An empirical analysis of winning bids in public procurement in the Italian construction sector (original) (raw)
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SSRN Electronic Journal, 2000
Despite successive reforms, public procurement in Italy is still highly fragmented and vulnerable to collusion, corruption and ex-post renegotiation. Other defects are found in the planning stages of the works. These problems are due in part to the regulations on the awarding of public works contracts, which do not guarantee the correct functioning of the selection mechanisms. Indications from the economic literature and international comparisons suggest a series of possible improvements: i) the elimination of automatic exclusion mechanisms for anomalous tenders (which would reduce the risk of collusion between bidders); ii) the centralization of assessments of anomalous offers under the responsibility of larger adjudicating authorities, with an increase in the surety guarantees provided by the winner, to reduce the risk of subsequent renegotiations; iii) stronger anticorruption measures; iv) more standardized planning and, for the more complex auctions, competitive dialogue.
Adaptation Costs in Public Works Procurement in Italy
It is widely agreed that rules governing public procurement of goods and services should be designed to ensure competition among suppliers, so as to achieve value for money. However in the public works sector, "… the good being procured is usually complex and hard to be exactly specified ex ante, … (and) alterations to the original project might be needed after the contract is awarded. This may result in considerable discrepancies between the lowest winning bid and the actual costs that are incurred by the buyer" (Bajari, Houghton and Tadelis, 2006). The paper is aimed at offering an empirical test of the existence of a differential impact of procurement procedures on renegotation, and of its costs. Using a detailed data set on Italian public works contracts, we run an empirical analysis of the differential impact of procurement procedures on the final cost, controlling for several factors such as complexity of the work, the execution mode, the market characteristics and o...
Bidding Strategy in Construction Public Procurement: A Contractor’s Perspective
Buildings
A contractor’s ability to prepare a competitive bid for a construction tender is crucial for its survival on the market. The bid price estimation strategy should promote the probability of winning a sufficient amount of tenders but, at the same time, ensure the economic stability and development of the company. This paper aims to address this issue in the area of Czech public construction procurement. The opinions, experiences and practices of contractors were collected through a questionnaire survey, and the data were evaluated with the support of statistical methods. This revealed that Czech contractors mostly base their multicriteria bidding strategy on cost-oriented pricing while considering various aspects such as the risks and attractiveness of the tender. The Czech construction market is generally perceived as oriented toward low costs, and with a relatively common occurrence of abnormally low bids. The findings presented in this paper may help contractors improve their curre...
SSRN Electronic Journal, 2016
By estimating a flexible nonlinear regression model of savings on an original data set of service procurements conducted by the Spanish Armed Forces, this paper provides robust and precise novel econometric evidence on the extent and sources of cost savings in public procurement. The net effect on savings of the policy-amenable and economically advantageous variables that we estimate, such as the size of the procured function, the importance of price in the contract award criteria, and the number of bidders who participate in the tender, may help contracting agencies to select management practices and to forecast the price paid out. A comparison with estimates reported in previous studies is also made.
Applied Economics, 2012
It is widely agreed that rules governing public procurement should be designed to achieve value for money. However, in the public works sector, "… the good being procured is usually complex and hard to be exactly specified ex ante, … [and] alterations to the original project might be needed after the contract is awarded. This may result in considerable discrepancies between the lowest winning bid and the actual costs that are incurred by the buyer" . There is now a wide body of literature focusing on cost escalation during the execution of contracts and their estimates reveal that it can be often quite large. The paper is aimed at offering an empirical test of the determinants of adaptation costs in the public works procurement. Using a detailed data set on Italian public works contracts, we run an empirical analysis, grounded on the main conclusions reached in the literature, to test for the main drivers of adaptation costs.
Comparison of efficiency of public procurement organized by public sector and local monopolies
Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 2013
The aim of this paper is to identify the difference between the prices achieved in public procurement by public and private bodies. The analysis exploits the fact that European legislation forced to follow the Public Procurement Act not only public sector but also private companies working in the position of local monopolies (gas supply, water supply, public transport, etc.).The analysis is based on data from the Information System of Public Procurement in the Czech Republic. The data set is created by more than 500 observations containing information about the large construction contracts from the years 2006–2011. Details of these contracts were analysed using regressions. As a dependent variable were used price achieved (in the first model) and the number of bids (in second model). As explained variables were the numbers of bids (only in the first model), type of tender, the contract size, etc. The methodology is based on foreign papers, which are dealing with the issue of competi...
European Transport, 2006
Competitive tendering is a popular mechanism for the provision of local bus services when a major objective is subsidy savings. Despite uncertainties in the legal framework some competitive tendering was implemented in Italy since 1998. The evidence so far is that participants were limited in number, the incumbents were almost everywhere able to gain the franchise, whilst subsidy savings were in many cases negligible. If some "political" conditions favouring more effective tendering procedures are not fulfilled, other regimes should be considered in order to obtain substantial subsidy savings.
The EU Directive 93/37 defi ned the “third kind” of tender procedures, that a public commissioning body may use to select a fi gure that is responsible for “the realization, by whatever means, of a work corresponding to the requirements specifi ed by the contracting authority.”. Italy has interpreted in an original way this tender procedure, introducing (through law 443/2001) the role of “contraente generale”. The point is that the notion of “contraente generale” still remains controversial on the ground of international comparisons, especially in terms of risk allocation between public client and contractor. The paper presents some results of a study on the Italian “contraente generale” scheme, compared with the procurement models as identifi ed by the available international literature. In conclusion, some recommendations are made for the adaptation of the Italian legislation, allowing to improve its compatibility with the ppp model generally adopted in Europe.
Public Sector Contracting Model for Management of Construction Tender Price Volatility
2023
Construction tender price volatility threatens desirable infrastructure push in the public sector. The damaging effects of escalating tender prices outweigh the socioeconomic benefits of such infrastructure. If not addressed, this harmful effect destroys construction sector productivity, causing it to lag behind other economic sectors, thereby decreasing its value in the national economy. Contractors use price to mitigate procurement and client-related risks at the tendering stage. The trend requires developing and implementing procurement strategies that consider price control implications at the project tendering phase, leading to the development of contract delivery models that inadequately address the impact and potential value of pricing in construction projects. This research focuses on implementing procurement strategies by developing a public sector contracting model considering price reduction implications at the project tendering phase. The study investigates pricing behaviours regarding implementing current contracting delivery models in Zambia and develops a conceptual model for managing tender price variability in the public construction sector. The study achieved this through a comprehensive literature review followed by semistructured interviews with 14 purposively and snowball-sampled industry experts. The study utilises person-to-person interviews to collect data from interviewing 14 purposive identified respondents to attain relevant research results. The findings show that governments can maximise social gains from an infrastructure project by deriving accurate technical parameters and optimising procurement. The study identifies four pricing behaviours demonstrated by contractors during tendering: resistance, reactive, anticipatory, and Consultant-based. Consultant-based pricing was the least practised behaviour, whereas reactive was the most established among all behaviours. Emergent patterns for turnaround strategies include cost estimating and financing, mitigating external and internal interferences, providing incentives, providing training, and encouraging innovations. Others include revising legislation, contextualising procurement functions, improving project management practices, predicting market forces, and guaranteeing sustainability. The study further proposes the conceptual Negotiated Construction Approach (NCA) for public projects that summarises and weaves together identified strategies.