost information requested. Check that your price can be evaluated under the published formula or weighting. Technical and financial submissions can be assessed separately, so a strong technical response does not cure missing or incorrectly formatted pricing. Failing to provide required financial information or to follow the specified format can affect how your bid is evaluated.

Read the evaluation section of each solicitation closely. It tells you whether price is assessed on its own, divided by technical points, or weighted against other criteria.