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HomeProcurement/Supply Chain ManagementUnderstanding QCBS, QBS, FBS and LCS Methods of Selection

Understanding QCBS, QBS, FBS and LCS Methods of Selection

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The selection methods for consultant and contractors may be different depending on the requirement of the client. For some clients, cost is the main criteria wherein in some cases the quality of the deliverable is paramount. Sometimes, you may have to make a balance between quality and cost. Particularly in case of selection of consultancy services this factor becomes very crucial and should be decided at the planning stage itself so that the evaluation criteria may be appropriately mentioned in the RFP document. Based on the requirement, there are four main methods are used by the clients for evaluating the proposals.

These methods are as follows:

Quality Cost Based Selection (QCBS)

Quality Based Selection (QBS)

Least Cost Based Selection (LCS)

Fixed Budget Based Selection (FBS)

Let us understand more in detail about these selection methods.

Quality Cost Based Selection (QCBS)

In this type of selection criteria, both quality and cost of the proposal are deciding factors for selection of the consultant or contractor. This method is used when the quality of deliverable is important but the cost of service or work can also not be ignored. Therefore, the weightage of both the quality and cost of the proposal is fixed in the evaluation criteria and the evaluation of the proposal in done accordingly. The weightage is assigned as per the requirement of the client, for e.g. 80% for quality & 20% for cost or 90% for quality and 10% for cost, etc.

First the technical proposal is evaluated and scores are given to it as per the evaluation criteria. It is multiplied by the weightage and weighted technical score is determined. Similarly, the financial score is calculated as per the evaluation criteria and multiplied by the respective weightage to determine the weighted financial score.

Formula for calculating the financial score Sf= 100xFm/F,

Where, Sf= financial score

Fm= Lowest Price

F= Price of the proposal under consideration

Formula for calculating final score:

S= St*T%+Sf*P%

Where T= the weights given to technical proposal,

P= the weights given to financial proposal

T+P=1,

For example, if the weightage for technical proposal is 80% and for financial proposal 20%, then T= 0.8 and P= 0.2.

Both the weighted technical score and weighted financial scores are added together and the bidder having highest score is declared the winner and hence awarded the contract.

Example:

Two firms A, B and C has submitted their proposals for the consultancy assignment of a world bank project. The technical scores given to the firms after technical evaluation are as follows:

Firm A= 91.22, firm B= 83.35 and firm C= 88.21.

The financial prices quoted by the firms are as follows:

Firm A= Rs. 28.35 million, firm B= Rs. 17.65 million and firm C= Rs. 14.85 million.

If the weightage of technical score is 80% and the weightage of financial score is 20%, then calculate the combined score and the ranking of the firms after the final evaluation.

Solution:

After technical evaluation, the technical scores of the firms are as follows:

FirmTechnical Score (Out of 100)Financial Price (Rs. Million)Financial Score Sf= (Fm/F)*100
A91.2228.35=(14.85/28.35)*100=52.38
B83.3517.65=(14.85/17.65)*100=84.14
C88.2114.85=(14.85/14.85)*100=100

Combined evaluation is done as per table below:

This selection method is used when there is a tradeoff between quality and cost of the proposal and the client wants to make a balance between these two factors.

Least Cost Based Selection (LCS)

This method is employed in the case when the cost is the deciding factor for awarding the contract. First the envelopes containing the technical proposals are opened and evaluated as per the evaluation criteria already mentioned in the Request for Proposal (RFP) document. The proposals qualifying as per the criteria are considered for opening the financial proposals. The technically qualified bidder who have quoted the least price is awarded the contract.

This method of selection is generally suitable for assignments of a standard or routine nature (such as engineering designs of non-complex Works), for which well-established practices and standards exist.

Quality Based Selection (QBS)

This selection method is suitable for the situations where the quality of the deliverable is paramount and no compromise on quality is admissible. As the selection is based on the quality of proposals hence only technical proposals are evaluated in this method. Financial proposals may either be submitted later on by the bidders or in case both technical and financial proposals are submitted at the same time, two envelope system is used.

The technical proposals are given score as per the evaluation criteria and the financial proposal of highest rank bidder is opened. The selected bidder is then invited for the contract negotiation. After the successful contract negotiations, the contract is signed with the successful bidder.

The quality based selection method is appropriate for the following type of assignments:

(1) Where the assignment is complex and highly specialized and the scope of work/ ‘Terms of Reference (TOR)’ cannot be precisely defined.

(2) Client expects firm to provide innovative solution for the problem.

(3) Assignments that can be carried out in substantially different way, so that the proposals will not be comparable.

Fixed Budget Based Selection (FBS)

This is also a competitive method of shortlisting consultants or contractors which takes into account the quality of proposal as well as the cost also. In the request of proposal document, the cost of the service is specified as a fixed budget which cannot be exceeded. The request of proposal document specifies the budget and the minimum qualifying score for the technical proposal. The highest qualified technical proposal meeting the specified budget is awarded the contract.

This method is appropriate when the type of service required is simple and can be precisely defined, the budget is reasonably estimated and the budget is sufficient for the firm to perform the assignment.

Conclusion

Choosing appropriate selection method is crucial for consultancy services and contractors. Based on the requirements of the client and the nature of service or work being procured, the decision regarding this should be taken during planning stage itself. The evaluation criteria and other information regarding the selection method should be appropriately mentioned in the RFP document to avoid any confusion later on.

Also read: Solicitation Methods and Documents in Public Procurement

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Rajesh Pant
Rajesh Panthttps://managemententhusiast.com
My name is Rajesh Pant. I am M. Tech. (Civil Engineering) and M. B. A. (Infrastructure Management). I have gained knowledge of contract management, procurement & project management while I handled various infrastructure projects as Executive Engineer/ Procurement & Contract Management Expert in Govt. Sector. I also have exposure of handling projects financed by multi-lateral organizations like the World Bank Projects. During my MBA studies I developed interest in management concepts.
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