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.