An eye on development when deciding to subcontract
Finnish Road Enterprise is looking for added development potential from innovative co-operation. In order to improve its productivity, the organisation requested competitive bids in February 2005 for a subcontracting partner's crushing work. Some of the partnership elements of the venture include a long period (3 years) and its optional years, joint development goals and grading of the innovation skills of the subcontractor as part of the overall comparison of bids.
When developmental ability was expected from a partner, the company's ability to innovate was also evaluated. Of the five companies that left bids, three demonstrated their abilities by using the innovation benchmarking method, and one company used a benchmark that they had created themselves. One company provided no innovation skill benchmarks.
Comparing bids
A total of 1,000 action points were used when evaluating the offers. The action plans were rated on a scale of 0 to 10. These scores were multiplied by a weight factor decided on beforehand. The sum of the weight factors was one hundred. The proportion of the innovation skills from action points was 50 percent, i.e., the weight factor was 50.
The innovation skills of the companies that provided benchmarking information were 60 to 68 on a scale of 0 to 100. The benchmark was based on an evaluation of the client organisation on the bidding company's partnership, bidding expertise and networking skills.
The innovation skill benchmarks were converted into scores using a previously decided method on a scale of 1 to 10. The score was determined by the ratio of innovation points. The best measured result gave a score of 10. If the ratio of a company's benchmark / the best bidder's result was 0.5 or less, the score was deemed to be 0; therefore, a ratio of 0.8 produced a score of 8. The other values were interpolated directly to an accuracy of one decimal point. Using this method, the best company received a score of 10. With the weight factor of 50, this amounted to 500 action points. With a benchmark of 60, the ratio (60/68) is 0.88, the score 8.9 and the action points 8.9 x 50 = 445. These innovation points were added to the action plan's points.
Comparison figures for awarding the contract were calculated after rating performance points with a significance value of 20 percent, according to a previously determined method. The company that had the lowest comparison figure was awarded the contract.
Experiences
The bids were well laid out and of a high quality. The actions plans contained in the bids were also easy to evaluate and rate. Out of the five bids, three were clearly superior to the others when considering performance. The quality of the documents showed that considerable effort had been put into creating their content when planning the offers.
Experiences from the competitive process show that competitive bidding such as this can be used, companies know how to create good bids, and new elements can be used for evaluating the bids. Naturally, there is also room for improvement; for example, a closer look must be taken at the weighing system. As companies capable of taking care of their performance and knowledge also seem to be capable of delivering the lowest prices available, the significance of skills and innovation skills to the selection process should be emphasized, with a heavy emphasis on abilities.
Erkki Nevala, Finnish Road Enterprise, Tel: +358 204 44 2904