Effect of Electronic Reverse Auctions on Competition and Abnormally Low Bids in Public Construction Procurement (original) (raw)
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Electronic reverse auctions (eRAs) are considered to be an effective tool for negotiating tender prices and achieving cost savings. Furthermore, if multicritera evaluation is used, it can be expected that eRAs will also contribute to achieving benefits in other areas, e.g. helping to minimize life-cycle costs. This study aims to analyse the mutual relationships between selected eRA variables. More specifically, correlation analysis is applied to explore real eRA data representing public tenders for construction work. This study's findings reveal that the correlations examined are generally weak or very weak. Furthermore, it has been found that the value of correlation coefficients varies depending on the type of structure, and that public tenders are usually evaluated solely on the basis of the criterion of the lowest bid price. Recommendations for public authorities in using eRAs in the role of the buyer are also provided at the end of this paper.
Analysis of Construction Auctions Data in Slovak Public Procurement
Advances in Civil Engineering, 2018
The requirement for efficient public spending leads contracting authorities to use electronic reverse auctions (e-RA), a tool that allows achieving financial savings. In this study, we aim to explore the relationships between the different acting e-RA variables and to check for predictive models in order to infer on the savings amount in construction public procurement. Data on real construction auctions in Slovakia were statistically analysed by means of graphics tools, multiple regression analysis, test, and statistics for measuring the association between categorical variables. The results revealed that one should take the type of contract into account when considering the use of e-RA. This research provides several implications for purchasing practitioners in the area of construction procurement, especially with regard to the level of competition in the auction and estimation of savings potential. Presented findings aid managerial decision-making process of e-RA adoption. At the...
Contractors' Bidding Behavior in First-Price Sealed Auctions for Construction Projects
International Journal of Innovation, Management and Technology, 2017
Procurement of public construction projects generally adopts first-price sealed auctions to promote competition between bidders and reduce owner's cost. This paper presents an analysis for bidding behavior of contractors in public construction markets. The analysis utilizes real data representing the bid results of 1396 projects submitted for public construction projects in Jordan. Bidding data were classified depending on the type of project into: building construction, transportation, infrastructure, water, and electro-mechanical projects. The data includes also engineering design and/or engineering supervision projects. The analyzed behavior attributes are: 1) competition between bidders measured by number of bidders and the bid spread between the lowest two bidders; and 2) bidding variability measured by the coefficient of variation. The analysis revealed that number of bidders and bid spread depend on type of project advertised and market conditions. The variability of bidding results also is correlated with type of project. The performed analysis provide owners with an assessment of the efficiency of the competitive bidding process and can be used to identify weaknesses that need to be addressed in bidding regulations. Contractors can utilize the results to develop their bidding strategies to win profitable jobs.
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...
Challenges of Electronic Reverse Auctions in Construction Industry—A Review
Economies
The innovation of construction procurement by means of electronic reverse auctions is a controversial subject of discussion among both researchers and practitioners. This paper consolidates and critically discusses current knowledge concerning the adoption and use of electronic reverse auctions in the light of specific features of the construction industry. A systematic literature review has been employed to select papers indexed in Scopus and Web of Science databases. The findings of the study indicate that studies are addressing especially five main areas, i.e., suitability of electronic reverse auction (eRA) for construction tenders, related drivers and barriers, ethical considerations, savings potential and bidding behavior, and bid distribution. Accordingly, the authors are suggesting three directions in which future research should focus on mutual interaction of electronic reverse auctions and long-term effects on construction project outcomes.
On-line reverse auctions in construction industry
On-line reverse auctions in construction industry The paper examines factors influencing the decision to use, and adoption rate, of online reverse auctions in construction sector. The main factors are identified and comprehensively discussed taking into account particularities of construction industry. The adoption level of this procurement route is examined via a web survey based on a selected sample of construction companies and clients from the Czech construction sector. It was established that online reverse auctions are the most widely used e-procurement tool in the Czech construction sector. Advantages of this procurement procedure are more significantly perceived by investors.
Implementation of Online Reverse Auctions: Comparison of Czech and Slovak Construction Industry
Online Reverse Auctions (ORA) are an electronic commerce tool that enables direct communication between buyers and sellers and thus have the potential to make the procurement processes more efficient which leads to improved business performance of the buyer. The presented research investigates how ORA are implemented in the specific environment of Czech and Slovak construction industry. The barriers and drivers associated with this procurement route were identified by investigating the available body of literature. Next, an empirical study investigating the use of ORA was conducted within Czech and Slovak construction industry using a carefully designed online survey. The results show that there is a difference between the adoption levels of ORA between the Czech Republic and Slovakia. Decrease in bid prices and increased transparency are perceived as the most important drivers for ORA users while unwillingness of suppliers to participate, followed by high acquisition costs are perceived as the most important barriers. The identified importance of drivers and barriers of the ORA use provides the starting point for the implementation of this procurement route in construction industry, which will lead to increased competitiveness of the sector in the next step. The obtained results confirm that this procurement route has a significant potential within the construction industry.
European Journal of Logistics, Purchasing and Supply Chain Management
This paper investigates current knowledge concerning adopted procurement strategies for managing construction-price in the public sector. The article reveals that studies mainly address four main areas: procurement decision support systems, transparency, ethical considerations in procurement, identification of procurement criteria, and overcoming inconsistencies in the procurement process. The paper provides a new perspective on the selection of procurement strategy. Therefore, selecting a suitable procurement strategy is essential for managing project pricing. The review has revealed that the lowest bid is the main criterion of contractor selection in the public sector. There is a need to combine some, if not all, procurement strategies within a significantly flexible approach that can have multiple potential advantages in the construction field by serving as a robust decision-making tool. There is a need to develop a public procurement strategy for managing construction price vari...
Impact of E-Au ctions on Public Procurement Effectiveness
2011
Effects o f E-Auctions are in expert literature often demonstrated on data from the domain of public procurement. The paper tests for their impact on public procurement effectiveness in conditions of the Czech Republic and within tenders for construction works. Using quantitative methods are analysed also other factors that may influence its strength (openness of the procedures, types of procurement management, etc.).
Prague Economic Papers, 2013
The article deals with the factors which infl uence efficiency of public procurement in the competitive contracting conducted through e-auctions in 15 Slovak cities. Data cover building and IT contracts awarded in the years 2007-2009. Together 186 observations were used for the analysis. The article starts with a theoretical discussion on the factors influencing efficiency of the procurement including potential impacts of the e-procurement and the e-auction. Than five hypotheses are formulated and the set of data is described. The next part introduces results of the regression analyses. It shows indirect proportion of the relation between the number of the submitted bids and the winning price. Each additional bid brings decrease of the price by approximately 3.4% of the expected price. The use of the e-auctions is connected with an increase of the number of the submitted bids by 0.7, which mean an average decrease of the winning price by approximately 2.4% of the expected price. The...