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
Best value source selection refers to the practice of awarding a contract based on the value of the services that the Federal government will receive from the awarded contractor.
What is the best value selection process? ›
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 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 the best value methodology? ›
Best Value Procurement (BVP) is an innovative procurement methodology based on procuring and realising the highest value for the lowest price (best value). BVP offers clients a high(er) predictability of the end goal expressed in cost, time and quality with minimum effort and control on the part of the client.
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 a source selection plan? ›
Proposal Development
Definition: A Source Selection Plan (SSP) is a formal document that outlines the approach, methodology, and criteria used to evaluate and select the best-suited supplier or contractor to fulfill a specific project or procurement requirement.
What is the most commonly used selection procedure? ›
Answer: TRUE Explanation: The personal interview is the most widely used selection procedure.
What is the most critical selection step? ›
And now it's time for the most important step in the selection process: The decision. This is when the employer makes the final decision on who to hire for the job. The employer will consider all the information they have collected about the candidate. They will also consider their preferences and the company's needs.
What is the best value determination when evaluating proposals? ›
Best value can be determined using one of two methods: lowest price, technically acceptable or tradeoff. Proposal evaluation is also conducted for sole source acquisitions as part of agency preparations to assist agencies prepare for negotiations with suppliers.
What are examples 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. ...
- Risk. ...
- Management approach. ...
- Technical approach.
Source selection criteria can include information on the supplier's required capabilities, capacity, delivery dates, product cost, life-cycle cost, technical expertise and the approach to the contract in a project management. This term is defined in the 5th edition of the PMBOK.
What are the two methods of selecting a contractor? ›
Two of the most popular contractor selection methods are low-bid and qualifications-based.
What is value methodology? ›
The value methodology is a structured, disciplined procedure aimed at improving value. That procedure is called the Job Plan. The Job Plan outlines sequential phases to be followed which support team synergy within a structured process, as opposed to a collection of individual opinions.
What is value analysis method? ›
Value Analysis (VA), also known as Value Engineering (VE) and Value Management(VM), is a systematic and function-based approach to improving the value of products, projects, or processes. Value Analysis uses a combination of creative and analytical techniques to identify alternative ways to achieve objectives.
What is the value methodology standard? ›
Value Methodology Standard – Establishes the specific six-phase sequential Job Plan process and outlines the objectives of each of those phases. It does not standardize the specific activities that are used to accomplish each phase.
What is best value and Lpta? ›
Under LPTA all factors other than cost or price are evaluated on an “acceptable” or “unacceptable” basis. Best value is expected to result from selection of the technically acceptable proposal with the lowest evaluated price.
Is LPTA considered the best value? ›
Best value procurements are: • more complex; • take more time to carryout; and often include delivery of features beyond the minimum specification defined by the client. LPTA is: • Fast and simple. You qualify or you don't and the low price offeror gets the job.
