Section Three: Market Research

3.1 Key Information

3.1.1 Market Research Phase Process Flow

The market research phase of the procurement lifecycle is defined as the process of defining the specific need and determining the most appropriate acquisition method for a procurement.  The market research phase is arguably the most important phase of the procurement lifecycle in that it is where the research is performed, the vast majority of major decisions are made about the procurement, and where the key components necessary to manage the contract after award are incorporated prior to solicitation.

The following are the major steps in the process flow for the market research phase:

 3.2 Perform Market Research

Once the Procurement Officer has completed the initial Procurement Strategy Plan in collaboration with the Procurement Team, the process of market research should begin. Market research refers to examining available sources of information to find available goods, services, construction and sources of supply, which may meet identified critical business requirements. The level of effort put into market research should be commensurate with the size and complexity of the procurement.

In preparation of a solicitation, the Procurement Team should consider the following factors:

• Is funding available? What is the project budget?
• Is the good, service, or construction currently under contract, either at an agency or state level?
• Who are the major vendors that tend to supply the goods, services, or construction?
• Is there a meaningful choice of supply in the market?
• How do local peers contract for the goods, services, or construction?
• How do other states contract for the goods, services, or construction?
• What is the estimated cost/price other agencies/States have paid for goods, services and construction similar in scope and magnitude to your procurement?

While an exhaustive review of sources of supply may not be feasible or practical, the goal of market research is to identify a variety of potential sources of supply. By identifying the potential sources of supply, the Procurement Officer and Procurement Team are able to analyze various goods, services, and construction offerings. Studying various offerings is essential to developing a solicitation that is not biased in favor of a single source of supply or otherwise reducing the pool of suppliers capable of meeting the state’s critical business requirements.

Although the Procurement Team may have knowledge of certain specific goods, services, or suppliers, the Procurement Officer should not rely exclusively on stakeholders’ knowledge. Instead, the Procurement Officer must actively engage in market research by accessing informational resources such as the Internet, industry organizations, consultant reviews, advertisements, cooperative procurement entities, or industrial publications. The Procurement Officer should also consult with other public entity Procurement Officers with similar purchasing needs, both within and outside of Hawaii.

As potential sources of supply are identified, the Procurement Officer may contact potential suppliers directly to request information. The Procurement Officer’s contact with potential suppliers may occur informally, such as by telephone or email. The Procurement Officer may determine a more formal method of gathering information from suppliers, such as the Request for Information discussed below.

3.3 Request For Information (RFI)

A Request for Information (RFI) is a method for requesting information from suppliers who have knowledge or information about an industry, goods, services, or construction. The Procurement Officer should use the RFI method when it is considered impractical to initially prepare a definitive purchase description,  when informal discussions with vendors are not productive, or it is required by statute, HRS 103F.((The Request for Information discussed in this section should not be confused with the mandatory Request for Information required in purchases of Health and Human Services under HRS 103F and HAR 3-142.))  The RFI process for HRS 103F procurements is discussed in Section 4.6.

The RFI method is not a competitive solicitation method and, as a result, does not satisfy the requirement for competitive bidding. The RFI method is no more than an information gathering tool, and such information gathered may or may not be used by the state agency to develop a competitive solicitation.

The RFI should detail the objective of the procurement and include, but not be limited to:

• A description of the information requested of vendors;
• A method for receiving the requested information;
• A statement that the response is to provide the purchasing agency with recommendations that will serve to accomplish the work required by the procurement;
• A statement that the purchasing agency reserves the right to incorporate in a solicitation, if issued, any recommendations presented in the response to the request for information; and
• A statement that neither the purchasing agency nor the supplier responding has any obligation under the request for information.

If the Procurement Team has developed an initial specification or statement of work, it can provide this in the RFI and ask that vendors validate the requirements and provide feedback and comments that will help the State reach its procurement objectives.

While an RFI can be useful, it should only be used when truly seeking input from the vendor community for the solicitation. If the Procurement Team does not intend to incorporate the information and/or feedback it receives then it should not utilize the RFI method. Also Procurement Teams are strongly cautioned against using an RFI as a method to restrict future competition on the resulting solicitation.  This can occur when in the team incorporates only the proposed delivery model or other unique features of a single bidder in the final scope or specifications.  Vendors are not required to respond to an RFI and a vendor’s failure to respond to an RFI will not prohibit the vendor from responding to any competitive solicitation that may result from the RFI.

3.4 Industry Day

An agency may consider holding an industry day event in order to present its plans for a current or future procurements and seek input concerning current industry practices related to the requirement from members of the vendor or contractor community. An industry day is usually held prior to the release of an RFP. It is an opportunity for the agency to provide the vendor community with a detailed overview of its procurement requirements and solicit feedback about the procurement. Various methods for hosting these meetings may be offered, such as webinars, video conferences, telephone conferences, or other methods.

Industry days are particularly useful when an agency has a complex program or project where multiple contracts of varying scope and magnitude will be required to complete the project.  Industry day goals include:

• Ensuring collaboration between the agency program office and vendors
• Incorporating vendor comments into the RFP development process
• Communicating program requirements and schedule
• Gaining a better understanding of recent industry or market developments
• Providing updates to vendors on future program developments and procurements
• Providing a forum for contractors to network with potential subcontractors, subconsultants, and/or the small business community for upcoming procurements.

3.5 Internal Government Estimate

In the market research phase the Contract Administrator, working with the Procurement Team, should take the time to develop an internal government estimate for the anticipated cost of the requirement. The internal estimate must be independent from the offeror’s proposal, which is why this estimate is often called an Independent Government Estimate. Independent development is vital because this estimate normally provides your first indication of a reasonable contract price and it is also one of the bases that you should consider in contract price analysis. The estimate development process may be automated or manual, but the best estimates reflect the findings from the market research. Section 4.7.2 covers elements of cost or price analysis to establish the estimated cost of the requirement. For in-depth guidance on developing your internal estimate, refer to our Basic Pricing Guide, Chapters 2 and 3 on Independent Government Estimates.

3.6 DETERMINE THE CONTRACT TYPE

Another key decision that must be made during the planning phase is what contract type to utilize.  Unlike the method of procurement, that determines how you are going to solicit bids for the project, the contract type will determine how the bidders will price the goods, services or construction and the contracting environment that will govern the contractual relationship between the State and the Contractor post contract award.  Based on market research the Procurement Team should have a good idea how the contractor industry prices work similar to your requirement. This market research will be critical in helping you determine the contract type to solicit.

The Hawaii procurement code allows for a number of contract types including everything from a firm-fixed price or lump sum contract to a time and materials contract.  See HAR 3-122 Subchapter 16 for a list of contract types.

The key factor that drives what contract type should be used on any given project is the level of project risk and how to fairly allocate that risk between the State and the Contractor.  The chart below shows a continuum of contract types and the associated risk level to either the State or the Contractor.

The following sections provide an overview of the types of contracts available for use in the State of Hawaii

3.6.1 Fixed Price Contracts

The fixed price contract is the only type of contract that can be used in competitive sealed bidding. It places responsibility on the contractor for the delivery of the goods or the complete performance of the services or construction in accordance with the contract terms at a price that may be firm or may be subject to contractually specified adjustments. It is appropriate for use when the extent and type of work necessary to meet the purchasing agency’s requirements can be reasonably specified and the cost can be reasonably estimated, as is generally the case of construction or standard commercial products or some services.

There are two types of fixed price contracts. The firm fixed-price provides a price that is not subject to adjustment due to variations in the contractor’s cost of performing the work specified in the contract. It should be used whenever prices which are fair and reasonable to the purchasing agency can be established at the outset.

The fixed-price contract with price adjustment provides for variation in the contract price under special conditions defined in the contract, other than customary provisions authorizing price adjustments due to modifications to the work. The formula, pricing index or other basis by which the adjustment in contract price can be made must be specified in the solicitation and the resulting contract. Adjustment allowed may be upward or downward only or both depending on the requirement.

An indefinite quantity contract, where the unit price is set but the total number of units may not be set, is a type of fixed price contract.

3.6.2 Cost Contracts

The cost-reimbursement contract, provides for payment to the contractor of allowable costs incurred in the performance of the contract and as provided in the contract. It establishes at the outset an estimated cost for the performance of the contract and a dollar ceiling which the contractor may not exceed, except at its own expense, without prior approval or subsequent approval by the Procurement Officer. It has a provision whereby the contractor agrees to perform as specified in the contract until the contract is completed or until the costs reach the specified ceiling, whichever occurs first.

It is appropriate when the uncertainties involved in contract performance are of the magnitude that the cost of contract performance cannot be estimated with sufficient certainty to realize economy by use of any type of fixed-price contract. It is particularly suitable for research, development, and study type contracts. This contract type necessitates appropriate monitoring by agency personnel during performance to provide reasonable assurance that the objectives of the contract are being met.

It may be used only when it is determined that:

• A contract is likely to be less costly to the purchasing agency than any other type or that it is impracticable to obtain otherwise the goods, services, or construction;
• The proposed contractor’s accounting system will permit timely development of all necessary cost data in the form required by the specified contract type contemplated; and
• The proposed contractor’s accounting system is adequate to allocate costs in accordance with generally accepted accounting principles.

The cost-plus-fixed fee contract is another type of cost-reimbursement contract. It provides for payment to the contractor of an agreed fixed fee in addition to reimbursement of allowable incurred costs. The fee is established at the time of contract award and does not vary whether or not the actual cost of contract performance is greater or less than the initial estimated cost established for the work. Thus, the fee is fixed but not the contract amount because the final contract amount will depend on the allowable costs reimbursed. The fee is subject to adjustment only if the contract is modified to provide for an increase or decrease in the scope of work specified in the contract.

The cost-plus-fixed fee contract can be either a completion form or term form. The completion form is one that describes the scope of work to be performed as a clearly defined task or job with a definite goal or target expressed and with a specified end-product required. This form of cost-plus-fixed fee contract normally requires the contractor to complete and deliver the specified end-product as a condition for payment of the entire fixed-fee established for the work and within the estimated cost if possible. However, in the event the work cannot be completed within the estimated cost, the agency can elect to require more work and effort from the contractor without increase in fee provided it increases the estimated cost. The term form is one that describes the scope of work to be performed in general terms and that obligates the contractor to devote a specified level of effort for a stated period of time. The fixed fee is payable at the termination of the agreed period of time. Payment is contingent upon certification that the contractor has exerted the level of effort specified in the contract in performing the work called for and that the performance is considered satisfactory by the purchasing agency.

The completion form of the cost-plus-fixed fee contract is preferred over the term form whenever the following can be defined with sufficient precision to permit the development of estimates within which prospective contractors can reasonably be expected to complete the work:

• The work itself; or
• Specific milestones which are definable points in a program when certain objectives can be said to have been accomplished.

In no event should the term form of the cost-plus-fixed fee contract be used unless the contractor is obligated by the contract to provide a specific level-of-effort within a definite period of time.

The cost-plus-a-percentage-of-cost contract is another type of cost-reimbursement contract. Prior to completion of the work, the parties agree that the fee will be a predetermined percentage of the total cost of the work. The contract provides incentive for the contractor to incur cost at the expense of the State since the more the contractor spends, the greater its fee.

Cost-reimbursement and cost-plus-a-percentage-of-cost contracts may only be utilized when the Procurement Officer determines in writing that the contracts are likely to be less costly than any other type of contract or that it is impracticable to obtain the goods, services, or construction required except by means of the contracts.

They are prohibited if their use would jeopardize the receipt of federal assistance funds or reduce the amount of the assistance under any applicable federal statute or regulation.

In addition, award of a cost-plus-a-percentage-of-cost contract may not be made unless:

• Notice is given to the head of the compliance audit unit, president of the senate, speaker of the house of representatives, and the chairpersons of the senate ways and means and house finance committees; and
• Notice is conspicuously posted in an area accessible to the public in the office of the Procurement Officer and available for public inspection during normal business hours.

For HRS 103F the SPO has established cost principles for purchases of Health and Human Services.

3.6.3 Cost Incentive Contracts

The cost-incentive contract that provides for the reimbursement to the contractor of allowable costs incurred up to the ceiling amount and establishes a formula whereby the contractor is rewarded for performing at less than target costs or is penalized if it exceeds target cost. The profit or fee under the contract will vary inversely with the actual, allowable costs of performance and consequently is dependent on how effectively the contractor controls cost in the performance of the contract.

The fixed-price cost incentive contract is one type of cost incentive contract. The parties establish at the outset a target cost, a target profit, a formula that provides a percentage increase or decrease of the target profit depending on whether the actual cost of performance is less than or exceeds the target cost, and a ceiling price. After performance of the contract, the actual cost of performance is arrived at based on the total incurred allowable costs as provided in the contract. The final contract price is then established in accordance with the formula using the actual cost of performance. The final contract price may not exceed the ceiling price. The contractor is obligated to complete performance of the contract, and, if actual costs exceed the ceiling price, the contractor suffers a loss.

The fixed-price cost incentive contract serves three objectives:

1. It permits the establishment of a firm ceiling price for performance of the contract that takes into account uncertainties and contingencies in the cost of performance.
2. It motivates the contractor economically since cost is in inverse relation to profit– the lower the cost, the higher the profit.
3. It provides a flexible pricing mechanism for establishing a cost sharing responsibility between the State and contractor depending on the nature of the goods, services, or construction being procured, the length of the contract performance, and the performance risks involved.

The cost-reimbursement contract with cost incentive fee is another type of cost-incentive contract. The parties establish at the outset a target cost, a target fee, a formula for increase or decrease of fee depending on whether actual cost of performance is less than or exceeds the target cost, with maximum and minimum fee limitations, and a cost ceiling which represents the maximum amount which the agency is obligated to reimburse the contractor. The contractor continues performance until the work is complete or costs reach the ceiling specified in the contract. After performance is complete or costs reach the ceiling, the total incurred, allowable costs reimbursed in accordance with subchapter 15 and as provided in the contract are applied to the formula to establish the incentive fee payable to the contractor. This type of contract gives the contractor a stronger incentive to efficiently manage the contract than a cost-plus-fixed fee contract provides.

Prior to entering into any cost incentive contract, or any cost-reimbursed contract with cost incentive fee, the Procurement Officer shall make the written determination.

3.6.4 Performance Incentive Contracts

In a performance incentive contract, the parties establish at the outset a pricing basis for the contract, performance goals, and a formula that varies the profit or the fee if the specified performance goals are exceeded or not met. For example, early completion may entitle the contractor to a bonus while later completion may entitle the State to a price decrease.

3.6.5 Time and Materials Contracts

A time and materials contract provides an agreed basis for payment for materials supplied and labor performed. A time and materials contract shall, to the extent possible, contain a stated ceiling or an estimate that shall not be exceeded without prior agency approval. A time and materials contract shall be entered into only after the Procurement Officer determines in writing that:

• Contractor has an adequate accounting system that accumulates and segregates costs in a manner that is traceable to the project level;
• Agency personnel have been assigned to closely monitor the performance of the work; and
• In the circumstances, it would not be practicable to use any other type of contract to obtain needed goods, services, or construction, in the time required, and at the lowest cost or price to the purchasing agency.

3.6.6 Labor Hour Contracts

A labor hour contract provides only for the payment of labor performed. A labor hour contract shall contain the same not to exceed pricing ceiling as the time and materials contract. A labor hour contract also requires the same determination as required for a time and materials contract.

3.7 Update Procurement Strategy Plan

After completing the necessary market research, the Procurement Team should update the original Procurement Strategy Plan based on the market research data. This can be done by updating existing components of the Procurement Strategy Plan or by adding additional information or sections to the original Plan. The goal is to document in a single place the information garnered during the market research phase as it impacts the procurement strategy (i.e., scope, schedule, budget, method of procurement, requirements, etc.).  Remember your Procurement Strategy Plan is a dynamic document that should be updated as new information is received.

3.8 Finalize Specifications/Statement of Work

3.8.1 Gathering Requirements

The Procurement Officer must facilitate open dialogue with the identified stakeholders to gather requirements for the procurement. Requirements are the essential features and functions that must be met by the provided good or service. The Procurement Officer should encourage discussion and ask sufficient and pertinent questions to ensure the stakeholders fully understand the requirements. Some examples of questions to consider when collecting requirements are:

• Who/what area is impacted by this procurement?
• What are the key functions the needed goods/services must meet?
• What factors will impact this purchase?
• When are the goods/services needed?
• Where will goods be delivered and/or services performed?
• Why are the goods/services needed?
• How must goods/services be provided or delivered?
• What key approvals are necessary and who must provide these approvals?
• What specific quality or quantity needs must be considered?

If the requirements are incorrectly, inaccurately, or incompletely specified there is little chance the proposed solution will meet agency expectations. Taking the time to ask these questions and elicit input from the Procurement Team will improve the procurement outcomes.

3.8.2 Develop Detailed Specifications/Scope of Work

A specification is any description of the physical or functional characteristics, or of the nature of a good, service, or construction item.  The term includes descriptions of any requirement for inspecting, testing, or preparing a good, service, or construction item for delivery. A specification should describe the features and functions of a product or service an agency seeks to procure along with a description of what a vendor must offer to be considered for an award. Specifications are the primary means of communicating agency requirements to the vendor community.

Specifications determine and control the:

• Minimum quality level of the product or service;
• Suitability of the product or service for the job to be done; and
• Method of evaluation used in making an award and determining the best value proposal for the purchase.

The Procurement Officer should develop specifications that meet the following characteristics:

1. SIMPLE: Avoid unnecessary detail, but provide sufficient information to ensure that requirements will satisfy their intended purpose.
2. CLEAR: Use terminology that is understandable to the agency and proposers. Use correct spelling and appropriate sentence structure to eliminate confusion. Avoid legalese, specialized language and jargon whenever possible.
3. ACCURATE: Use units of measure compatible with industry standards. All quantities and packing requirements should be clearly identified.
4. COMPETITIVE: Identify at least two commercially available brands, makes, or models (whenever possible) that will satisfy the intended purpose. Avoid unneeded “extras” that could reduce or eliminate competition and increase costs.
5. FLEXIBLE: Avoid inflexible specifications that prevent the consideration or acceptance of a proposal, which could offer greater performance for fewer dollars. Use approximate values such as dimensions, weight, speed, etc. (whenever possible) if they will satisfy the intended purpose. If approximate dimensions are used, they should be within 10% unless otherwise stated in the solicitation document.

The end product of a well-written specification should be expressed as SMART:

• Specific – clearly states what is required
• Measurable – to confirm when it has been met
• Achievable – can be done, is technically possible
• Realistic – is reasonable, is not cost prohibitive
• Timely – achievable within an acceptable timeframe

A scope of work, sometimes called a statement of work, or scope of services, is a description of the requirements of services to be performed. The scope of work may include material requirements to perform the needed services.  A scope of work should contain the following information:

• Background of the procurement
• Objectives to be achieved
• Contractor’s tasks
• Deliverables
• Schedule (performance, deliverables and payment)
• Department responsibilities

3.8.2.1 Mandatory Specifications

As the Procurement Team works to develop the specifications it should be aware of statutorily mandated specifications as detailed in Part IV of HRS-103D. In accordance with HRS §103D-405, specifications shall seek to promote overall economy and encourage competition, and shall not be unduly restrictive.

Examples of statutory specifications set forth in the procurement code include, but are not limited to:

• Roadway construction materials
• Construction materials
• Hawaiian plants in public landscaping
• Light duty vehicles
• Recycled products

Outside contractors may be utilized to prepare specifications and work statements in the development of a solicitation.  Contractors paid for those services are not allowed to bid on or receive a contract when they participated in any way in the development of the solicitation package or any resulting contract.  In all cases, the Procurement Officer and Team should review these statutory requirements to ensure they are properly incorporated into their specifications, as appropriate.

3.8.2.2 Mandatory Specifications for Competitive Purchase of Services – Health and Human Services

HRS §103F-402, Competitive purchase of services, was established to promote uniformity in health and human service procurement. Service specifications shall address in detail each of the following items and if an item is not applicable to the request for proposals, the specification must state that it is not applicable:

1. Minimum or mandatory activities
2. Probable funding amounts, source, and period of availability
3. The need or problem the service addresses
4. Goals of the service
5. Target population to be served
6. Geographical coverage of service
7. Expected outcome measurements
8. Units of service and unit rate, as applicable
9. Quality assurance and evaluation specifications, as applicable
10. Whether single or multiple contracts are to be awarded and define the criteria for the multiple award, if applicable
11. Whether single- or multi-term contracts are to be awarded and define the terms, including but not limited to initial contract term and conditions for extension
12. Reporting requirements for program and fiscal data, and provide sample forms and instructions, as available or appropriate
13. Minimum or mandatory administrative requirements
14. Minimum or mandatory personnel requirements
15. Pricing or pricing methodology to be used, as applicable
16. The method or procedure for compensation or payment

3.9 Develop Proposal Evaluation Strategy

Proposal evaluation, particularly in a RFP, usually consists of an evaluation of mandatory requirements, evaluation criteria and cost/price.  The evaluation criteria used to assess proposals consist of the factors and sub-factors that reflect the areas of importance to an agency in its selection decision. Through the evaluation factors, the agency is able to assess the similarities and differences and strengths and weaknesses of competing proposals and, ultimately, use that assessment in making a sound selection decision. In accordance with HRS §103D-303 for goods, services and construction and HAR §3-143-205(d), for health and human services, the evaluation criteria and their relative point value shall be expressed in the RFP and proposals shall be evaluated only on the basis of those criteria. In addition, the RFP must state the relative point value of price to all of the other evaluation criteria. In doing so, offerors are informed of the factors that the agency will consider in determining which proposal best meets its needs, and offerors may use this information to determine how to best prepare their proposals.

In general, evaluation criteria should be tailored to each procurement and include only those factors which will have an impact on contractor selection. The nature and types of evaluation criteria to be used for an acquisition are within the broad discretion of the agency. In order to determine the point allocation for the price /cost factor please refer to the formula discussed below.

Non-cost factors address the evaluation areas associated with technical and business management aspects of the proposal. Examples of non-cost factors include technical and business management concerns such as technical approach and understanding, capabilities and key personnel, transition plans, management plan, management risk, past performance, and corporate resources. The level of quality needed by the agency in performance of the contract is an important consideration in structuring non-cost factors.

Mandatory requirements are requirements an offeror must meet to demonstrate they are legally or otherwise authorized to perform the work described in the RFP. This may include such things as business and/or contractor licensing or board certifications, proof of insurance, bonding requirements, etc. Mandatory requirements are evaluated on a pass-fail basis.

3.9.1 Evaluation Process

The evaluation process is typically divided into four (4) main phases and one (1) optional one. The evaluation phases are:

1. Evaluation of Mandatory Requirements
2. Evaluation of Technical Proposals
3. Evaluation of Cost Proposals
4. Ranking and Selection
5. Optional Discussions and Best and Final Offers  (Final Revised Proposals HRS 103F)

The specific steps and processes the Procurement Team will utilize in each step in the evaluation process should be documented in an evaluation plan. This ensures that at the time of evaluation there is a clear and documented process for how the solicitation responses will be evaluated.

3.9.2 Evaluation Factors

It is important to identify all evaluation factors and their relative importance, including price, prior to RFP development. Factors not specified in the RFP shall not be used for evaluating the proposals.

Next, the Procurement Team should begin making a detailed list of the most important aspects of the goods, services or construction required, including cost. Each item on the list is a potential evaluation criterion. From this list, the Procurement Team should group the criteria into categories, referred to as evaluation factors, and arrange the list in sequence of most important. This process will help to determine the most appropriate weighting (see below) and aid in assigning a point value to each factor based on its relative importance. The most important items will naturally be evaluated heavier and have more points available.

Evaluation factors should be individually tailored to each RFP. For criteria to be effective, they should have the following characteristics:

• Clear: not subject to multiple interpretations, not ambiguous
• Relative: all key elements of the project requirements must relate to the requirement definition and be covered by evaluation criteria
• Discriminating: separate best, average and weaker proposals
• Non-discriminatory: fair and reasonable
• Realistic: given the nature or value of the contract
• Measurable:  must have distinguishing importance
• Economical: use of the criteria should not consume an unreasonable amount of time or resources
• Justifiable: make sense and can be justified on common sense, technical and legal basis; mandatory and heavily weighted criteria must be justified

3.9.3 Weighting Factors

Weights reflect the relative importance of each of the evaluation criteria to the agency.  A statement in the RFP of the specific weighting to be used for each factor and subfactor, while not required, is recommended so that all offerors’ will have sufficient guidance to prepare their proposals.

Typically, factors are divided in four (4) major categories for evaluation purposes:

1. Technical approach
2. Managerial approach
3. Qualifications, prior experience (past performance) and references
4. Cost

In accordance with HAR §3-122-52(b), points assigned to each factor must be presented in the RFP using a numerical rating system, that details the relative priority of each evaluation factor. The following is an example of evaluation factors used in an RFP with a weighted 60/40 split between cost and technical/managerial merit.

In accordance with HAR §3-122-52(d), cost is identified as a percentage of the total available points and cost proposals from all offerors are “normalized” meaning that the lowest cost offeror receives 100% of the points available and the other higher cost proposals receive a percentage of the available points based on their submitted cost.

The following is an example of a cost evaluation using the formula mandated in HAR §3-122-52.((This formula described in this section does not apply to procurements under HRS 103F.))

3.9.4 Evaluation Committee

Prior to writing an RFP or Competitive Procurement of Services, the purchasing agency must determine whether the solicitation responses will be evaluated by the Procurement Officer exclusively, or by an evaluation committee of named participants.  The following details the requirements for evaluation committees for each of these methods of procurement.

3.9.4.1 RFP Evaluation Committee

Although responses to an RFP may be evaluated by the Procurement Officer, it is generally considered best practice to establish a committee to evaluate proposals for an RFP.

In accordance with HAR §3-122-45.01, if an evaluation committee is used it must be composed of a minimum of three (3) governmental employees with sufficient qualifications in the area of the goods, services, or construction to be procured, one of which must be the contract administrator. The contract administrator or a designee shall serve as chairperson, and the Procurement Officer or a designee shall serve as advisor.

Private consultants may also serve (without compensation) on the committee provided that they have the relevant knowledge, do not have a conflict of interest, agree to keep the evaluation and all information they view confidential, and agree to their name being made public upon the award of the contract.  See Section 4.4.4 for guidance on how to evaluate proposals.

For the Executive Branch:

Individuals serving on the Evaluation Committee should be documented on form SPO-044, and each member must complete form SPO-024, Attestation Serving on an Evaluation, Review or Selection Committee to ensure that there are no potential conflicts.

3.9.4.2 Competitive Purchase of Services Evaluation Committee

For HRS 103F, The Procurement Officer or an evaluation committee selected by the Head of the Purchasing Agency or the Procurement Officer shall review and evaluate the proposals.  The approved list of evaluators shall be placed in the procurement file.

Evaluators:

1. The Procurement Officer; or
2. A Committee of a minimum of two state employees with the education and training to evaluate the proposals

Non-state employees may serve as advisors only if there is no conflict of interest and shall not represent or act in the selection or award process.

A copy of the document identifying the evaluation committee members and any subsequent changes thereto shall be kept in the procurement file. See Section 4.6.7 for guidance on how to evaluate proposals.