When forming a construction contract, owners and developers are working to create an agreement that maximizes the quality of the project and minimizes the time and cost to complete. While this goal of attaining “best value” may seem obvious, achieving it is challenging, as different circ*mstances require distinct approaches to create a fully optimized contract.
A key aspect of achieving best value is determining which source selection method one should use for their project. Source selection is the process by which contractors are selected. There are three primary methods of source selection: (1) competitive bidding, (2) non-competitive negotiation, and (3) competitive negotiation.
When to Use Competitive Bidding to Achieve Best Value
For certain projects, particularly public projects, state or local law may require the use of competitive bidding. Along with cases for which it is stipulated by law, competitive bidding should be used in projects that include all of the following circ*mstances:
- Two or more contractors are willing to compete for the work.
- The owner/developer and its design professionals have time to create plans and specifications, prepare a bid, evaluate submitted bids, and award a contract.
- The owner/developer’s design professionals can provide sufficient detail of the specifications, duration of performance, and quality of workmanship expected for the project such that there is no ambiguity in its requirements.
Note: The overall value and complexity of the project should also be considered, as complex projects may eliminate potential contractors.
When to Use Non-Competitive Negotiation to Achieve Best Value
Non-competitive negotiation should be used in projects that include the following circ*mstances:
- Contract terms or technical specifications cannot be clearly defined.
- The owner/developer and contractor can evaluate technical proposals and pricing data together to reach an agreed scope and cost of work.
Competitive Negotiation
Two-step “competitive negotiations” are increasingly popular in the construction industry. Competitive negotiations can be executed in multiple ways. In one approach, proposals are solicited from selected offerors, with whom the owner/developer subsequently negotiates to achieve best value. In another approach, the owner/developer refines its requirements and scope of work through preliminary negotiations with selected offerors, and those offerors then submit competitive bids based on the agreed upon requirements and scope of work. This hybrid approach can act as the best of both worlds for owners and developers.
Whatever selection method one utilizes to select its contractor, it is crucial that best value is always at the forefront of the owner/developer’s mind.
This article summarizes content from Bruner & O'Connor on Construction Law. For more information on this topic, or for additional citations, see Sections 2:21 & 2.22.
FAQs
A Best Value Selection is a selection process for construction services where total construction cost, as well as other non-cost factors, are considered in the evalua- tion, selection, and final award of construction contracts.
What is the best value selection process? ›
Best value selection means a selection based upon objective criteria related to price, features, functions, life-cycle costs and other factors. Best value selection means a process to award contracts based on quality and costs.
What are source selection methods? ›
Source selection is the process by which contractors are selected. There are three primary methods of source selection: (1) competitive bidding, (2) non-competitive negotiation, and (3) competitive negotiation.
What is best value procurement in construction? ›
Best value procurement (BVP) is a procurement system that looks at factors other than only price, such as quality and expertise, when selecting vendors or contractors. In a best value system, the value of procured goods or services can be simply described as a comparison of costs and benefits.
What is the best Value in construction? ›
The similar term 'best value' (BV) refers to the most advantageous combination of the whole-life cost, quality (fitness for purpose) and sustainability (in terms of the economic, social and environmental benefits) available to meet client requirements.
What is the best Value acquisition? ›
“Best Value means the expected outcome of an acquisition that, in the Government's estimation, provides the greatest overall benefit in response to the requirement.” Lowest Price Technically Acceptable (LPTA) process: An offer is acceptable if meets or exceeds standards.
What is the best value technique? ›
Best value is a valuable procurement process for construction project execution. It can fall behind in overall cost and speed to market but will usually create higher customer satisfaction and performance and minimize risk. Traditional cost-first procurement methods like the lowest responsible bidder are outdated.
What is the most commonly used selection procedure? ›
Answer: TRUE Explanation: The personal interview is the most widely used selection procedure.
What is the best value determination? ›
Best Value: The expected outcome of an acquisition that, in the government's estimation, provides the greatest overall benefit in response to the requirement. When determining best value, ordering activities should: Identify what factors affect the overall value of the requirement.
Which source selection processes can be used to select the best value? ›
Best-Value Continuum
This document describes two of the acquisition processes and techniques that may be used to design competitive acquisition strategies suitable for the specific circ*mstances of the acquisition: Tradeoff Source Selection Process and Lowest Price Technically Acceptable Source Selection Process.
Source selection is a process by which multiple vendors are compared and the best vendor is chosen to be the supplier for the good/service being procured. In other words, source selection is the process of selecting the source from which a good/service will be purchased. It is a way of choosing a vendor.
What is an example of source selection criteria? ›
Some possible source selection criteria are: Understanding of need. How well does the seller's proposal address the procurement statement of work? Overall or life-cycle cost.
What is the procurement method best value? ›
Best Value Procurement: Procurement method implemented by issuing Request for Proposals (RFP) where evaluation factors in addition to cost/price are considered in the selection of a firm or contractor and encompasses the total benefits a State entity expects from the acquisition.
What is the most preferred method of procurement? ›
Open tendering
Prospective vendors can then respond with how they intend to fulfill the contract and persuade the company that they are the best for the job. This method provides the most competition among suppliers and encourages new or emerging vendors to bid and obtain more work.
What is the best Value determination? ›
Best Value: The expected outcome of an acquisition that, in the government's estimation, provides the greatest overall benefit in response to the requirement. When determining best value, ordering activities should: Identify what factors affect the overall value of the requirement.
What are the two primary selection criteria considered when using the best Value method? ›
The two primary selection categories considered with the best-value procurement method are price (quantitative factors) and qualification factors such as design, management, or past performance.
What is best Value analysis procurement? ›
Best Value Procurement
Generally achieved through the Request for Proposals (RFP) method. cost-benefit analysis to define the best combinations of quality, services, time, and cost considerations over the useful life of the acquired item.”
What is the best Value bid evaluation? ›
Best value bid means the optimal balance of technical merit and cost determined in accordance with pre-set evaluation criteria disclosed in a Bid Solicitation for the purpose of making an Award.
