The strengths and weaknesses of Score Normalisation

Dec 1

In circumstances where competition in bidding for a major contract is fierce, the need for a robust evaluation model which creates clear separation between bidders. Typically, when it comes to major contracts of $100 million and above, there are only a handful of bidders who can realistically provide the specialist services that the project requires. As such, in each respective market, potential bidders will know who their likely competition will be. They will be able to conduct war gaming exercises to gain the additional 1 or 2 percent that could be the difference between winning and losing.

This desire to win has also driven losing bidders to become far more savvy when it comes to looking for signs of a chink in the amour of an assessment scheme. Any competition in which there is a ridiculously small margin between the winner and the second-place bidder is a prime candidate for an initial review by the lawyers.

The tender review team therefore faces a very real and increasing threat of challenge which can’t be ignored. To be more specific, even if the result is only in the process of being challenged, it puts the entire competition on hold. This will most likely delay the original purpose of the competition in the first place – the delivery of a much-needed product or service by a certain deadline. Furthermore, it almost goes without saying that the financial cost to the project of a successful challenge could be crippling – this adds further pressure to the up-front design of the competition in order to help mitigate the risk of challenge.

The impact of Normalisation in practice: There is a school of thought that supports the ‘normalisation of scores’. Using this approach, the tender that scores highest in the evaluation has their score inflated to 100%, and the scores of the other tenders are scaled up accordingly (the normalised score for each tender is calculated as: evaluated score / highest score * 100%). Designing the evaluation model to include the normalisation of scores expands the gap between the scores of the best and worst tenders (and all in between), typically resulting in larger differences in score between first and second place. The theory goes that by taking this approach the tender review team will end up with a more significant difference in scores between all the bidders. This results in the debrief process becoming a lot easier and helps reduce the likelihood of challenge.

The counter argument to the use of Normalisation suggests that it effectively mask a poorly designed marking structure that only creates scoring differences at the surface level that can be picked apart.

There are three specific issues with normalising the technical score:

In cases where all the technical scores are low, the winner will be awarded a score that appears to relate to a good technical offering when it’s actually a poor solution. This is misleading all round, and certainly won’t be appreciated by the project sponsors.

On a related note, the carefully considered weightings which were applied to the components of the technical score can then end up losing their desired effect and the outcome can unintentionally be changed.

Ranking paradoxes may occur – for example, the elimination or withdrawal of a tender that has the best technical score but is not an overall contender can change the final ranking, with the hitherto leading bid suddenly losing the top spot for no good reason.

Here at Jaxion Consulting, while we don’t promote the use of Score Normalisation as best practice, when it comes to complex and/or strategic procurements we certainly understand why some of our customers choose to use it, for some of the reasons outlined above. Our expertise in designing competition and criteria schemes, in conjunction with Score Normalisation being an optional feature in awarding the package of work after a robust risk based normalisation process, which unpacks potential and likely under the line costs, means that we can help create the ideal foundation for your procurement in order to help get the best possible outcome. For more information on how we can support you then please get in touch below or take a look at of our website.

Desmond Woodroff

Director

Jaxion Consulting Pty Ltd

MOBILE +61 0430368759

Desmond Woodroff

Terms and Conditions

TERMS AND CONDITIONS FOR PROFESSIONAL SERVICES (AGREEMENT)

1. Professional standard of care – Jaxion shall exercise reasonable skills, care, and diligence in the performance of the Services in accordance with the standards normally exercised by consultants in similar circumstances.

2. Notice of matters likely to change scope of timing of Services –

1) Any amendment, increase or change to the quality, character, or extent of the Services (Variation), whether directed by the Client or determined to be necessary by Jaxion (acting reasonably) must be valued by agreement between the Client and Jaxion (both acting reasonably) or failing agreement, must be reasonably determined by applying Jaxion’s current hourly rates, and a corresponding adjustment made to the Fee.

2) Subject to clause 2 sub clause 3), Jaxion will not be required to perform a Variation unless the Client and Jaxion agree upon the adjustment to the Fee payable by the Client to Jaxion in respect of that Variation.

3) Where the Services are required to be varied due to an event outside of the reasonable control of Jaxion, then Jaxion shall notify the Client of that event and the adjustment to the Fee, or the basis of which Jaxion will calculate the amounts that it may charge the Client.

3. Provide information, documents, and other particular’s – The Client shall, as soon as practicable, make available to Jaxion all information, documents and other particulars relating to the clients’ requirements for the Services.

4. Obtain all necessary approvals - The Client shall, as soon as practicable, arrange for all approvals, authorities, licenses and permits which are required from governmental, municipal, or other responsible authorities for the lawful implementation and completion of the Services. Jaxion is required to perform the Services at such times and in such a manner to facilitate the obtaining of these approvals.

5. Appoint a representative - The Client has appointed the “Client Contact” (Item 4 of the Client Authorisation Form) to act as its representative in relation to the Services. The Client agrees that the Client Contact shall have authority to act on behalf of the Client for all purposes in connection with this Agreement.

6. Give notice of matters likely to change scope or timing of Services - If the Client becomes aware of any matter which may change the scope or timing of the Services or the Services then the Client will give written notice to Jaxion.

7. Special Conditions – Any special conditions set out in the Proposal are in addition to the Standard Terms and Conditions of Contract. Where the special conditions contradict the Standard Terms and Conditions, the special conditions shall apply.

8. Client to make payment - In consideration of the promise by Jaxion to perform the Services, the Client promises to pay to Jaxion the Fee and the Reimbursable Expenses in accordance with the Proposal at the times and in the manner set out therein.

9. Timing of payment – Jaxion does not extend credit without prior agreement. Invoices are payable as noted in the proposal text.

Where noted, reports and deliverables will not be released until payment clears our account. For ad hoc Services done at hourly rate, at or about the end of each month, or after completion of the Services, Jaxion shall give to the Client a tax invoice for the Services performed and for Reimbursable Expenses incurred during the month.

Within 14 days of receipt of the invoice the Client shall make payment of the amount contained therein to Jaxion. If the Client defaults in payment of any invoice when due, the Client shall indemnify the Consultant from and against all costs and disbursements incurred by the Consultant in pursuing the debt including legal costs of a solicitor and own client basis and the Consultant’s collection agency costs.

10. Disputed payment - Within 10 days of having received the invoice mentioned in Clause 9, the Client shall inform Jaxion of any dispute arising from the invoice. Where such a dispute occurs, it must be dealt with in accordance with the provisions of Clause 21. Where Jaxion receives no response from the Client regarding the invoice, the client agrees that the invoice will be deemed to be valid and payment due as outlined in this Agreement.

11. Agreement entered into by agent - Where this Agreement was authorised or entered into by an agent of the Client (or a person purporting to act as an agent of the Client), both the Client and the agent will be jointly and severally liable for payment of the fees and expenses due to Jaxion under this Agreement.

12. Interest on overdue payment - If the Client fails to pay all moneys as and when due, Jaxion shall be entitled to interest at the rate of 18% per annum on all moneys which are not so paid, calculated on daily balances from the date upon which payment became due until the date of payment of the account by the Client.

13. Effect of termination on right to payment - If the engagement of Jaxion is terminated for any reason, Jaxion shall be entitled to payment for the Services carried out and consequential costs and expenses incurred as a result of the termination for the period up to and including the date of termination.

14. Site Access - Jaxion will not arrange permits for site access unless by prior arrangement with the Client. The Client shall, at its own expense, obtain all necessary permits and licences for site access and execution of the Services. Where the timing of site access was agreed with the Client, but access was not available for reasons outside Jaxion’s control, Jaxion reserves the right to charge costs associated with delays and arranging alternate access to the site.

15. Scope of Work – Unless expressly included in the Proposal, Jaxion’s scope of work is understood to be limited to professional services. Similarly, unless expressly included in a Proposal, Jaxion’s scope is understood to be limited to professional services and excludes any legal advice.

16. Rates - The rates described in the Proposal shall be valid for 90 days after the date of submission of the Proposal, or the duration of the Services, whichever is greater. After this period has expired, Jaxion shall review the Rates and reserves the right to adjust them in line with market conditions. Where the Proposal is accepted more than 90 days after original submission of the Proposal, Jaxion reserves the right to review the Rates provided in the Proposal and re-negotiate them with the Client.

17. Goods and Services tax - Except for terms which are defined in this Agreement, capitalised expressions set out in this clause bear the same meaning as those expressions in the A New Tax System (Goods and Services Tax) Act 1999. Unless this Agreement provides otherwise, and subject to this clause, any consideration that may be provided for under the Agreement is exclusive of GST. If a party makes a Taxable Supply in connection with this Agreement for a consideration which represents its Value, then the Recipient of the Taxable Supply must also pay, at the same time and in the same manner as the Value is otherwise payable, the amount of any GST payable in respect of the Taxable Supply. A party’s right to payment under this clause is subject to a valid Tax Invoice being delivered to the Recipient of the Taxable Supply.

To the extent that one party is required to reimburse another party for costs incurred by the other party, those costs do not include any amount in respect of GST for which the other party is entitled to claim an Input Tax Credit.

To the extent that any Consideration payable to a party under this Agreement is determined by reference to another amount, the GST exclusive amount of the other amount must be used.

18. Copyright and use of documents - Copyright in all reports, specifications, bills of quantities, calculations, software, and other documents provided or created by Jaxion in connection with the Services shall remain vested in Jaxion.

The Client shall have a licence to use the documents referred to above for the purpose of completing the Services; however, the client shall not use nor make copies of such documents in connection with any work other than work comprised in the Services unless express approval is given in advance by Jaxion.

19. Patents and trademark - If, during the course of providing the Services, Jaxion develops, discovers or first reduces to practice a concept, product or process which is capable of being patented then such concept, product or process shall be and remain the property of Jaxion and:

1) the Client shall not use, infringe, or otherwise appropriate the same other than for the purpose of the Services without first obtaining the written consent of Jaxion;

2) the Client shall be entitled to a royalty free licence to use the same during the life of the works comprising the Services.

20. Third Party Reliance - No third party may rely upon any Services provided by Jaxion under this Agreement, unless expressly agreed in writing by Jaxion. The Client indemnifies Jaxion from any unlicensed use of, or reliance on, such Services.

21. Time and Delay – if Jaxion becomes aware of any matter that may change or delay the performance of the Services, Jaxion will notify the Client.

Jaxion is entitled to an extension of time if the Services are delayed by a cause beyond the reasonable control of Jaxion, including though not limited to:

1) Any act, default or omission of the Client or its Personnel,

2) A change in Legislative Requirements and or Law taking effect after the date of this Agreement,

3) A Variation.

22. Dispute determination - In the event that any dispute or difference whatsoever shall arise between the Client and Jaxion from the performance or as to the meaning of this Agreement, such dispute or difference shall be submitted to arbitration in accordance with and subject to The Institute of Arbitrators Australian Rules for the Conduct of Commercial Arbitrations.

23. Termination of Services - This Agreement may be terminated by either party on the expiration of one month’s notice given in writing. Upon termination, Jaxion shall be entitled to payment for Services provided in accordance with this Agreement up to an including the date of termination. Where this Agreement is terminated by the Client other than because of default by Jaxion or is terminated by Jaxion because of default by the Client, Jaxion shall be entitled to reimbursement for any expenses incurred by Jaxion in contemplation of Jaxion providing the balance of the Services set out in this Agreement.

24. Limitation of Liability - The provisions of this clause are subject to the provisions of Part V of the Trade Practices Act 1974 as amended, or any other law which cannot be modified, restricted, or excluded by this Agreement. The maximum extent permissible by law, Jaxion’s liability and that of its employees, officers and directors arising from the performance or non-performance of the Services, whether under contract law, tort law or otherwise, shall be limited in the aggregate to the amount of the Services or the cost of rectifying the Services which are the subject of the Services, whichever is lesser, including that is recoverable from Insurance.

Jaxion shall not be liable to the Client for special, consequential, or indirect losses (including loss of profit, loss of business opportunity and payment of liquidated sums or damages under any other agreement).

Jaxion shall be deemed to be discharged from all liability in respect of the Services, whether under contract law, tort law or otherwise, after:

1) 1 year has passed since the completion of the Services;

2) the date of Jaxion’s final invoice; or

3) the termination of this Agreement,

whichever is earliest. After that date, the Client shall not be entitled to commence any claim or action against Jaxion, or Jaxion’s employees, agents, sub-consultants, or sub-contractors in respect to the Services provided.

25. Transfer and assignment - Neither the Client nor Jaxion shall assign or transfer this Agreement without the written consent of the other, which consent shall not be unreasonably withheld.

26. Consultants - Jaxion may engage any sub-consultant without the prior approval of the Client.

27. Insurance – Prior to commencing the Services, Jaxion will effect and maintain the following insurances:

1) A Professional Liability insurance

2) A Public Liability and Indemnity policy for the sum of AUD$20,000,000

3) Workers’ compensation (where required) in the form and amounts required by the relevant workers compensation legislation.

28. Definitions - Unless the context otherwise requires then in construing the Agreement:

1) “Agreement” means the entire contractual agreement between the parties;

2) “Client” means the entity nominated in the Client Authorisation Form.

3) “Client Authorisation Form” means the form by which the Client engages Jaxion to perform the Services (Attachment A), to which these Terms and Conditions of Agreement are located in Annexure A.

4) “Fee” means all the amounts payable by the Client to Jaxion in consideration of the provision of the Services.

5) Jaxion” means the company, person or firm named in the Agreement and includes any other person taken into partnership by that person or firm during this Agreement and includes the surviving members of the partnership.

6) “Client Contact” means the person nominated in the Client Authorisation Form Attachment A.

7) “Proposal” means the proposal document referred to in the Client Authorisation Form issued by Jaxion to the Client containing the offer for the Services.

8) “Services” means the work described in Proposal document in respect of which the Client has engaged Jaxion to provide the Services.

9) “Rates” means the hourly or other unit costs and lump sums used in determination of the cost of the Services described in the Proposal; and

10) “Reimbursable Expenses” means those expenses incurred by Jaxion in the course of, or which are reasonably incidental to, the provision of the Services, which are reimbursable by Jaxion from the Client; and

11) “Services” means those professional Services specifically described in the Proposal.

29. Miscellaneous

1) Unless repugnant to the sense or context, in construing this Agreement:

a) words importing one gender shall mean and include every other gender.

b) words importing the singular number shall mean and include the plural number and vice versa.

c) where the description of a party includes more than one person, covenants on the part of that party herein contained shall bind those persons and every one or more of them jointly and each of them severally.

d) the description of a party herein shall be deemed to include the party described and the personal representatives, successors and assigns of such party and where the benefits and obligations of these presents are capable of assignment, the assigns of such party; and

e) the headings to the clauses of this Agreement shall not affect their construction or interpretation.

2) This Agreement shall be governed by and construed by reference to the law of Western Australia.

3) If any provision or part of a provision of this Agreement is or becomes void, invalid, or unenforceable for any reason, the same shall be severed from this Agreement but the remainder of this Agreement shall continue in full force and effect.

4) This Agreement shall be binding upon each person who has executed it notwithstanding the avoidance invalidity or unenforceability of any part of this Agreement.

5) A reference to any statutory enactment shall include all amendments for the time being in force and any other statute enacted in substitution for and the regulations, by-laws or other orders for the time being made under that statutory enactment.

6) Any demand notice, consent, or other communication to be made or given under this Agreement shall be in writing and signed by the party giving it and shall be served either by delivery, by facsimile, or by prepaid registered mail, to the address of the party as herein specified or at the last known address of such party. All notices shall be deemed to be received on the date of delivery or at the expiration of 48 hours after it has been posted. Notices sent by facsimile shall be deemed to be delivered on the date of transmission.

7) No party to this Agreement shall assign or purport to assign, transfer or convey any of its rights hereunder without the prior written consent of the other party.

8) Any reference to this Agreement herein means and includes the schedules and annexures (if any) to this Agreement, and which are hereby deemed to form part thereof.

9) Unless the context otherwise requires, references in this Agreement to clauses, schedules, or annexures, mean and constitute references to the recitals, clauses, schedules, or annexures (if any) of this Agreement.

10) No party to this Agreement shall be taken to have waived breach of this Agreement by any other party unless such waiver shall be in writing and signed by the party granting the waiver. Such waiver shall only apply to the breach specified therein and shall not constitute a general waiver unless it is expressly defined as a general waiver.

11) This Agreement shall bind each of the parties hereto and their respective personal representatives’ successors and permitted assigns.

12) Where the day or date appointed or specified by this Agreement for the payment of any money is not a business day, the day or last by which payment of that money shall be made shall be deemed to be the next following business day.

13) Notwithstanding anything said or written prior to the execution hereof, this Agreement embodies the entire understanding of the parties and constitutes the entire terms agreed upon between them and supersedes and replaces entirely any prior written or verbal agreement between the parties. Unless otherwise agreed in writing by both parties, this Agreement supersedes any Terms and Conditions which form part of the Client’s Purchase Orders or other documents of appointment.

14) Each of the parties to this Agreement hereby covenant and agree to execute, complete, deliver, make, and do all such other assurances, documents, instruments, notices, acts, and things as may be necessary or required for effectually carrying out the terms of this Agreement.

The strengths and weaknesses of Score Normalisation

The Value of Spend Consolidation

Jaxion Consulting Pty Ltd