Reverse Bidding in a Research, Development, and Innovation Project

In the reverse bidding (in Finnish käänteinen kilpailutus or ranskalainen urakka), bidders can showcase a broader range of expertise and solutions compared to a purely price-based tender. This way, the quality aspect is better reflected in the bidding process. A careful market dialogue is required to get access to the sufficient information on the market and the options available. It provides a good basis for setting the goals and objectives of the project within the framework that is feasible. This article provides the project staff of the universities of applied sciences and other parties interested in the procurement the beginners’ experiences and key takeaways from the reverse bidding of a technology service provider in VIVA research, development, and innovation project.

stock photo. — Photo: Michael Burrows / Pexels

The purpose of the VIVA – Virtual Technologies Boost SME Exports project, funded by the Helsinki–Uusimaa Regional Council, is to provide small and medium-sized enterprises (SMEs) with a new way to simulate and practice export trade interactions. The project encounters export trade, modern technologies, and continuous learning. Modern technologies refer to Augmented Reality (AR) and Virtual Reality (VR).

The aim of the project is to develop sustainable export competencies, improve SMEs’ ability to change and support their green growth towards carbon neutrality. This is done by tackling critical skills gaps, anticipating future skills needs and enabling micro-learning. At the same time, the digital skills of SMEs evolve. (Heiskanen & Kuhmonen 2021.)

The evaluation of the tenders must be equal and transparent

In VIVA, the reverse bidding process was initiated in the application phase with a market dialogue to increase the market knowledge and find suitable service providers on the internet. The market dialogue helped to define more precisely the technical services and products needed for the implementation of the project and clarified the price level. A more detailed understanding of how the subject of the procurement should be defined in the invitation to tender was also obtained.

Unlike price-based tendering the reverse bidding means that the contracting entity sets the price of the procurement. It is very important to set the price of the procurement at just the right level to get exactly what is needed for the implementation of the project. (Koljonen 2018.)

In VIVA’s case the value of the public procurement did not exceed the national threshold value, which meant that the tenders of this small procurement could be requested directly from service providers (JHNY 2021).

The minimum requirements that the bidder had to meet were set out in the invitation to tender. They concerned either the suitability of the tenderer or the subject of the contract. As an example of the suitability, the tenderer had to be financially sound and solvent to carry out the service for which the contract was awarded for the entire duration of the project. The requirements for the subject of the project concerned the obligations of the virtual reality (VR) software offered to meet the following characteristics: The project participants must be able to create interactive VR content without, for example, Unity or Unreal coding skills. The VR content provided, produced by the project, had to meet the Accessibility Directive’s Accessibility Levels A and AA. VR glasses were not required, but the content had to be accessible via mobile phone and web browser.

The evaluation criteria for the bid concerned the co-development and co-creation expertise in the overall service, training and consultancy expertise, pedagogical competences with regard to the target group of the project, experience in producing virtual reality (VR) and augmented reality (AR) learning environments for educational or business use, and experience in managing similar projects. Co-development and co-creation assessment areas included the use of service design principles, processes and tools, gamification skills and knowhow of utilizing virtual technologies in the international business of SMEs, especially in the context of green growth, in the rapidly changing, post-COVID environment. Each criterion was scored, and the scores were used to weight the different evaluation items.

According to the several rulings of the Market Court regarding the reverse bidding, the importance of defining the criteria for comparison and of very careful justification of the comparison is emphasized. The Market Court is a special court that deals with procurement, competition, and supervision matters, as well as market law and intellectual property rights matters (Oikeuslaitos 2022). When bidders cannot compete on price, all attention is focused on the comparison of quality. The tenderers must be clearly informed of the criteria for winning the competition, what exactly will be evaluated in the comparison. It is important to stress to tenderers that you cannot gain an advantage in competition by lowering the price. (Kontio & Takala 2014.)

In the VIVA project’s reverse bidding process, the invitation to tender was sent to five companies by email. The questions received from the bidders during the bidding process were answered collectively to all companies to which the invitation to tender had been sent. By the deadline, the bids were received from three of the five service providers. In the evaluation process it was checked that all the minimum requirements were met by each bidder. The tenders were then scored according to the evaluation criteria defined in the invitation to tender, and the scoring table was sent to all tenderers for information when the winner of the tender competition was announced in the procurement decision.

Ten key takeaways of the reverse bidding

A market dialogue at the project application stage will help to understand the products available and their price level. It enables the achievement of the project’s goals and objectives by giving an overall impression of the products and services and their price level. The objectives of the bidding process should be carefully defined. The more accurate information there is available already in the application phase, the smoother the bidding process.
The project application must allow sufficient working time for the tendering process. The project staff must be prepared for the fact that they are responsible for carrying out the tendering process. The reverse bidding process is laborious, even if it is a small procurement, especially when you are doing it for the first time. It requires the processing a pile of documents during the bidding with accuracy: invitation to tender, tender, evaluation and scoring of tenders, procurement contract, personal data processing contract, transfer of rights contract. The project application must also carefully define what is required from the external service provider to achieve the project’s objectives.
It is important to make use of the UAS’ procurement expertise and utilize the UAS’ procurement guidelines. The procurement expert can advise to choose a suitable tender procedure, help with the preparation and revision of the bidding documents, act as a sparring partner in the tricky parts, guide where and when legal assistance is needed, and assist in comparing tenders and preparing the procurement decision.
If you are not a lawyer, the use of an external lawyer is essential from the initial stage. It is safer not to trust only your gut feeling. There are a lot of legal issues to be considered, such as Contractor’s Liability Act, The General Terms of Public Procurement (JYSE) and General Data Protection Regulation (GDPR). The use of a lawyer at the tender stage can save significant costs in the event of a possible dispute later.
Qualitative criteria must be carefully drawn up and the weighting of scores carefully considered. When comparing bids, the differences arise from the issues that go beyond the minimum requirements, as each bidder must meet all the minimum requirements. The evaluation of tenders must be objective and equal.
It is advisable to request a structured tender with a limited response space (x characters/words) for each quality criterion. Not all small businesses are very experienced bidders, so the structured tender helps them to focus on essentials, and also facilitates the evaluation of tenders, since differences in text style and length may be confusing.
Payment instalments, payment schedule and the procedure for approving the work stages and the definition of done (DoD) of the finished product should be outlined as clearly as possible at the tender stage. DoD is a shared understanding within the team on what it takes to make the product releasable. It thus refers to an item being fully developed i.e. finished (Agile Academy).
Allow sufficient time for the evaluation and scoring of tenders. Each scoring must be justified in written. It is strongly recommended to sleep through the night – and another night – and having the tenders read and evaluated by an external reader.
Ensure transparency of the process. It is important to document each stage of the tendering process with memorandums. This allows to go back and justify decisions afterwards, if necessary.
Psychologically safe environment and resilience skills are the key factors. In a stressful process, a good colleague is worth more than gold. The process is demanding and requires a lot of learning, iterations and continuous improvement. The work must be done in good spirit and in a flexible, smooth cooperation and open interaction. During the project, you have to be curious about new things and ask a lot of ”stupid” questions. With a good colleague, you dare to ask them all.

Our experience shows that during the reverse tendering process, a lot of bottlenecks inevitably arise to be tackled. Despite of all the challenges, the task is not impossible in case you are agile, have ability to change and like solving problems.

As a development suggestion we propose that the legal design could be applied to make the reverse bidding process more accessible, usable, and engaging. It could also help to communicate the process in a clearer way. According to Hagan (2019), the purpose of legal design is to focus on improving legal services by innovating, testing, and building systems that serve best the people involved in them (Hagan 2019).