What is a best and final offer (BAFO)?

After the buyer evaluates the initial bids, each supplier still in contention receives a written request for a revised offer by a set deadline, and the buyer compares those revised offers to decide the award. In procurement and bid management, the term refers to the final round of revisions between evaluation and award, which a public or private buyer requests from the supplier’s bid team. The BAFO ends at the request’s deadline, and the buyer’s evaluation of the revised offers and its award decision come after it.

How a BAFO works

Who receives the request

A BAFO request goes only to suppliers whose bids remain in contention after the buyer’s evaluation: its shortlist. A bid team that receives one is still competing, because the buyer asks every other supplier on that shortlist at the same time.

Take a supplier that has answered a buyer’s RFP for a multi-site facilities management contract. After evaluating the bids and holding a negotiation meeting, the buyer sends the bid team a written BAFO request. The letter opens the price schedule and the service level schedule to revision and keeps the specification’s minimum requirements unchanged. It also sets a deadline and states that no further negotiation will follow.

That revision is the last one the buyer scores before the award, which makes it the team’s last chance to raise its score and sharpen its price.

What the bid team revises

Bid teams commonly revise more than the price in a BAFO. Commercial terms, service levels, the method, and the assumptions behind the price can all change.

In the facilities management bid, the commercial lead reworks the pricing assumptions behind the price schedule, and the price moves as a result. The service levels the team offered move with them; the team reopens the schedule letter.

The legal reviewer then reviews the contract terms the team accepted, with comments wherever the revised schedules affect them. Each change must still meet the minimum requirements the letter kept as-is.

Where a BAFO sits in the process

What comes before the request

A buyer asks for BAFOs after evaluating the initial bids submitted to its RFP or tender, and the request ends the stage in which those bids can still change.

Every supplier still in the proceedings receives the request at the end of the dialogue in a request for proposals with dialogue, or once competitive negotiations are complete, under the UNCITRAL Model Law.

In the RFP response process, the BAFO is one of the last steps a bid can reach. The supplier’s tender process runs through the stages leading up to it.

What follows the deadline

Once the deadline passes, the buyer evaluates the BAFOs and makes the award decision, scoring them according to the rules set out in the procurement.

For the bid team, the next step is the award decision. The offer submitted by the deadline is the one the buyer weighs against the other suppliers’ BAFOs.

The rules behind a BAFO

What a bid team may change in a BAFO, and what it can hold the buyer to, comes from the rules the buyer’s procurement runs under. Those may be a national law, a model law a state has enacted, or the rules of a body that funds the contract, and a funder’s rules bind only what it funds.

What may change and what may not

Where the World Bank agrees to a BAFO under its Procurement Regulations, the borrower running the procurement invites the bidders whose bids are substantially responsive to submit one. It gives them a last chance to improve their bids, such as by lowering prices, clarifying or modifying the bid, or adding information.

In the EU, for example, the minimum requirements and the award criteria are not open to negotiation in the competitive procedure with negotiation, under Directive 2014/24/EU. A bid team’s BAFO is measured against the same criteria as its first bid.

In the EU’s competitive dialogue, the final offer builds on the solutions the bidder presented in the dialogue and contains everything needed to perform the project. The authority may ask for clarification, specification, and optimisation, as long as no change to its essential aspects, or to the needs and requirements the buyer stated, could distort competition or discriminate.

A bid team can hold the procuring entity to the subject matter, the qualification and evaluation criteria, and the minimum requirements it started the dialogue with, which the UNCITRAL Model Law bars it from changing during the dialogue.

Equal treatment and one deadline

In the EU, for example, every supplier still in the competitive procedure with negotiation is told when the authority intends to close the negotiations, and gets one common deadline for new or revised offers, under Directive 2014/24/EU.

The bid team can rely on equal treatment in the negotiations and the dialogue there, which sets these duties for the authority:

• It does not provide information that favours another supplier.
• It informs every supplier still in the procedure, in writing, of any change to the specifications or documents, other than the minimum requirements. It gives enough time to amend and resubmit.
• It reveals no supplier’s confidential information or solutions to the others without that supplier’s specific consent.

Under the UNCITRAL Model Law, what the procuring entity tells one supplier in the dialogue goes to every participant at the same time and on equal terms, unless it is specific to that supplier or confidential. The request for proposals must also tell suppliers of their right to challenge decisions that breach the law, and of any standstill period.

How final offers are scored

In the EU’s competitive procedure with negotiation, the authority checks the final offers against the minimum requirements. It assesses them against the award criteria before awarding the contract, under Directive 2014/24/EU.

The winning BAFO is the one that best meets the procuring entity’s needs under the criteria and procedure set out in the original request for proposals, according to the UNCITRAL Model Law. A bid team there can rely on the weightings it saw at the start.

Whether talks can follow

Whether the buyer may negotiate after the BAFO turns on the rules governing its procurement.

Under the UNCITRAL Model Law, no negotiations take place on best and final offers, whether they follow a dialogue or competitive negotiations.

A request for bids or proposals must state whether a BAFO will be used and that no negotiation follows it where the World Bank’s Procurement Regulations apply.

Under Directive 2014/24/EU, final offers in the EU’s competitive procedure with negotiation are not negotiated. After a competitive dialogue, the authority may negotiate with the supplier whose final offer offers the best price-to-quality ratio to confirm its financial commitments or other terms. It may do so provided no essential aspect changes materially, and competition is not distorted.

How a BAFO differs from similar steps

Other steps a buyer takes after submitting a bid can look like a BAFO request, and each asks something different of the bid team.

A round of negotiation

In a round of negotiation, the buyer works through each supplier’s initial and later offers to improve them, and the offer can change as the talks go.

A BAFO is a written revision of the whole offer that the bid team submits by the deadline the request sets. The request also closes the negotiation.

A clarification request

With a clarification request, the buyer asks a supplier to submit, supplement, clarify, or complete information in its bid that looks incomplete or wrong, within a set time. The answer completes the bid the team already submitted.

The BAFO request goes further and invites the bid team to change the offer itself, including its price.

A reverse auction

In a reverse auction, suppliers bid against one another on price in an online event the buyer schedules. The system evaluates bids automatically, and each bidder sees its standing as the auction runs.

A BAFO’s price counts alongside the rest of the offer, because the buyer scores the BAFO on the award criteria. For the bid team, an auction leaves only the price to move, while a BAFO lets it revise its terms and service levels as well.