Fair ranking in competitive bidding procurement: a case analysis

Fair ranking in competitive bidding procurement
A case analysis
Michael Soltys
KES 2014
18th International Conference on Knowledge-Based
and Intelligent Information & Engineering Systems
IS13: Modelling with Qualitative and Quantitative Pairwise Comparisons
Pomorski Park Naukowo-Techniczny (PPNT) Gdynia
September 15, 2014
Fair ranking - Soltys KES'14 PPNT Gdynia Title - 1/26

Fair and transparent procurement procedures are a cornerstone of
a well functioning free-market economy.
Competitive bid procurement involves suppliers of services
competing for a contract.
The traditional method involves the Owner issuing an Invitation,
directed to a group of suppliers.
Bidders who wish to participate submit binding oers to do the
required service by a

xed rate and time and in accordance with
the Owner's requirements.
The Owner then reviews and evaluates all on-time bids and
chooses one Bidder to do the work.
The Owner and that Bidder then sign a contract to do the work.
Fair ranking - Soltys KES'14 PPNT Gdynia Introduction - 2/26

General rules of bidding
For the Owner, the implied obligations or terms of the Bid
Contract will be:
1. A duty of full disclosure
2. A duty of fairness and good faith
For the Bidder the implied term of the Bid Contract will be:
1. Honor the rules of the Invitation.

If any of these implied obligations are broken, then the wronged
party has grounds for a lawsuit for breach of contract.
Note that in the case that we examine in this paper we make no
claims whatsoever of a breach of contract.
Rather, we claim that the rules put in place to rank the bids did
not adequately select the best bid.

Reilly vs Contemporary
In our case the Owner is the Ministry of Community Safety and
Correctional Services, and we consider two Bidders: Reilly Security,
and the second Bidder was Contemporary Security.
While Reilly is an Ontario based company, Contemporary Security
is a Vancouver-based subsidiary of an American company.
All companies (a.k.a., proponents) were bidding for a contract to
provide security during the Pan American games to be held in
Toronto in 2015.
Since the Owner is the Ministry, the party concerned regarding the
$-value of the bid are the tax payers of Ontario; indeed, the rules of
the bid should satisfy the tax payers that they are getting the most
competitive bid that can ful

ll the obligations of the contract.
Fair ranking - Soltys KES'14 PPNT Gdynia Contention - 5/26

The Ministry conducted the evaluation of proposals in the
following stages:
Stage I consists of a review to determine which proposals
comply with all of the mandatory requirements.
There were only two proposals left at the end of this
stage: Reilly and Contemporary.
Stage II consists of a scoring by the Ministry of each quali

ed
proposal on the basis of the rated criteria. Only
proponents meeting a minimum score of 65% will
proceed to Stage III. Stage II will be worth 35% of
the proponent's overall score.

Stage III consists of a scoring by the Ministry of each quali

ed
proponent meeting the minimum score in Stage II on
the basis of a presentation. Stage III will be worth
25% of the proponent's overall score.
Stage IV consists of the sealed pricing envelope provided by
each proponent meeting the minimum score in
Stage II and completing Stage III will then be opened
and Stage IV will consist of a scoring of the pricing
submitted. Stage IV will be worth 40% of the
proponent's overall score.

At the conclusion of Stage IV, the scores from Stage II, Stage III,
and Stage IV will be added, and the highest scoring proponent will
proceed to Stage V| where they will undergo a security
investigation.
Thus, a bona

de contender who proceeds to Stage V is the de
facto winner.

Initial Analysis
Table : The bidding stages.
Stage Reilly Contemporary
Stage II r2=35 c2=35 min 65%
Stage III r3=25 c3=25
Stage IV r4=40 c4=40
Fair ranking - Soltys KES'14 PPNT Gdynia Initial Analysis - 9/26

Fact 1
Since to pass stage II at least 65% is needed, in terms of points we
know that:
35 r2; c2 35 0:65 = 22:75 23:

Assumption 1
In Stage IV the points are given based on the bid's $-value.
Assume that the distribution is inversely linear; that is, lowest bid
(Reilly's $67) is given 40 points, and since Contemporary's bid was
$81, and 81 = 1:21 67, we assume that Contemporary gets
40=1:21 = 33 points.
This assumption is consistent with the explanation in the Request
for Proposals.

Given that Contemporary obtained more points, and given the
above, we have the following:
r2 + r3 + r4 c2 + c3 + c4
) r2 + r3 + 40 c2 + c3 + 33
) (c2 r2) + (c3 r3) 7 ()

On the other hand we know that jc2 r2j 12, because the
highest possible score is 35 and the lowest possible score is 23.
So the largest dierence possible in the scoring in Stage II is
12 = 35 23.
So we consider the two possible scenarios under the assumption
that Contemporary scored higher overall.

Scenario 1
Suppose Contemporary won Stage II.
Then c2 r2 12. But then using line (), we have that
(c2 r2) 7 (c3 r3)
and so we know that it is impossible to have 7 (c3 r3) 12,
which in turns means that it is impossible to have r3 c3 5.
In other words, if Contemporary won the bid, and Contemporary
won Stage II, then it is impossible for Reilly to win Stage III by
more than 5 points.

Scenario 2
Suppose Contemporary lost Stage II.
Then (c2 r2) 1, so again using (), we get that (c3 r3) 8.
In other words, if Contemporary won the contest, but
Contemporary lost Stage II, then Contemporary must have won
Stage III by at least 8 points.

Initial Conclusion
When the actual scores showing that Contemporary won are made
public, we can check that they are consistent as follows:
If Contemporary won Stage II, then Reilly cannot lead
Contemporary by more than 5 points in Stage III.
If Contemporary lost Stage II, then Contemporary must lead Reilly
in Stage III by at least 8 points.
If neither is true, then the results are inconsistent.
Of course, this is the case under Assumption 1, which is reasonable.

Final Analysis
A few days later we were given more information:
Table : Reilly's scores released.
Stage Reilly Contemporary
2 25/35 ?
3 18/25 ?
Fair ranking - Soltys KES'14 PPNT Gdynia Final Analysis - 17/26

Plugging those into (), we obtain:
(c2 25) + (c3 18) 7;
which means that c2 + c3 50. On the other hand, c2 + c3 60,
so together we get:
50 c2 + c3 60:

Scenario 2 not possible
In other words, Contemporary must be within 9 points of the
maximum possible for both Stage II and Stage III.
In particular, this means that Scenario 2 (Contemporary lost in
Stage II) is not possible:
for suppose that it did lose in Stage II, (c2 r2) 1, so
c2 1 + 25 = 24. So c2 24, but then Contemporary is not
within 9 points of the maximum possible.
So Scenario 2 is not possible.

For Contemporary not to win Stage III, it must be the case that
c3 18, which means that it lost at least 7 = 25 18 points in
Stage III.
Thus, if Contemporary lost more than 2 points in Stage II (i.e.,
Contemporary won Stage II, but scored at most 33/35), it must
have necessarily won Stage III.

Final Conclusion
Therefore, we know that Contemporary must have won Stage II,
and either won Stage III as well, or lost no more than two points in
Stage II.
Overall, Contemporary's combined score in Stage II and Stage III
must have been very close to the maximum number of points
possible:
51 c2 + c3 60:
What is interesting is that Contemporary can lose Stage III and
Stage IV, but by scoring nearly perfect in Stage II (i.e., at least
33/35) it can still win the competition.
This seems to be an aberration.

Fair ranking in competitive bidding procurement: a case analysis

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Fair ranking in competitive bidding procurement: a case analysis