Financial Evaluation

Financial evaluation is the part of a procurement evaluation in which a buyer assesses the price or financial proposal of a bid. It normally takes place after the buyer has determined that the proposal is technically responsive. The result is an evaluated price that the buyer uses when selecting the successful bid.

The term is used in public-sector competitive procurement, including NATO procurement and Canadian federal solicitations. In Canadian solicitations, the buyer commonly calculates a total evaluated price from the pricing tables that the bidder completed. Related terms include technical evaluation, mandatory and point-rated criteria, weighted price, lowest evaluated price and best-value selection.

How a Canadian solicitation calculates the total evaluated price

A CanadaBuys request for proposals for structured cabling services shows the method clearly. It calculates the bidder's total evaluated price by adding specified totals from the pricing attachment. The responsive bid with the lowest evaluated price is then recommended for contract award. The full wording is in the CanadaBuys solicitation document.

CanadaBuys solicitations use financial evaluation provisions to calculate an evaluated price. Where a solicitation specifies weighted financial criteria, the calculation produces a total weighted price instead. The solicitation itself sets the calculation method and the selection rule, so each bid package must be read on its own terms.

Technical responsiveness comes before price is assessed

Financial evaluation does not apply to every proposal received. The same CanadaBuys solicitation states that financial evaluation is performed only on technically responsive proposals, and it defines a technically responsive proposal as one that meets all mandatory criteria. A bid that misses a mandatory requirement is not carried into the price stage.

The Office of the Procurement Ombudsman describes bid evaluation as having separate technical and financial evaluations. Its procurement practice review states that the contracting authority conducts the financial evaluation only for proposals that passed the technical evaluation. Price strength cannot make up for a failed mandatory criterion.

Financial evaluation in National Defence and NATO procurement

A Department of National Defence solicitation lists "Financial Evaluation" as its own evaluation stage. It states that the evaluation is conducted using the pricing tables completed by bidders. The wording appears in the National Defence request for proposals.

NATO states that bids are evaluated case by case by the responsible NATO procuring body, as set out on its procurement opportunities page. NATO procurement is governed by NATO Financial Regulations and associated financial rules and procedures, which are referenced in this NATO financial audit document. Suppliers pursuing NATO work should confirm which procuring body is running the competition and read its solicitation closely.

What it means for a supplier bidding on Canadian public contracts

• Pass every mandatory technical requirement first, because price is evaluated only for technically responsive proposals.
• Complete every required pricing table or financial form, in the required currency and format.
• Follow the solicitation's pricing instructions exactly, because the pricing attachment feeds the total evaluated price.
• Read the evaluation section to learn whether selection is by lowest evaluated price or by a weighted price.