Competitive bidding analysis

Sunday, June 10, 2007

In preparing their bids on a product category, suppliers should remember that all of their product category bids will be rolled into a composite bid. The composite bid has two components, the item weight and the supplier's bid amount for the item. In other words, the individual item bid will be multiplied by the item's weight and each of the weighted bids for the product category will be added to arrive at the composite bid.

The weights for individual items in a product category will be based on utilization, not expenditures. The total of all the weights in a product category is equal to one. All bidders will have the same weights applied to their bids for a product category. Once the composite bids for each bidder are calculated, the competitive bidding implementation contractor (CBIC) will array the composite bids from lowest to highest in order to compare suppliers' overall bids in a product category.

The CBIC recently published additional information clarifying the effect of the weighting mechanism on suppliers' bids. According to the CBIC, product weights are based on utilization so that more frequently used codes, such as the code for a power wheelchair battery, will have a higher weight. The battery will have a higher weight than the power wheelchairs because power wheelchairs are spread out over more HCPCS codes. The CBIC cautions, however, that higher weights for an item does not mean that the item is driving the composite bid more than any other item. Using the power wheelchair example, the CBIC explains that, because power wheelchairs are more expensive than batteries, the bids for the power wheelchair will account for a greater percentage of the composite bid than the battery.

Suppliers who intend to bid should review the information on product weight on the CBIC Web site,, to make sure they understand how weighting affects their bids.

Attorney Asela Cuervo is based in Washington, D.C.