How Government Tenders Are Evaluated: Price vs. Functionality Scoring Explained

You submitted the lowest price. R2.3 million versus the next bidder's R2.8 million. You saved the government R500,000.

And you lost.

How? Because you didn't understand how government tenders are actually evaluated.

The lowest price rarely wins. In South African government procurement, tenders are evaluated on a points system that combines price, B-BBEE status, and often technical functionality. If you don't understand this system, you're bidding blind.

The Preferential Procurement Framework

Government procurement in South Africa is governed by the Preferential Procurement Policy Framework Act (PPPFA) and its 2022 regulations. This framework mandates that tenders are evaluated using specific point systems:

The two standard formulas:

Formula	Price Points	B-BBEE Points	Used For
80/20	80 points	20 points	Contracts up to R50 million
90/10	90 points	10 points	Contracts above R50 million

What this means: In an 80/20 tender, a Level 1 B-BBEE bidder automatically gets 20 bonus points. They could bid R400,000 more than a non-compliant bidder and still win.

How price points are calculated

Price points use a comparative formula. You're not scored on your absolute price—you're scored relative to the lowest bidder.

The formula:

Ps = X × (1 - (Pt - Pmin) / Pmin)

Where:

• Ps = Points scored for price
• X = Maximum points for price (80 or 90)
• Pt = Your tender price
• Pmin = Lowest acceptable tender price

Example calculation (80/20 tender):

Scenario: Three bidders for a cleaning contract

• Bidder A: R1,000,000 (lowest price)
• Bidder B: R1,100,000
• Bidder C: R1,200,000

Price scores:

• Bidder A: 80 × (1 - (1,000,000 - 1,000,000) / 1,000,000) = 80 points
• Bidder B: 80 × (1 - (1,100,000 - 1,000,000) / 1,000,000) = 72 points
• Bidder C: 80 × (1 - (1,200,000 - 1,000,000) / 1,000,000) = 64 points

Now add B-BBEE points:

• Bidder A: Level 4 B-BBEE = 12 points → Total: 80 + 12 = 92 points
• Bidder B: Level 1 B-BBEE = 20 points → Total: 72 + 20 = 92 points
• Bidder C: Level 2 B-BBEE = 18 points → Total: 64 + 18 = 82 points

Result: Bidders A and B are tied at 92 points. The contract may go to A (lowest price among equals) or there may be a functionality tiebreaker.

Notice: Bidder B's better B-BBEE status completely offset their R100,000 higher price.

Functionality evaluation (the hidden hurdle)

Many tenders add a functionality evaluation before price and B-BBEE scoring. This is where most bidders fail.

How functionality works:

1. The tender specifies evaluation criteria (experience, methodology, resources, etc.)
2. Each criterion has a weight (e.g., Experience: 30%, Methodology: 40%, Team: 30%)
3. Evaluators score each bidder on each criterion (typically 0-5 or 0-10)
4. Weighted scores are totaled
5. Bidders must meet a minimum threshold to proceed (often 60-80%)

Example functionality criteria:

Criterion	Weight	What They're Looking For
Relevant experience	30%	Similar projects, reference letters, completion certificates
Technical approach	35%	Methodology, understanding of scope, innovation
Team qualifications	20%	CVs, certifications, relevant skills
Resources & equipment	15%	Proof of vehicles, equipment, facilities

The 70% trap: If the threshold is 70% and you score 69%, your price is never even opened. You've done all that work for nothing—and you'll never know why you lost.

The full evaluation sequence

Here's how a typical government tender is evaluated:

Stage 1: Administrative compliance

• Are all required documents included?
• Is the tender properly signed?
• Was it submitted on time?
• Is the bidder tax compliant?

Fail here = instant disqualification

Stage 2: Functionality evaluation

• Score technical proposals against criteria
• Calculate weighted scores
• Eliminate bidders below threshold

Fail here = price never considered

Stage 3: Price and B-BBEE scoring

• Only qualifying bidders are scored
• Price points calculated using PPPFA formula
• B-BBEE points added
• Total points determined

Stage 4: Final adjudication

• Highest scoring bidder recommended for award
• Bid adjudication committee approves
• Award letter issued

Strategic bidding: How to maximize your score

Strategy 1: Calculate your B-BBEE advantage

Before pricing, calculate how much your B-BBEE status is worth:

In an 80/20 tender:

• Level 1 (20 points) vs. Level 4 (12 points) = 8 point advantage
• 8 points = 10% price premium you can charge and still tie

If you're Level 1 B-BBEE on a R1 million tender:

• You can bid R1,100,000 against a Level 4 bidder's R1,000,000 and score equally
• That's R100,000 extra margin—use it strategically

Strategy 2: Target functionality criteria ruthlessly

If the tender shows:

• Experience: 30% (score 0-5)
• You can get max 1.5 weighted points from this section

Your proposal should:

• Lead with your most relevant experience
• Include completion certificates and reference letters
• Match your experience narrative to the tender requirements word-for-word

Strategy 3: Price to beat, not to survive

Once you know your total non-price points (B-BBEE + expected functionality), calculate the price that wins:

1. Estimate competitor B-BBEE levels (use CSD data or industry knowledge)
2. Estimate their functionality scores
3. Calculate the price that gives you a winning total

Strategy 4: Don't bid on unwinnable tenders

If the functionality criteria heavily weight "10+ years experience" and you have 2 years—don't bid. You'll fail functionality regardless of price.

Use the evaluation criteria as a go/no-go decision tool.

B-BBEE points breakdown

For reference, here's the B-BBEE points allocation:

80/20 system (contracts up to R50M):

B-BBEE Level	Points
Level 1	20
Level 2	18
Level 3	14
Level 4	12
Level 5	8
Level 6	6
Level 7	4
Level 8	2
Non-compliant	0

90/10 system (contracts above R50M):

B-BBEE Level	Points
Level 1	10
Level 2	9
Level 3	6
Level 4	5
Level 5+	4 or less

The bottom line

Government tender evaluation isn't black magic—it's a formula. And formulas can be reverse-engineered.

The businesses that consistently win government contracts understand:

1. Which evaluation system applies (80/20 or 90/10)
2. What the functionality criteria are (and the minimum threshold)
3. How to calculate their B-BBEE advantage
4. How to price strategically (not just competitively)

Stop bidding blind. Start bidding smart.