This is the English version of the blog about the price/quality ratio. The conclusion will be the same, the way to get there is completely different. The reason for the later is simply because I do have to explain the Dutch situation here and that is not needed in the Dutch version of this blog.
In chapter 3 of the Best Value Standard 2013 the Best Value PIPS selection phase is explained. One of the things that is dominantly clear is that everything is graded, including the price. That makes it possible to find the Best Value Vendor. In the Netherlands we give a price tag to all submittals and that also makes it possible to find the Best Value Vendor. Both systems work adequately.
The question is how do the Dutch calculate the price tags for the submittals. Step one in this process is to ‘estimate’ a maximum budget. The submitted price of the Vendor(s) must be lower than this budget. That budget gives us a number in Euros. The next step is to see what a good price/quality ratio is. In chapter 3 of the Best Value standard it is 30% price and 70% quality, in the Netherlands it is often 25% price and 75% quality. So basically you can say that quality = 3 * budget (since 75 = 3 * 25). However, for reasons unknown to me, the formula used in the Netherlands is: quality = 75% of budget, and that is incorrect since 75 does not equal 75% of 25.
Well to be honest this is what I explained in Dutch using a lot more words. I can imagine you are left with a few questions, feel free to ask me. See the contact page for my E-mail. I will at least answer one potential question here, and that is why is it so hard to explain it in Dutch? The thing is when you are stuck in the Dutch P/Q paradigm it is hard to see the mistake. And when you see it, it is hard to explain it to others who are in the Dutch P/Q paradigm, because they are blind due to the Dutch P/Q paradigm bias. Since most readers of the English version of this blog are in de BV PIPS P/Q paradigm it is dominant clear and I can imagine one might even find it hard to believe that such an error has occurred without anyone has seen it for over 5 years.
My journey started after I heard vendors complain that price still has a huge impact at Best Value projetcs and the journey continued when a buyer was unsatisfied with the result b/c vendor prices turned out to make the difference after all. I combined practice with theory (mathematic) and it became clear to me.
The day I translated the blog I read an article about the same subject, the article is about a study conducted by the University of Utrecht. It is about the P/Q ratio, as the client wanted it and how it turned out to be due to several reasons. Two conclusions from that article are interesting. First one when using filters on the quality submittals the P/Q ratio change in favor of Price. The second one when using a relative method the ranking between Vendor A and Vendor B depends on the submittal of Vendor C. These conclusions just entered my mind, I haven’t had time to consume them and see what impact, if at all, it has on BV PIPS ranking.