Tender evaluation and supplier selection methods in public procurement (original) (raw)
Related papers
Tender Evaluation and Award Methodologies in Public Procurement
SSRN Electronic Journal, 2000
The EU procurement directives stipulate that public contracts are awarded to the lowest bidder or to the bidder with the economically most advantageous offer; the latter requiring that a scoring rule must be specified. We provide a simple theoretical framework for tender evaluation and discuss the pros and cons of common scoring rules, e.g., highest quality (beauty contest) and price-and-quality-based evaluation. Some descriptive facts are presented for a sample of Swedish public procurements. We argue that the most common method, price-to-quality scoring, is flawed for several reasons. It is non-transparent, making accurate representation of the procurer's preferences difficult. It is often open to strategic manipulation, due to dependence on irrelevant alternatives, and it is unreasonably non-linear in bid prices. We prefer quality-to-price scoring, where money values are assigned to different quality levels. When the costs of quality are relatively well-known, however, lowest price is the preferable award criteria.
Tendering Design when Price and Quality Is Uncertain : Theory and Evidence from Public Procurement
RePEc: Research Papers in Economics, 2014
Departing from a simple normative theory for the choice between lowest price, highest quality (beauty contest) and more complex scoring rules, we empirically investigate the behavior of local and central authorities. We survey a gross sample of 40 contracting entities about perceived key characteristics of products bought in 651 public procurements and collect data on supplier selection methods for these procurements. We compare actual scoring rules with theoretical norms and analyze what product characteristics make deviation from the norm more or less likely. In addition, a control group of 275 authorities was surveyed about similar but hypothetical procurements. We find that more complex scoring rules are used more often when the authority is uncertain about costs and about delivered quality, in accordance with our hypotheses. However, authority effects are also found to directly and indirectly influence the choice of supplier-selection method, suggesting that tendering design is partially driven by local habits or institutional inertia.
REDUCING THE COSTS OF PUBLIC TENDERS: A MODEST PROPOSAL
2008
While in the private sector the buyer chooses the number of potential suppliers to involve in an exchange, in the public sector the procedures to follow usually oblige the purchasing manager to behave in a different way. According to the European Directive 2004/18/EC, the Public Administration has to consider all the bids belonging to all the suppliers willing, and able, to take part into the trade. The main purpose of the law is to increase the competitiveness among several bidders in order to reduce the public spending, avoiding monopolistic or oligopolistic behaviours. However the legislator has not taken into account the costs associated with participation in the single tender. In the paper we underline that these costs are relevant and so by limiting the number of bidders it is possible to save money both for the Public Administration and the private sector.
Tendering design when price and quality is uncertain
International Journal of Public Sector Management
Purpose The purpose of this paper is to analyze how local and central authorities choose between lowest price and more complex scoring rules when they design supplier-selection mechanisms for public procurements. Five hypotheses are tested: a high level of cost uncertainty and highly non-verifiable quality makes the use of the lowest-price supplier-selection method less likely. Organizational habits and transaction-cost considerations influence the choice of mechanism. Strong quality concerns make complex rules more likely. Design/methodology/approach The analysis departures from normative theory (rational choice) and is based on the regression analysis and survey data comprising a gross sample of 40 contracting authorities and detailed information about 651 procurements. Findings More complex scoring rules are used more often when the authority is uncertain about costs and about delivered quality. Authority effects are also found to directly and indirectly influence the choice of s...
Non-Price Criteria for the Evaluation of the Tender Offers in Public Procurement of Ukraine
International Journal of Financial Studies
Traditionally, public procurement has been associated with the measurement of achieving savings. However, recent research shows that the economic impact of public procurement is not limited only to savings, but by measuring the impact of four capitals—natural, human, social, and economic—on sustainable well-being over time. Ukraine is a country with a very low gross domestic product (GDP) per capita, which exacerbates the problem of the impact of public procurement results on the population’s welfare. Ukrainian public procurement legislation allows customers to apply non-price criteria (the share of non-price criteria cannot be more than 70%), which, together, are taken into account in the formula of the quoted price. The studies show that the effect of the use of non-price criteria depends on the relevance of the method of the evaluation of non-price criteria. The most important non-price criteria for Ukrainian customers by product categories and the methods of their evaluation are...
Use of "The Lowest Price" Award Criterion in the Public Procurement in Romania
Business Excellence and Management, 2019
Taking into account the very large sums being spent through the Romanian public procurement system (approximately 8% of the GDP), analysing the award criteria used in the procurement procedures is an important element that influences the achievement of the economic and social efficiency of procurement. The article describes the criteria for public procurement award in Romania, focusing on the most used criterion, namely the lowest price. It also presents the advantages and disadvantages of using this criterion, statistical situations at national and European level, the difficulties encountered in using this criterion by contracting authorities and the vulnerabilities of tenderers participating in the procurement procedures which use for the award the criterion under consideration.
2010
Public procurement rules in the European Union require that public contracting authorities must publish all tender evaluation criteria and its weights in advance. In order to define sound weights, the authors argue that the scoring rules for all evaluation criteria must be defined beforehand. Furthermore, the authors further argue that those scoring rules should also be published, in order to provide much more relevant and meaningful information for tenderers when preparing their tenders.
Nispacee Journal of Public Administration and Policy, 2015
Th rough the institute of public procurement a considerable volume of fi nancial resources is allocated. It is therefore in the interest of contracting entities to seek ways of how to achieve an effi cient allocation of resources. Some public contractawarding entities, along with some public-administration authorities in the Czech Republic, believe that the use of a single evaluation criterion (the lowest bid price) results in a more effi cient tender for a public contract. It was found that contracting entities in the Czech Republic strongly prefer to use the lowest bid price criterion. Within the examined sample, 86.5 % of public procurements were evaluated this way. Th e analysis of the examined sample of public contracts proved that the choice of an evaluation criterion, even the preference of the lowest bid price criterion, does not have any obvious impact on the fi nal cost of a public contract. Th e study concludes that it is inappropriate to prefer the criterion of the lowest bid price within the evaluation of public contracts that are characterised by their complexity (including public contracts for construction works and public service contracts). Th e fi ndings of the Supreme Audit Offi ce related to the inspection of public contracts indicate that when using the lowest bid price as an evaluation criterion, a public contract may indeed be tendered with the lowest bid price, but not necessarily the best off er in terms of supplied quality. It is therefore not appropriate to use the lowest bid price evaluation criterion to such an extent for the purpose of evaluating work and services. Any improvement to this situation requires a corresponding amendment to the Law on Public Contracts and mainly a radical change in the attitude of the Offi ce for the Protection of Competition towards proposed changes, as indicated within the conclusions and recommendations proposed by this study.
Incentives and award procedures: competitive tendering vs. negotiations in procurement
Handbook of Procurement, 2006
Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we offer a framework that first describes the buyer's choice of contracts, and then links this choice to the selection of competitive tendering or negotiations. The analysis suggests a number of possible limitations to the use of competitive tendering. These may perform poorly when projects are complex, contractual design is incomplete and there are few available bidders. Furthermore, competitive tendering may stifle communication between buyers and sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Implications of these results for procurement in the private and public sector are discussed. * This is a preliminary version of a future chapter to appear in Dimitri, Piga, and Spagnolo (Eds.) "Handbook of Procurement", forthcoming in Manufactured goods, such as computers, TVs and automobiles are mass produced, have standardized characteristics and are typically purchased at list price. Other goods, such as new buildings, fighter jets, custom software or consulting services are tailored to fit a procurer's specific and often unique needs. To procure these customized goods, the procurer hires a contractor who supplies the good according to a set of desired specifications. We call this the procurement problem.
Price-quality relation in tenders Author
2016
It is commonly assumed better quality comes at a cost, so higher quality products have a higher price. Here we investigate that assumption in the context of business to business public procurement. We use data from 400 real tenders. Results indicate there is a weak negative price-quality correlation, indicating higher quality is associated with lower prices. Data shows 30.6% of all winning tenders have the best score both on quality as well as the best score on price. These findings provide evidence to believe some companies have a good brandimage, or have structured its supply chain in such a way they can provide its customers high-quality products for a low price. Statistical tests performed on different subgroups pointed out the relation between price and quality does not vary across those groups: the difference between ‘product or service’ and ‘weight of price and quality’ most likely does not heavily influence the price-quality relation.