Supplier's bid Comparison Formula

In course of purchasing , finding out a bid comparision method for arriving out at and selecting the best bid for placement of order is an extremely important activity. This is done by inviting the bids keeping in mind various criteria against which the suppliers are to offer their best offers.



When there are multiple criteria for a supplier selection, purchasers often rely on supplier scorecards as a guide. Such supplier scorecards allow a maximum number of points per criterion. Suppliers' scores for each criterion are based on predetermined point award schemes.

For example, one criterion may be location with a maximum of 50 points. The evaluator may award 50 points if the supplier is located within 20 Kilometers (KM) of the buyer's plant, 25 points if the supplier is located between 20 and 40 KM

away, and 0 points if the supplier is located more than 40 KM away.

But most purchasers struggle to figure out a way to score prices for comparison. So, I took it upon myself to create a supplier scorecard price comparison formula.

The Formula is built on this principle:
The penalty to a supplier's pricing score should be proportionate to the  degree  that its price varies from the Lowest Qualified Bid (LQB). So, if a supplier's price is 25% higher than the LQB, its pricing score should be 25% lower than the pricing score of the supplier who submitted the LQB. If the supplier's price is 40% higher, it's pricing score should be 40% lower. Here is the Formula:

PS = MP x (1 - ((SP-LQB)/LQB))


PS = Pricing Score

MP = Maximum Points

SP = Supplier's Price

LQB = Lowest Qualified Bid




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