Financial evaluation of bids/offers/arrangements

Financial evaluation of bids, offers and arrangements is the assessment of the financial portion of a supplier's submission against the financial requirements and evaluation methodology stated in the solicitation. In Canadian federal procurement, it is one part of checking whether a submission is responsive.

The submission is called a bid, an offer or an arrangement depending on the procurement instrument. The financial evaluation may cover price, financial terms and, where the solicitation calls for it, the supplier's financial capability. Government of Canada guidance treats it as separate from technical and contractual evaluation and requires evaluators to follow the procedures specified in the solicitation. See the CanadaBuys evaluation process guide.

What evaluators check in the financial portion

The CanadaBuys buyer's guide states that offers must be reviewed against the contractual, technical and financial requirements of the solicitation. Financial requirements are the mandatory pricing, cost, currency, payment or other financial conditions the buyer has written into the document.

The solicitation also states the basis of selection. That is the method for combining price or financial results with technical results, such as lowest price or a combined technical-and-price score, as shown in a CanadaBuys tender document.

Sequencing and responsiveness

Financial offers must not be shared with technical evaluators until the technical evaluation is complete. This keeps price from influencing the scoring of technical merit. The Office of the Procurement Ombudsman describes the federal process as evaluating the financial portion only for proposals that passed the technical evaluation (Office of the Procurement Ombudsman review).

Failing to meet a mandatory financial requirement or criterion can make an offer non-responsive. A non-responsive submission is not carried forward in the evaluation.

Financial capability reviews

Some solicitations ask evaluators to confirm that a supplier can actually afford to deliver. CanadaBuys guidance states that evaluating an offeror's financial capability verifies that the offeror has the financial resources needed to fulfil the requirement. It directs officials to consult cost analysts and, where required, to submit a request for financial review. The detail is in the CanadaBuys financial capability guidance.

PSPC's task-based services supply arrangement documentation lists "evaluation procedures and basis of selection" and "financial capability (if applicable)" as bid-solicitation content. The Treasury Board Directive on the Management of Procurement assigns contracting authorities responsibility for designing and conducting the bid-evaluation process, financial assessment and due diligence (Treasury Board directive).

How price is evaluated in practice

Solicitation documents set out the mechanics. One CanadaBuys tender document states that, unless otherwise specified, financial evaluation is done by calculating the total bid price from the pricing tables the bidder completes, and it requires firm all-inclusive amounts.

A Department of National Defence request for proposal requires bidders to submit the financial bid using the specified quotation annex. Bids are evaluated in Canadian dollars, and foreign-currency bids are converted using the Bank of Canada rate applicable on the closing date.

Other federal organizations apply the same principle. Correctional Service Canada's contracting directive requires bids or proposals to be evaluated fairly against the criteria in the tender documentation, with value for money and cost-effectiveness considered where applicable.

What this means for a supplier

• Complete every pricing table exactly as the solicitation specifies, using the required annex and currency.
• Check that your prices are firm and all-inclusive when the document requires it.
• Treat each mandatory financial requirement as pass or fail, because missing one can make your submission non-responsive.
• Be ready to show financial resources when the solicitation includes a financial capability requirement.
• Read the basis of selection first, since it determines how your price is weighed against your technical score.