News

New Guidance to Help Determine Construction Procurement Pricing

The Scottish Government has issued a new Construction Policy Note 3/2024 Graduated Pricing Mechanism Guidance, for building procurement, to provide an alternative method of determining price score in tender assessments.

Target Audience

The Construction Policy Note (CPN) aims to help public sector buyers plan, procure, and manage projects. Suppliers can also use the CPN to help them understand best practice on setting pricing in their bid submissions.

Background

While the policy requirements for public sector tender evaluations are to assess both price and quality, the misconception that lowest price always wins encourages some contractors to adopt the poor practice of submitting artificially low tender bids.

The Graduated Pricing Mechanism (GPM) has been developed to encourage bids to meet a job’s requirements, without placing unsustainable financial pressures on either the supplier or the client projects.

How GPM Works

Under GPM, the lowest price is awarded the highest score (i.e. 100 marks) with other prices submitted incurring a percentage deduction to their score, depending on their distance from the lowest price and proximity to the median price.

More Information

Although it sounds complicated, guidance on how to apply GPM, including a Method Example and Tender Calculator Spreadsheet can be found in the Scottish Government’s Construction Policy Note (CPN) 3/2024 webpage.

Assessing GPM Effectiveness

The Scottish Government will assess the usage and viability of the GPM in the one-year, and two-year anniversary dates of the CPN being issued.

SDP Training

Suppliers can get more advice on submitting public sector tenders, in SDP’s 1.3 Getting Your Business Tender Ready - The Checklist training, on 13 August.

Book the Training Here