BPW Advisory 1996-4 Economic-Benefits as a Factor in Evaluating CSP

BPW Advisory 1996-4 Economic-Benefits as a Factor in Evaluating CSP

Purpose: To provide general guidelines for procurement agencies to follow when using an economic-benefits evaluation factor in the Request for Proposals process.  This Advisory outlines considerations for assessing whether the economic-benefits factor is appropriate in particular procurements; suggests RFP language; discusses how to evaluate proposals that offer such benefits; and requests agencies to keep the Board apprised of the results of using such a factor.
 
Background: At its September 18, 1996 meeting, the Board of Public Works amended COMAR 21.05.03.03 — Procurement by Competitive Sealed Proposals.  This regulation has always stated that a Request for Proposals must delineate “the evaluation factors and an indication of the relative importance of each evaluation factor, including price.”

The amendment that the Board adopted provides that procurement officers may include an “economic-benefits” factor as one of several technical factors to be evaluated in determining which offeror’s proposal is the most advantageous to the State.  This economic-benefits factor is intended to encourage offerors — both resident and non-resident — to be innovative in developing their proposals and to demonstrate how awarding the contract to them will provide economic benefits to the State of Maryland.  

NOTE:  The economic-benefits evaluation factor is NOT a resident business preference.  This factor may NOT be used to provide competitive advantages to one business over another based upon the business’ location.  Preferences based on residency are not authorized by law, regulation or policy.  

Applicable RegulationCOMAR 21.05.03.03  

Guidelines
 
I.  Evaluation Factors Generally
 
As noted, an RFP must list the evaluation factors — and the relative importance of each factor— that the agency will use to evaluate the proposals.  These factors convey to potential offerors what will be evaluated, compared, and ranked in selecting the most advantageous proposal.

Evaluation factors must be tailored to the specific circumstances of each procurement.  Factors often relate to the offeror’s staff experience; business experience; approaches to problem resolution; capabilities; understanding of State requirements; financial stability; and project implementation plans.  

The economic-benefits factor is only one of several factors that may be included for evaluation.  Indeed, the regulation limits the impact of this factor to no more than ten percent of the total allocable technical points (when a point system is used for evaluation).  When the economic-benefits factor is used, the RFP must guide offerors in preparing their proposals, and direct offerors to respond as to how award of the contract to them would benefit the State economy.  These responses would be evaluated to determine the relative value of the contributions offered and would be scored or ranked accordingly.

II.  Thinking through the RFP— Preliminary Considerations

A.  When to use the economic-benefits factor.

  • Exercise discretion in using this factor.  Apply your professional judgment as  a procurement officer and assure that solicitations using the factor are appropriately reviewed by your agency’s solicitation review team and assistant attorney general or other legal advisor.
  • Use only when soliciting competitive sealed proposals.  Further amendments are required before it can be used to evaluate proposals from architectural or engineering service providers under COMAR 21.12.01 through 21.12.05.  Economic-benefits may not be used under the competitive sealed bidding method.
  • Use only in procurements where there is a reasonable potential for competing offerors to generate economic benefits in performing the contract.  For example, some procurements of supplies and equipment may not provide opportunity for creating new jobs, for subcontracting, for generating tax revenues or other economic benefits, whereas the procurement of labor-intensive services or maintenance may offer such opportunities.
  • The factor may not be used for any contract reasonably expected to be $25,000 or less.  Contracts of substantial dollar value may be good candidates for the use of an economic-benefits evaluation factor, whereas other contracts may not; again, apply good judgment.
  • The economic-benefits factor should not be used to the extent it actually conflicts with regulations, written policies, or rules specific to the use of the funds to be expended under the contract.​
B.  What qualifies as an economic benefit?
 
The amended regulation specifies four subfactors that may be evaluated.  In addition, the regulation provides offerors an opportunity to explain other benefits that would result from accepting their proposals.  The subfactors are: 
  1. Intended procurements from Maryland subcontractors, Maryland suppliers, and Maryland joint venture partners.
  2. The number of jobs generated for Maryland residents as a direct or indirect result of the contract.  The types and the value of the jobs to Maryland’s economy may be considered, as well as the potential for long-term, as opposed to temporary, employment.
  3. Tax revenues generated to Maryland and its political subdivisions.  The aggregate value of estimated tax revenues to the State and its political subdivisions that may be generated as a result of the contract, any subcontracts or supply orders, may be considered.
  4. The amount or percentage of subcontract dollars placed with Maryland small businesses and Maryland MBEs.
  5. OTHER:  Offerors should be given the opportunity to explain other approaches they may propose to benefit the State economy.  It is neither necessary or desirable to limit offerors’ options.  Let them be innovative in their approaches. 
C.  How to rank economic-benefits as an evaluation factor.
 
When a point system is used, no more than ten percent of the total allocable technical points may be awarded for this factor.  At least half of the points awarded for economic-benefits must be attributable to the subfactors explicitly set forth in the regulation (numbers 1 — 4 above).  In order to encourage innovation, up to half of the economic-benefits points may be for proposed contributions other than those specifically set forth in regulation (items 1-4 above).
 
For example, if technical points total 60, the points attributable to the economic-benefits factor may not exceed six points.  In this scenario, the points attributable to the specific sub-factors must be at least three; the remaining points may be assigned for other contributions.
 
When a point system is not used and the evaluation factors are simply listed in order of importance, the procurement officer must establish the appropriate ranking of the economic-benefits factor.  This factor should not be ranked higher in its relative order of importance than it would have been if a point system were used.
 
D.  How to Encourage Compliance 
  • When the economic benefits factor is used, the successful offeror’s promised contributions to the Maryland economy should be incorporated in the contract. 
  • Consideration should be given to including a provision in the solicitation and contract requiring the successful offeror to submit either, or both, progress reports during the performance of the contract, and a final report upon completion of the contract, whereby achieved verses promised economic benefits are verified and compared.
 
III.  Drafting the RFP — Suggested Language
 
Following is an example of language addressing the economic-benefits factor that may be included in the RFP.  Procurement officers should modify the language as appropriate for specific procurements.
 
Economic-Benefits
 
Offerors shall submit with their proposals a narrative describing benefits that will accrue to the Maryland economy as a direct or indirect result of their performance of this contract.  Proposals will be evaluated to assess the benefit to Maryland’s economy specifically offered. 
  • The contract dollars to be recycled into Maryland’s economy in support of the contract, through the use of Maryland subcontractors, suppliers and joint venture partners.  Be as specific as possible.  Provide a breakdown of expenditures in this category. 
  • The number and types of jobs for Maryland residents resulting from the contract.  Indicate job classifications, number of employees in each classification and the aggregate payroll to which the contractor has committed at both prime and, if applicable, subcontract levels. 
  • Tax revenues to be generated for Maryland and its political subdivisions as a result of the contract.  Indicate tax category (sales taxes, payroll taxes, inventory taxes and estimated personal income taxes for new employees).  Provide a forecast of the total tax revenues resulting from the contract. 
  • Subcontract dollars committed to Maryland small businesses and MBEs.  (These are also included under the first category.)  
  • Other benefits to the Maryland economy which the offeror promises will result from awarding the contract to the offeror.  Describe the benefit, its value to the Maryland economy, and how it will result from the contract award.
 
IV.  Evaluation of Proposals
 
Proposals are evaluated to determine which proposal is most advantageous to the State.  The process involves applying the evaluation criteria contained in the RFP, comparing the proposals to each other, and ranking them from most to least advantageous.  When used in the evaluation process, numerical point scores can be useful guides but should not be the sole factor in determining award.  The key to sound decision-making is not the raw scores themselves, but the strengths, weaknesses, advantages, and deficiencies that the scores represent.  Similar to any other evaluation factor, the economic-benefits factor must be evaluated based on the overall merit of that aspect of the proposal, rather than on strict application of numerical evaluation points assigned to the subfactors.
 
V.  Post-Procurement — Provide Feedback to the Board of Public Works
 
In order that the Board may evaluate the effectiveness of the economic-benefits evaluation factor, procurement officers are encouraged to provide feedback to the Board staff as to their experiences in using this factor.  To facilitate this evaluation, Board staff would like to hear from procurement officers concerning: 
  • ​​​​​​​​​​​​Use of this factor.
  • Impact on competition.
  • Situations where the economic-benefits factor made an impact on contractor selection.
  • Actual economic impacts (during contract performance) vs. promised impacts.
  • ​Successes attributable to the use of this factor, and situations where particular caution should be exercised.
     
Procurement agencies are requested to maintain a cumulative record containing the above information.