How Defence Actually Evaluates

In Defence's final evaluation for the Army's new infantry fighting vehicles, then planned as a fleet of up to 450, Rheinmetall's tendered price was almost $4 billion lower than Hanwha's.

Hanwha won.

That outcome follows from how Defence evaluation is designed to work. Once Defence had modelled the full cost of each offer, the gap had shrunk to $298 million, and Hanwha was judged to deliver the best cost per unit of capability (ANAO, Report No. 26 2025, 26).

Last week we followed this same tender from 79 companies at the industry briefing to four that bid. This week is about how those four were judged.

For anyone tendering into Defence, including the construction, estate and facilities firms that read this series, this should change how a bid is built. The number you submit is an input. The number that gets judged is Defence's.

One department, two scoreboards

"Defence evaluation" is really two systems. Most readers of this series tender into the estate system, but the clearest public evidence on how Defence weighs a tender comes from materiel audits. We use that evidence, and say where estate works differently.

For materiel, meaning equipment and support contracts written on the ASDEFCON templates, Defence's standard approach is to list criteria without ranking or weighting them. Defence told a Senate committee that its templates "do not typically weight evaluation criteria", so evaluators can judge value for money across all of them in the round (Defence answer to Senate committee, 2020).

For estate and infrastructure, Defence's Capital Facilities and Infrastructure branch works differently. Evaluators score against weighted criteria on a ten-point guide, and price is released to them only after technical scores are finalised (CFI Tender Evaluation and Probity Protocol).

Materiel tenders also start with a gate. Under the ASDEFCON conditions of tender, Defence will exclude a tender that fails the minimum content and format requirements or the conditions for participation, before any comparison begins (ASDEFCON Support Short COT). A capable company can lose here on paperwork alone.

What the board actually weighs

Under the Commonwealth Procurement Rules, value for money is the core rule and price is never the only factor. A tender evaluation board turns that rule into a recommendation, and two audit findings show how.

Most criteria do not decide the result. In Land 400 Phase 3, Defence told the ANAO that by the end of evaluation only two of 13 criteria, capability and price, separated the tenders. In Land 400 Phase 2, the two finalists were rated equal on six of ten criteria (ANAO, Report No. 18 2020, 21). Defence's 2019 procurement manual, provided with its Senate answer, sets out the logic: where the non-price assessment shows little or no difference, the lowest-priced tender is likely to be best value.

Our reading is that most criteria act as hurdles. Weak financials or a heavily marked-up contract can sink a tender. Strong performance on them rarely wins one.

Your price is rebuilt. In Land 400 Phase 3, Defence added non-contract costs, the value of anything missing from each response, likely schedule slippage, inflation and exchange-rate effects, and an allowance for uncertainty. Those adjustments added between $8.8 billion and $12.5 billion to the two tendered prices.

The same logic applies well below that scale. Picture a facilities bid with a lean fixed monthly fee and higher hourly rates for reactive work. Defence's guidance tells evaluators to estimate likely volumes and test those assumptions, and its worked example shows the cheaper headline becoming the dearer offer (Defence Better Practice Guide).

The model is only as fair as its consistency. The ANAO found anticipated subcontractor savings and schedule slippage were added to one bidder's price but not the other's, understating Hanwha's cost by $852.6 million. Defence maintains the preferred tenderer offered the best capability and best value for money.

The priorities you are not told

This is where the audit is sharpest.

The ANAO found that Defence placed greater emphasis on price and capability in the Land 400 Phase 3 evaluation, but did not say so in the request for tender, which the ANAO said the procurement rules require. It said weighting capability and price would have helped tenderers understand how their offers would be judged.

The rule in question is paragraph 10.6(d) of the Commonwealth Procurement Rules, part of the additional Division 2 rules for procurements above the threshold (see Edition 13). It requires tender documents to state the relative importance of criteria "if applicable", and the current rules keep that wording. The audit also found Defence did not record an exemption from Division 2 until December 2023, immediately before signing the contract and more than five years after the tender was released.

Defence's position has a genuine basis. Its guidance argues that low fixed weights can stop a serious issue from counting properly, and research shows scoring methods are not neutral. One study of 38 scoring formulas across 382 real public tenders found that the choice of formula sometimes changed the winner and frequently changed the overall ranking (Stilger, Siderius and Van Raaij, Journal of Public Procurement, 2017).

But the disclosure standard elsewhere is firmer. The UK's Procurement Act 2023 and the EU's defence procurement directive both require buyers to tell bidders the relative importance of their criteria. Parliament's audit committee held a public hearing on this audit on 20 July 2026. We could find no published committee report at the time of writing.

What this means for your next Defence tender

1. Confirm the rule set. ASDEFCON tender documents state whether Division 2 applies (ASDEFCON conditions of tender). Estate tenders under the CFI protocol set out weighted criteria in the tender documents. Know which game you are playing before you write a word.
2. Hunt for the discriminators. Where weights are absent, our reading is that the statement of work, stated objectives and industry briefings are the best signals of what Defence values most. Put your strongest evidence there.
3. Price the whole of life. Defence prices gaps and omissions into your tender itself, and you will not control its estimate.
4. Treat contract departures as price. Defence guidance says departures are risk-rated and usually priced into your tender (Defence Better Practice Guide).
5. Write one consistent tender. Defence's conditions of tender allow material in one part to be used when evaluating another criterion (ASDEFCON Complex Materiel COT).

The real test

For major materiel, Defence evaluation is less a scoreboard than a cost model wrapped in a judgement, written to survive an audit years later.

That changes the question a bidder should ask. Not "how do we score highest?" but "when Defence rebuilds our offer in its own model and has to defend the choice to an auditor, what will it find?" Our reading of the evidence is simple: the less Defence has to estimate, adjust or explain, the stronger your position.

Next week: Probity and the Rules of Contact, and how to ask Defence what matters without breaking the rules.