Public bidding in government procurement - A new methodology for ranking bid proposals using full dimensional efficient facets of DEA frontier

This work proposes a new methodology to evaluate bid proposals for government procurement which complies with the European Union directives. It allows a bidder to seek a better match between price and quality of the bid good or service, by assigning appropriate weights, while ensuring transparency. The theoretical foundation is based on the use of full-dimensional efficient faces (FDEFs or “facets) of a Data Envelopment Analysis (DEA) Variable Returns to Scale (VRS) efficient frontier for measuring performance and ranking proposals. It applies a non-radial/non-oriented performance measurement which is a modification of the Enhanced Russell Graph Measure (ERGM) to search for nearest targets on FDEFs. The methodology combines the use of FDEFs and ERGM in two phases. In the first phase, a team of experts identifies the outputs and inputs attributes whose values will determine the performance of the proposals for the good or service being procured. They also identify instances of exemplary goods or services seeking to explore a wide range of possibilities that meet the technical requirements. The data points for these special units will determine the facets of the efficient frontier. The first phase concludes with the identification of the supporting hyperplanes of the full-dimensional efficient faces (FDEFs) which will be defined by normal vectors with necessarily strictly positive weights. The second phase evaluates the submitted proposals through their projections onto the FDEFs.