What Is a Bid Evaluation?

Prior to awarding a contract, government entities and companies invite vendors and business partners to submit bids. The bid evaluation process involves decision makers from the entity that plans to award the contract who review the terms and conditions of each vendor's bid. Contracts are typically awarded to the firm that provides the best overall value.

The bidding process normally begins when a government or business entity places advertisements online or in local newspapers with details of a project that it intends to carry out. Governments that are planning to build new schools, hospitals, or roads usually invite bids from construction firms. In other instances, firms may be invited to bid for service contracts, such as installing telephone lines, communications networks, or computer systems. The entity inviting the bids must provide each contractor with clear guidelines as to the maximum amount it is willing to spend on the project and the precise types of services and goods that it expects to receive from the successful bidder.

Vendors submit bids in written form, but the bid evaluation process may begin with each vendor preparing a verbal presentation to highlight key points of the bid. A panel of people generally presides over the bid evaluation process, and all of the panelists attend each vendor's presentation. After the presentation ends, the panel members have the opportunity to ask the presenter questions about the specific details of the bid.

The individuals involved in the bid evaluation process generally commission someone to conduct a feasibility study. This involves conducting research into the cost of each aspect of the proposed bid to see if proposed pricing is reasonable and realistic. A government or corporation could run into financial problems if an approved bid runs over budget, so the feasibility study is an important part of the evaluation process. Checks are made on the bidder's credentials to ensure that the firm in question has the necessary licenses to conduct the work and that the individuals involved have the skills and the qualifications necessary to complete the project.

Any bids that do not pass scrutiny are rejected while the prices of the other bids are reviewed by the panel of decision makers. If the terms on offer are comparable, the decision makers will usually accept the least expensive bid. In some instances, the entity awarding the bid may enter into negotiations with the bidders in order to gain price concessions. The bid evaluation process reaches its conclusions after these negotiations have been completed. The bidders are then notified of the panel's final decision.