This article is contained in Chapter 8, The Request For Proposal Handbook (www.rfpmentor.com) and is reproduced with permission of the publisher.

REQUESTING BEST AND FINAL OFFERS

According to the procurement people in New Mexico, “The best and final offer step has produced some truly amazing results over the years saving the State literally millions of dollars.”

The RFP process is highly flawed. Buyers issue documents that often provide a distorted, incomplete, or inaccurate description of the problem. This is not their intention but simply the result of many different people trying to describe a complex requirement or a difficult problem. Suppliers then take this information and interpret it in the light of their own knowledge and product offerings and develop their proposals.

Our evaluation processes attempt to compensate for these systemic problems by basing the award on a number of factors: not simply the least cost, nor only the best project management plan, nor just the best technical solution. We combine all of these factors so that we often award the contract on the basis of least apparent risk. The winning proposal often does not represent the best value but rather the proposal with the fewest “holes”, the fewest ambiguities, the fewest weak sections. In short, the proposal that seems to solve the problem and is most credible.

The systemic problem is easy to define. Many of the critical details of a solution cannot be articulated by buyers until they have reviewed the suppliers’ proposals. Until this time, the buyers do not have sufficient insight or knowledge of potential solutions to make an informed decision. But it is fundamental to our RFP process that suppliers can’t revise their proposals; evaluators can only evaluate the submitted material. And evaluators hate it! For example, you issue and RFP and get six proposals. Only three are anywhere close to the mark. They are o.k. but not great. One of the proposals lacks the depth of technical information which would inspire confidence in the solution. The second lacks project management depth. The third is simply too expensive.

Best and Final Offers (BAFO) is often used when the Evaluation Team believes that the price could or should be better, when some elements of a proposal are confusing and need further definition. It is also used to obtain additional information which will provide a larger point different between competition proposals.

Vendors hate the traditional RFP process – the one without BAFO. Losing a major contract because one section of their proposal was rated a ‘6’ rather than an ‘8’ is difficult to understand. Vendors often complain that “If we had only known more details and understood the buyers’ reasons, then we would have proposed a different solution.”

There is a process - Best and Final Offer (known as “BAFO”) - designed to solve this problem. This procurement strategy permits buyers to get revised proposals from vendors. In the U.S., this process is defined in the procurement statutes of many states and in the ordinances for many cities. In Canada, BAFO is rarely used. I haven’t seen it used by the federal government or Ontario. Nor by many of our largest cities. The Province of British Columbia used this technique a few times in the mid to late 90s for IT procurements. And the City of Mississauga has used it but rarely. In the U.S., it is used in many jurisdictions, but always under rigid controls. The concern is that all suppliers be treated fairly, and that no information be transmitted from one supplier about the other suppliers’ offers.

Here’s how it works. First, the RFP contains language that properly defines the rules and the process. Typically, the evaluators identify those proposals capable of delivering the required results. This evaluation is the same as would normally be done to develop the short-list of finalists. These finalists are then provided detailed questions related to their proposals, or informed of those parts of the proposals that are deficient. The suppliers are given the opportunity to redo their proposals. They are provided with the opportunity to improve their offering and to eliminate unacceptable conditions contained in their original proposal. The amended sections are then re-evaluated and re-scored according to the evaluation process defined in the RFP.

There are several different ways in which BAFO is employed:

1. In some jurisdictions, such as Arizona, competitive negotiations precede BAFO. In this way, the revised proposals reflect the agreed upon changes resulting from the negotiation process.

2. In some jurisdictions, such as New Mexico, competitive negotiations are not used. Rather, vendors are sent a letter indicating the weaknesses in their proposals and invited to submit a BAFO.

3. In other places, such as Idaho, negotiations occur after BAFO and result in a contract. No revised proposal is required.

Montana has produced an easy to read, logical description of the RFP process and BAFO:[i]

Best and Final Offers  (Optional step)

Ø       The committee may decide to seek best and final offers from one or more offerors if additional information is necessary or responses will be altered in order to make a final decision.

Ø       The committee may request only one best and final offer.

Ø       Offerors may not request an opportunity to submit a best and final offer.

Ø       The procurement officer must be notified of the offerors who are provided the opportunity to submit best and final offers and the areas to be addressed.

Ø       The procurement officer will send out the request for best and final offers in a letter stating the areas to be covered and the date and time in which the best and final offer must be returned.

Ø       Proposal scores are adjusted in light of the new information received in the best and final offer. Additional points cannot be given.

Ø       A best and final offer cannot be requested on price/cost alone unless so stated in the RFP. (ARM 2.5.602.)

New Mexico’s RFP Guide[ii] provides some insight into the use of BAFO:

The best and final offer is the only step in the process where the proposal can be amended. If the offeror’s proposal contains unacceptable contract terms and conditions, this is the step in the process where that problem is resolved. If an offeror stamped every page of the proposal “proprietary” or “confidential”, this is the step in the process where that problem is corrected. If costs were not proposed on exactly the same basis as the other offerors, this is the step in the process to correct that problem.

New Mexico uses BAFO to ensure that the winning proposal receives at least 90% of the available points – they simply do not accept mediocre proposals. Here are the rules that they have published:

A. NOTIFY FINALISTS

This step is an extremely important part of the procurement process as this is the only place in the process where offerors can amend their proposals. They may amend their proposed costs as well as other portions of their proposals. Offerors should be encouraged to improve their proposals. The recommended technique is to collect questions about the offeror's proposal from the Evaluation Committee. The Procurement Manager divides the questions into two groups: 1) questions to be addressed in the best and final offer; and 2) questions for the oral presentation. If the Procurement Manager took good notes during the evaluation, the notes may suffice as the basis for the notification letters.

The Procurement Manager must provide each finalist a written notification letter that contains the following:

• The date, time and location of the oral presentation or system demonstration, along with instructions as may be appropriate for the conduct of the session including an agenda.

• Specific areas of the offeror's proposal that the Evaluation Committee may request to be addressed as part of the submission of best and final offers. For example, the Evaluation Committee may request that the offeror readdress important aspects of the proposal such as the implementation schedule, level of support, type or amount of resources proposed, or contract terms and conditions.

• Specific areas of the offeror's proposal that the Evaluation Committee may require to be addressed as part of the submission of best and final offers. For example, unacceptable terms and conditions may have to be amended or withdrawn as part of a best and final offer. Confidential or proprietary designations on non-proprietary
• portions of an offeror's proposal must be removed. Unacceptable licensing or other restrictions on the use of the product must be eliminated through a best and final offer amendment.

• The due date and time for submission of best and final offers.

• The final paragraph should emphasize the fact that the best and final offer is an opportunity for the offeror to improve the proposal by submitting revised proposed costs as well as other amendments.

If the best and final offer contains meaningful revisions to the original proposal, then all of the revised portions of the proposal must be reevaluated and points reassigned accordingly. The best and final offer step has produced some truly amazing results over the years saving the State literally millions of dollars. The step works best on single source awards. However, it is valuable every procurement as it is the only step in the process where the offeror is given an opportunity to amend the proposal. The RFP document encourages the offerors to respond to the contract with specific wording changes and additions. Some of these changes and additions could preclude the signing of a contract. That is why they are required to be submitted up front as part of the proposal as opposed to the more traditional negotiation process that corporate attorneys thrive upon. For example, offerors have required that the contract be governed under laws of some other state than New Mexico. That requirement is not acceptable. The offerors were given the opportunity to amend their proposals eliminating the requirement. In some cases the proposals were amended, in others they were not and the offeror was eliminated from the process, deemed non-responsive. In other cases offerors have required payments in advance, which is prohibited by statute. There have been almost endless variations. That is why the Procurement Manager is responsible for reviewing the offeror's changes and additions with in-house counsel before this step in the process. Another area that causes serious problems is workmanship or other warranties that impact the offeror's proposed costs. For example, the contract may require that the contractor be bound and honor a six-month workmanship warranty where errors will be fixed during the warranty period at no additional cost to the agency. If one finalist agrees to the requirement and another does not, what does that do to the points awarded for cost by the formula. Obviously, the cost formula works only when the costs are proposed on an identical basis. Since, in this case, proposed costs are not on the same basis, the Procurement Manager has an obligation to get the inequity fixed as part of the best and final process. The Procurement Manager may demand that the second offeror resubmit costs and a written amendment eliminating objections to the six-month contractual workmanship warranty. The Procurement Manager may ask both offerors to propose costs on a new basis, e.g. a three-month workmanship warranty.

The key point of this discussion is that the model RFP best and final paragraph uses the phrase "offerors may be required to submit revisions...", and this step in the process is where proposal inequities and unacceptable conditions are eliminated.

DON'T ACCEPT RESPONSES SUCH AS "SUBJECT TO NEGOTIATIONS" AS AN ANSWER.

If the best and final offer request contains instructions for reproposing the offeror cost on a basis other than what was contained in the RFP document, then the change should be treated as an RFP amendment and identified as such.

After the award the Procurement Manager is responsible for preparing the proposals for public inspection. This simply means that one or more of the competing offerors may request copies of one or more of the proposals submitted by the other offerors. Of course, the winning proposal is the one most often requested. Public disclosure has to be timely. The problem arises when the offeror has designated all or sections of the proposal as "proprietary" or "confidential" when they do not meet the requirements for such designations. The best and final offer step in the process should be used to correct this type of problem. The Procurement Manager should require that the extraneous designations be removed from the proposal as a condition of award. After the award it is generally difficult to get even the winning offeror to cooperate with the public disclosure requirements. This situation can extend the protest period and delay contract initiation. Finalist notification letters should be sent via facsimile or e-mail and U.S. Mail.

B. NOTIFY NON-FINALISTS

Non-finalists need to be notified too. They probably have a procurement response team on standby awaiting notification of the selection. Therefore, prompt notification of the non-finalist is required so that the procurement teams may be released for other duties.

The recommended notification procedure is a telephone call from the Procurement Manager followed by a written letter of notification. "This letter is notification that your company's proposal in response to RFP # was not selected as a finalist. On behalf of Secretary and the members of the Evaluation Committee, I want to express our sincere appreciation for the time and effort you and your staff have taken to respond to our Request for Proposals."

If the company representative requests a critique of the proposal, schedule the critique after the expiration of the protest period. The notification letter should be sent via facsimile and U.S. Mail.

C. COLLECT BEST AND FINAL OFFERS

The model RFP language states that the best and final offer must be submitted on a given date and time. This deadline is treated exactly like the proposal submission. Best and final offers submitted after the deadline are not accepted. There is no reason to hear an oral presentation from an offeror who is going to be deemed non-responsive for failure to adequately address required “best and final” offer requirements. The best and final offers must be verified for compliance with the requirements.

Disqualification decisions are made by the Evaluation Committee and disqualification letters must be promptly sent as well.

Best and final offers may need to be clarified which is another good reason for having them early for review prior to the oral presentation. The Procurement Manager may request a written clarification or the offer may be amended via hand written notes which are dated and signed by a qualified representative of the offeror's organization. Since the amended offer is binding, it must be signed by someone who has the power to contractually obligate the organization.

Best and final offers, as amended, are accepted only once. They are discussed and clarified at the oral presentation which concludes the contact with the offerors' organizations. For some unknown reason, some jurisdictions require a sealed best and final offer that is opened sometime after the oral presentation has been concluded. That is not the way this process is conducted. The best and final offer must be submitted by the specified due date and time. The best and final offer should be discussed and clarified, if necessary, before the oral presentation/demonstration has been concluded.

The state of Massachusetts uses BAFO to solve budget and cost issues:

If all the responses received are priced too high for the department’s available funding, a department has the choice of canceling the procurement, amending the procurement or requesting a Best and Final Offer to obtain more reasonable pricing.

It then defines the rules for BAFO:

Best and Final Offer (BAFO)

Pursuant to 801 CMR 21.06(11), a Procurement Management Team may provide bidders with an opportunity to provide a Best and Final Offer (BAFO). The BAFO process represents an optional step in the bidder selection process and is not part of the contract negotiation process. BAFOs may be useful when no single response addresses all the specifications, when the costs submitted by all bidders are too high, when two or more bidders are virtually tied after the evaluation process or when all bidders submitted responses that are unclear or deficient in one or more areas.

The PMT may restrict the number of bidders invited to submit a BAFO, or may offer the option to all bidders. In either case, the PMT should provide the same information and the same submission requirements to all bidders chosen to submit a BAFO. Departments are required to develop and distribute to selected bidders the written terms for a BAFO with specific information on what is being requested, submission requirements with timelines and information on the basis for evaluating responses and determining the successful bidder(s). Bidders may be asked to reduce costs or provide additional clarification to specific sections of the RFR.

Selected bidders are not required to submit a BAFO and may submit a written response notifying the PMT that their response remains as originally submitted. The terms of the BAFO may not identify either the current rank of any of the bidders selected for a BAFO or the lowest costs currently proposed. The Procurement Team Leader will have full discretion to accept or reject any information submitted in a BAFO. OSD recommends that departments consider how the BAFO option will be evaluated. Departments may evaluate the submissions of BAFOs as an addition to the scores already received by bidders on their original RFR responses or may develop a new evaluation process based entirely on the BAFO submission. Departments should articulate in the evaluation criteria the process to be used in evaluating the BAFO.

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