Tender Evaluation and Award Methodologies in Public Procurement
AbstractThe 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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 821.
Length: 36 pages
Date of creation: 16 Mar 2011
Date of revision:
Contact details of provider:
Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
Web page: http://www.econ.umu.se/
More information through EDIRC
Public Contracts; Public Procurement; Scoring Rules; Quality;
Find related papers by JEL classification:
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John Asker & Estelle Cantillon, 2008.
"Properties of scoring auctions,"
RAND Journal of Economics,
RAND Corporation, vol. 39(1), pages 69-85.
- Gregory Lewis & Patrick Bajari, 2011.
"Procurement Contracting With Time Incentives: Theory and Evidence,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 126(3), pages 1173-1211.
- Patrick Bajari & Gregory Lewis, 2009. "Procurement Contracting with Time Incentives: Theory and Evidence," NBER Working Papers 14855, National Bureau of Economic Research, Inc.
- Gian Luigi Albano & Milo Bianchi & Giancarlo Spagnolo, 2006.
"Bid Average Methods in Procurement,"
Rivista di Politica Economica,
SIPI Spa, vol. 96(1), pages 41-62, January-F.
- Francesco Decarolis, 2009. "When the highest bidder loses the auction: theory and evidence from public procurement," Temi di discussione (Economic working papers) 717, Bank of Italy, Economic Research and International Relations Area.
- Spagnolo, Giancarlo & Bergman, Mats A. & Lundberg, Sofia, 2012. "Privatization and Quality: Evidence from Elderly Care in Sweden," SITE Working Paper Series 19, Stockholm Institute of Transition Economics, Stockholm School of Economics.
- Makoto HANAZONO & Jun NAKABAYASHI & Masanori TSURUOKA, 2013. "Procurement Auctions with General Price-Quality Evaluation," KIER Working Papers 845, Kyoto University, Institute of Economic Research.
- Koning, Pierre & van de Meerendonk, Arthur, 2012.
"The Impact of Scoring Weights on Price and Quality Outcomes: An Application to the Procurement of Welfare-to-Work Contracts,"
IZA Discussion Papers
7116, Institute for the Study of Labor (IZA).
- Pierre Koning & Arthur van de Meerendonk, 2013. "The Impact of Scoring Weights on Price and Quality Outcomes: An Application to the Procurement of Welfare-to-Work Contracts," Tinbergen Institute Discussion Papers 13-066/V, Tinbergen Institute.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kjell-Göran Holmberg).
If references are entirely missing, you can add them using this form.