SVW Willingness to Pay (WTP): an application for contracting authorities in public procurements

Most procurements are conducted with award criteria that concern both price and quality. How can contracting authorities ensure that the relationship between price and quality actually ends up reflecting what they want?

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In all competitions above the EEA threshold values, the award criteria, with an associated weighting, must be indicated in the announcement or the tender specification. This may often be the only information that a contracting authority provides as to the relationship between price and quality. E.g., the price may have been given a weighting of 40% and quality a weighting of 60%. Then, evidently, it is quality that will be of greatest importance during this evaluation.

However, there is no certainty that the nominal weight given in the tender specification reflects the actual weight of the award criterion. This depends on the evaluation method, i.e. how the contracting authority chooses to evaluate the award criteria, usually in the form of a numerical score. E.g., if the evaluation is conducted so that very small price differences will give a head start of one point with regard to pricing, the price criterion will be of greater importance than when it takes a large price difference to achieve a one-point head start. In this manner, the weighting of the award criteria may be by means of the evaluation method.

If the contracting authority uses a relative method, the contracting authority should calculate, in advance, what impact the method will have, and how much the method will affect the willingness to pay for quality differences. After an evaluation has been carried out, the contracting authority should furthermore check that the evaluation method provides a result that reflects the contracting authority’s willingness to pay for quality.

We have created a calculator that allows contracting authorities to test the outcome of evaluation models and to calculate willingness to pay. This is done by filling in the award criteria and any sub-criteria and by calculating the willingness to pay based on what is assumed to be the lowest offer. By making such calculations, you as the contracting authority may uncover weaknesses in the evaluation method, e.g., that you pay a disproportionate amount for certain characteristics of the contract object, delivery time or environmental aspects that you, as the contracting authority, have chosen to emphasise in the award evaluation.

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In our opinion, decisive for successful procurements is that the contracting authority avoids, as much as is possible, the arbitrary effects of the evaluation method, but rather ensures that the method safeguards the actual willingness to pay for quality differences.