Step 3: Prepare Bid Package
Overview: The key to a successful project is to clearly and concisely communicate project expectations to all bidders. The bid package is the mechanism by which this communication takes place.
Process: Follow the steps below to prepare your bid package. Each step has been described in general terms. The following documents are samples of typical bid package documents. Register to download editable versions of these documents.
- Example Cover Letter
- Example Technical Specifications
- Example Bid Specifications
- Example Bid Evaluation Criteria
Follow These Steps:
Step 1: Project Technical Specifications - Prepare a technical specifications document for the project that addresses the following:
- The purpose of the document
- The scope of work to be performed
- Expectations for staffing and expertise
- Project deliverables
- Expectations for timing / schedule
- Example contract, including minimum insurance requirements and payment terms
Step 2: Project Costing Strategy / Structure - Structure a costing strategy (fixed price, cost plus fixed fee, hourly, etc.) for the project, with consideration to the following:
Fixed Price contracts shift the financial risk almost entirely to the vendor because the vendor is agreeing to complete the scope of work, as written, regardless of any unexpected obstacles that may be encountered. For most REACH projects, the types and number of obstacles that may be encountered will be nearly impossible to predict. Something as seemingly simple as preparing robust study summaries may take 10 hours to several hundred hours depending on the number and types of studies, and the client’s expectations regarding the robustness required. As such, to minimize this risk, fixed price bids can be expected to include at built-in safety factor of up to 30% and/or include provisions for additional fees for performing out-of-scope work. In the case of the latter, disputes arise over interpretations of the scoping documents.
Cost Plus Fixed Fee contracts tend to share the risk equally between the customer and the supplier. Under these arrangements, the customer agrees to pay all the vendor's costs for completing the work (actual labor costs, including an agreed overhead burden, and expenses) plus a fixed fee upon successful completion of the project or as certain milestones are reached. The fee is the company's profit for the project. In order to arrange a cost plus fixed fee contract, the vendor must be willing to open its accounting practices for audit so that normal costs can be verified.
Fixed Hourly Rate contracts tend to be viewed as placing the financial risk entirely on the customer since the vendor is to be paid for all hours worked regardless of productivity. In practice, however, most fixed hourly rate contracts are accompanied by an estimated total cost and it is in the vendor's best interest to stay within that estimate unless there is good justification for exceeding it. In addition, the customer can always choose to withold final payment if they feel the vendor has mismanaged the project, and most vendors understand this. As such, fears against fixed hourly rate projects are often unfounded. However, comparing bids on fixed hourly rate projects has its own special challenges. Consideration must not only be given to the rate(s) being charged, but also to the qualifications of the individuals connected to that rate and to the productivity (output) expected from those individuals. All of these factors will combine to determine the final price of the project. For this reason, it's important that vendors be asked to provide sufficient detail in their bid to aid in a proper comparison between vendors.
Other types of contracts, including combinations of the above, also exist. The specific structure should be tailored to the project. It should be noted, however, that some vendors are only willing to work under certain types of contracts.
Step 3: Bid Specifications - Prepare a bid specifications document that addresses the following:
- Format and content of technical proposal
- Format and content of cost proposal
- Need for a mandatory or voluntary pre-bid meeting or conference call
- Deadline for submitting bids
- Number of copies of each technical and cost proposal to be sent
- Need for sealed bids, with cost proposals sealed separately
- Need for vendor anonymity in technical proposal
- Buyer's Address (shipping & hand delivery)
- Buyer's Administrative & Technical Contacts
- Procedure for submitting & responding to questions
- Grounds for automatic disqualification
Step 4: Bid Evaluation Criteria - Prepare a bid evaluation criteria document that addresses the following:
- Evaluation criteria and weighting/scoring factors for technical proposal
- Evaluation criteria and weighting/scoring factors for cost proposal
- Make-up of review team (no names should be provided)
- Procedure for obtaining clarification of vendor's proposal
- Final selection procedure / criteria
Step 5: Cover Letter - Prepare a cover letter to each pre-qualified vendor on your short list.
Step 6: Solicit Bids - Send bid packages to pre-qualified vendors.
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