Monthly Archives: August 2014

New EU Directives – Reasons to be cheerful #5

MEATing a need

Currently, there is much frustration in the marketplace when cost:quality ratios seem inequitable to the “product” being purchased.  For example, if you are buying professional services – is it more important to achieve the lowest day rate (with no guarantee of quality), or is it more important to measure both cost & quality to ensure that overall value is being achieved?  This same principle applies to many works & services and currently there is no overbearing statement in relation to Public Sector Procurement that says “look at the total life cycle cost, not just the day rate that you are measuring for the purpose of this paper exercise”.  Controversial?

Not really.  It is interesting to note that Building report the main reason for T&Ts legal claim on the project management & design framework was as a result of “uneconomically low tenders from rival bidders” where bidders were aware that only one region (South East) in the pricing matrix was being tested as part of the cost evaluation.  Now clearly, this challenge is at a very early stage and it will be interesting to understand more fully the nuances of the case…..but in the meantime, we can consider what elements the new directives contain to prevent such issues taking place.

Currently, there is an option when procuring a contract for “lowest price” or “most economically advantageous tender” but the new directives states that:-

The only award criterion available is MEAT

Which will, in essence, mean that there will always have to be an element of quality in any tendering exercise. It’s not as simple as it initially sounds though because the directives say:

  1. You can use MEAT by looking at price “best price:quality ratio”
  2. You can use MEAT by looking at cost “lifecycle cost of product/service”

Are these changes going to take some practical working through?  Option 1 should be relatively simple for those who are used to price:quality tender processes but Option 2 is currently very vague in its actual meaning – certainly something that will need practical work through.  What is clear however, is that if some form of ‘lifecycle’ costing had been applied to a pan government framework tender, it would have become apparent very quickly whether or not costs provided for the South East pricing modules were skewing the overall pricing matrices.  So, even though looking at the total ‘cost’ of a service may take more planning front end, the overarching benefits may be more than worthwhile in the long run.

We will be providing more information on the practical implementation of this when the Directives have been transposed.