Definition of MEAT for the Competition

7.2.1 General rules

7.2.1.1 The Bidder submitting the most economically advantageous tender shall be determined by reference to the criteria and principles set out in this Section 7. 7.2.1.2 Subject to subsection 7.1 (Introduction), the most economically advantageous

tender will be the Bid which achieves the highest Final Score (which, for the avoidance of doubt, would be the highest positive Final Score or where there are no positive Final Scores would be the negative Final Score closest to zero), as described below, except where the difference between such Final Score and the Final Score of any other Bid(s) is less than 15 points. In such a case, the principles set out in subsection 7.2.2 (Supplementary rules) will apply for the purposes of determining the most economically advantageous tender.

7.2.1.3 The Final Score for each Bid shall be calculated as follows: Final Score = P + (n x Q)

Where

P is a score equivalent to the Bidder’s Net Present Value (“NPV”) of the Franchise Payments for the Core Franchise Term, as calculated in sheet NPV cell F51 in the Bidder’s Financial Model (“As Bid NPV”). P will be measured in millions rounded to two decimal places, with the midpoint always rounded up (for example, 225,524,999 will be rounded to 225.52, and 225,525,000 will be rounded to 225.53). P will be a positive number in the event of an overall premium and a negative number in the event of an overall subsidy;

Q equals the Quality Score described in subsection 7.11 (Conversion of evaluation scores into quality scores), expressed as a score out of 13. This will be rounded to two decimal places using the standard mathematical rules (for example, 10.1234 will be rounded down to 10.12 and 10.3850 will be rounded up to 10.39); and

n equals 25.

7.2.1.4 The As Bid NPV will be for the Core Franchise Term and will not include the Extension Period.

7.2.1.5 For the avoidance of doubt, no adjustment will be made to the As Bid NPV used in the determination of P to reflect:

i. Any payments to the Department that may be made under the profit share/cap arrangements in the Franchise Agreement;

ii. To the extent included by Bidders in their calculation of Annual Franchise Payments, any payments to/from the Department that may be made under any of the performance or incentive regimes in the Franchise Agreement; or iii. The impact of risks to the Bidders financial robustness. Financial robustness

will be addressed through the approach described in subsection 7.6 (Evaluation of Financial Robustness).

7.2.1.6 The maximum Quality Score is 12.88 (this is less than 13 because the evaluation score for certain Sub-Plans is capped at 8) and therefore the maximum value of (n*Q) is 322.00. This is the maximum score that a Bid can obtain in relation to quality, whatever the NPV of that Bid or the winning Bid. Since the size of P is not known until Bids are received, it is not possible to specify in the ITT a fixed weighting in percentage terms between price and quality.

Table 7.1. Illustrative example of calculating the Final Score using the General

Rules

n = 25 for this example.

Bidder 1: P = subsidy of 450; Q = 10 Bidder 2: P = subsidy of 400; Q = 5 The Final Score for each Bidder will be: Bidder 1: -450 + (25 x 10) = -200 Bidder 2: -400 + (25 x 5) = -275

The winning Bidder would be Bidder 1 as there are no positive Final Scores and Bidder 1 is the negative Final Score closest to zero.

7.2.1.7 If:

i. A Bid is found to be non-compliant in accordance with subsection 3.5 (Non- compliant Bids); and

ii. The Department decides not to exercise its right to reject the Bid and disqualify the Bidder who has submitted that Bid from the competition; and

iii. The effects of the non-compliance include a likely financial impact on the Department (in the Department’s reasonable view);

the Department may reduce the value of P used in the calculation of the Final Score for that Bid to take into account its reasonable view of the most likely financial impact of the non-compliance on the Department.

7.2.2 Supplementary rules

7.2.2.1 In the event that the difference between the highest Final Score and the total Final Score of any other Bid is less than 15 points, the following rules shall apply for the purposes of identifying the winning Bid:

• Stage 1: Any Bid with a Final Score that is 15 points or more away from the leading Final Score will be excluded from this part of the process. The remaining Bids will be deemed “Stage 2 Bids”;

• Stage 2: If the difference between the highest quality component of the Final Score, which for the avoidance of doubt is n*Q, and the second-highest quality component of the Final Score amongst the Stage 2 Bids:

• Is at least 6 points, the winning Bid will be the Stage 2 Bid that achieved the highest quality component of the Final Score; or

• Is less than 6 points, any Stage 2 Bid(s) with a quality component of the Final Score of 6 or more below the highest Stage 2 Bid quality component score will be excluded. The remaining Bids will be deemed “Stage 3 Bids”. • Stage 3: The winning Bid will be the Stage 3 Bid that achieved the highest

value for P (without reference to n*Q), which for the avoidance of doubt, would be the highest positive P in the event of a premium or where there is no positive P would be the negative P closest to zero.