Financial analysis: Keeping the playing field level
The Public Contract Regulations 2006 state that contracting authorities, such as Procure Plus, may assess the economic and financial standing of those bidders who wish to participate in a procurement exercise. Here at Procure Plus we choose to do this to ensure the financial health of a bidder.
Alan Rotherham, procurement project manager, says “When setting up our framework agreements, we set out our analysis to ensure that each bidder has a financially sound business and that they will be able to undertake the works if successful in their framework submission”.
This financial assessment uses a holistic and balanced approach, measuring every aspect of the bidding organisation. This ensures that we’re looking at every element that feeds into financial stability, preventing an organisation being exited from the tender process because of an inaccurate assessment of their financial health. In order to get an accurate picture of a bidders’ financial health we use ratios to assess the organisations financial accounts in terms of: profit and loss; balance sheet; liquidity; solvency; and operational running costs.
These ratios allow us to assess the organisation’s profitability, leverage, equity and efficiency enabling us to gain an overall view of the bidding organisations financial standing to ensure it is healthy.
The financial standing procedure can be a daunting process for bidders, as it can be unfamiliar to have an external organisation viewing ins and outs of its financial workings particularly if a bidder has been through a difficult trading period. However, it’s important to remember that the process is in place to ensure fair consideration is given to all bidders, allowing for equal treatment no matter what the size of the organisation.
Alan Rotherham, Procure Plus