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Line-by-Line Tender Evaluation
Preamble
Tupaia advocates a Line-By-Line tender evaluation process in determining the awarding of contracts.
This results in several Contracts emanating from a single Tender. This is done for several reasons –
primarily, awarding the entire tender to one supplier will almost always result in paying higher costs
and thus achieving poor value-for-money.
The alternative to line-by-line evaluation is awarding the entire tender to a single bidder or
awarding the tender in ‘lots’.
Often, Tenders are awarded by ‘Lots’. In those tenders, all lines are divided into two or three ‘Lots’
and suppliers are required to bid on an entire lot in order to be eligible. To place a bid on a lot, the
supplier must be able to supply >80% or >90% (sometimes even 100%) of the item lines in the lot
and then a single contract is awarded for that lot. This system is deeply flawed; few suppliers are
able to bid on all the lots, as they are unable to supply all lines in most lots. Further, those suppliers
who are able to bid on the lots in some cases are sometimes able to provide only just above the 90%
threshold mark, meaning that nearly 10% of items have to be re-tendered anyway.
The ‘lot’ process results in poor value-for-money – most companies only provide competitive prices
across a limited range of items. Larger companies are competitive across a wider range of products
but even they are unable to provide the cheapest prices for all lines. Some niche suppliers specialise
in providing high-quality, low cost products for smaller product ranges, such as eyedrops or
injectables; tendering by lot excludes them from bidding entirely.
‘Lot’ tendering also increases the risk of widespread stock-outs, if the single supplier who wins the
contract does not perform strongly. This has been the case in some countries, where individual
suppliers have been awarded all item lines but then run into problems meeting their contract terms.
Line by line evaluation removes many of these risks
In line-by-line evaluation, every item line on the tender (this can be several hundred lines) is
awarded to the cheapest bidder for that item. Typically, this means that several companies are
awarded contracts and you achieve the best value-for-money on every single line.
Line-by-line evaluation can also help ensure Quality Assurance is maintained, without paying
substantially higher prices. This is complicated – basically though, you may have decided to exclude a
particular manufacturer or product, based on previous performance in your country, or based on
information you have received from other countries or procurement agencies. Suppliers generally
bid with items from dozens of manufacturers and if a supplier has included a single item from a
banned manufacturer in their bid, this can cause their entire bid to be rejected. Line-by-line
evaluation allows you to remove this line item from their bid but still assess the rest of their tender.
It allows a far more nuanced and targeted approach to Quality Assurance than blanket bans on large,
otherwise reputable suppliers.
Using modern software, line-by-line evaluation can be completed very quickly – usually at least as
quickly as awarding an entire lot to a single bidder.
Cheapest is not always best – each line does not necessarily go to the lowest bidder!
Most commonly, each line is simply awarded to the lowest bidder on the item – but not always.
There are several reasons to award some lines to a ‘non-cheapest’ bidder.
A Procurement Evaluation Committee can apply a range of criteria to ensure it will receive high-
quality medicines within the agreed time period. Criteria might include lead times, a desire to source
the same brand across a product range (e.g. with sutures or IV fluids) or to ensure bioequivalence
(e.g. with warfarin). Some manufacturers may have been excluded from the bidding process after
bid opening and these line items must not be counted. Prior performance is also taken into account
on each item; where a company has performed strongly (or weakly) in the past and there is a
negligible difference in quoted prices, it is acceptable to choose the slightly higher bid if appropriate.
Other countries have applied a rule that if bids from two suppliers on a line item are priced within
5% of each other, the procurement agency can use its discretion in awarding that line. This
discretion can be used to ‘balance’ out the Purchase Orders, so that several suppliers get awarded a
higher number of line items. This modest discretionary is not currently used at SAMES however.
All instances of ‘non-lowest bid selection’ must be noted and a complete summary of these
instances (and reasons) stored in the Tender File, as well as electronically.
It is also strongly advisable that a ‘minimum contract value’ – say, USD $50,000 – is outlined in the
tender documentation. This says that any bidder being awarded lines that do not add up to $50,000
is not awarded any contract and ‘their’ lines are re-allocated to the next best bidder. This eliminates
very small contracts being awarded, which suppliers are unlikely to accept and which become
inefficient to manage.
There is no single formula for how many companies you would expect to award contracts to,
following a large tender. Typically though, we would hope to see a minimum of 4 (four) companies
receiving contracts from tenders over the value of USD$1,000,000. This is likely to result in
substantial savings.
Case Study
The charts below show increases in medicines availability and savings achieved after line-by-line
bid evaluation was introduced in one south-east Asian country last year. Across four tenders, we
were able to achieve USD$1,280,000 in savings.
Procedure
1. The Procurement Evaluation Committee should set aside a suitable period of time to
undertake the line-by-line selection process. A total of two days should be allocated to the
task but it is unlikely to take that long. The process can take 5 to 6 hours for 400+ items but
the Committee may elect to do this over several sessions. An external oversight auditor
should be invited to this important meeting
2. The Committee should meet at a central location, with full access to the electronic Inventory
System. A data projector may be used to display the entire tender on a large screen for all
members to view simultaneously. One person is selected to operate the computer system;
another member will hold the ‘Supplier Previous Performance’ summary and cross-check
each item as the Committee moves along. Another person will monitor the list of banned
manufacturers. These people should be nominated before each meeting starts.
3. If there is to be ANY deviation from selecting the cheapest bidder, the selection criteria must
be defined prior to the issuing of the tender. You should develop standard criteria for
approval by an external auditor prior to the advertising and issue of the tender. This may be
done using shared information via regional cooperation. Exclusion criteria may include (but
is not necessarily limited to):
a. ‘Supplier X is not allowed to supply Zinc Oxide Tape, due to poor past performance’
b. ‘Manufacturer X is banned from supplying Zinc Oxide Tape, due to poor past
performance’
c. ‘Manufacturer X is completely excluded from the tender and all bids on their items
will be rejected’
d. ‘Item X is a critical item, running low in supply; supplier X is not allowed to supply
Item X this tender, due to previous slow delivery schedules’
e. Cold-Chain items may not be supplied by supplier X, due to concerns over previous
transport delays from the port-of-origin.
f. All Sutures must be the same brand, come in similar, distinguishable packaging and
must therefore come from the same supplier and manufacturer.
The application of stated criteria must be consistent and the use of the criteria is aimed at
optimising quality, at the most competitive price.
4. Where the lowest bid on a line-item is rejected, the Committee MUST choose the next
lowest bid, unless it has also been excluded and so on.
5. In any instance where the Committee decides not to select a lowest bid, for a reason other
than a pre-established criteria, this needs to be carefully recorded. Common instances of
this include:
a. Where you have elected to use the same brand across a full product range (such as
IV fluids), the cheapest supplier on average for this product range may be selected.
This is done to reduce confusion for clinical staff, who may find it difficult to
distinguish between products, where different branding and packaging is being
used.
b. Where you have elected to continue purchasing a particular brand, due to clinical
bioavailability, this brand may be selected, even if not the cheapest. An example of
this are Coumadin and Marevan brands of warfarin, which cannot be substituted
due to concerns over bioavailability.
c. Where an agreement has been reached with a Division or Health Program to supply
one product, due to ongoing health promotion activities within your country, that
product may be selected even if not the cheapest. An example might be Coartem,
where the national malaria program has produced a broad range of promotional
materials, based on the Coartem brand, already distributed throughout provinces.
Another example might be blood glucose strips, which are specific to a particular
brand.
6. It should always be remembered that it is not your role to achieve the cheapest possible
tender; we are not purchasing petrol! Your role is to procure high quality medicines, within
a reasonable timeframe, at the cheapest possible price. It is the first two elements of that
sentence which take precedence. Only where all other things are equal, should the
Procurement Evaluation Committee then consider pricing.
7. As a guide, previous tenders in other countries have selected a non-cheapest bidder on
approximately 20% of line items, for a wide number of reasons, with a further 1% of items
not being selected from the second-cheapest bidder. This is not a target or a benchmark,
merely a loose indication. If each instance is justified and well documented, there is no onus
on you to meet a particular figure.
8. Recording: Every instance of non-lowest bid selection must be recorded in two ways. Firstly,
your electronic LMIS should have the capacity for the user to enter comments about each
bid selection; in each instance, the Procurement Evaluation Committee member nominated
to use the computer during the meeting should record in the Comments section the exact
reason (or reasons) for why the lowest bid was excluded in that case. Secondly, a
spreadsheet detailing each item should be maintained. This spreadsheet should be stored
electronically by the Manager of Procurement, then printed and stored in the Tender File.
9. At the end of the selection process, the summary of non-lowest bid selections should be
edited to include the overall value of non-cheapest items and the difference between that
and what would have been paid if the cheapest bidder had been selected. This difference
should be expressed as a percentage of the total of the tender, along with the percentage of
line items where the second-lowest bid was not selected.
10. This final summary, with each item detailed, the non-lowest bid selection summary and an
overall summary of contracts to be awarded to each company (Annex IV) is printed and
prepared for external audit, along with the overall total value of the Tender.
mSupply© Processes
This is the procedure to follow if you are using mSupply as your LMIS. For other software, contact
your provider.
1. Once the bids for
every supplier have
been entered, to
select a bid for each
line, click on the
‘Items and Compare
Prices’ tab
Each line should have
‘Not Chosen’ in the
Preferred Supplier
column before you
start.
2. Double click on the first item to open it up for selection.
3. The item will
open in a pop-
up screen. In
this case, we
are choosing a
supplier for
Amoxicillin
tablet 500mg.
The cheapest
bid will appear
in blue; the
system
determines the
cheapest
bidder by
converting all currencies to USD and adjusting the cost, to make it equivalent to one unit. You do not
have to do any more calculations, even if companies have submitted bids for different pack sizes.
The most important column is the ‘Adjusted Cost’ figure. By clicking at the top of this column, we
can sort all the bids from cheapest to most expensive.
In most cases, we can simply check the box next to the cheapest bid as the selected supplier but in
some cases, as outlined above, we will need to change it.
Select your supplier for this line item in the ‘Pref’ column.
Note: You may also wish to select the check box for ‘disqualified’; this will stop you from being
able to select that as the preferred bidder later on but it is not necessary to do this in every case.
6. In the ‘notes’ section, enter the reason why the lowest bid was not selected. Remember to also
enter the item (and the reason) into the summary spreadsheet being prepared (Annex IV).
7. If you wish to
review the details
of a bid (such as
the manufacturer
or country of
origin), you can do
this by double-
clicking on the bid
in the screen
above. The
following screen
will appear (right)
and you can look
at more details of
each bid. If you wish, you can also make a comment. When you are finished, click ‘OK’ (or ‘Cancel’, if
you do not wish to save any changes).
8. Go through each item and select your bidder on each one. When you come back to the main list
screen, you will see your selected suppliers in the ‘Preferred Supplier’ column.
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