Tender Evaluation and Award Methodologies in Public Procurement
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.
|Date of creation:||16 Mar 2011|
|Contact details of provider:|| Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden|
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Web page: http://www.econ.umu.se/
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- 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.
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"Bid avarage methods in Procurement,"
8997, University Library of Munich, Germany.
- John Asker & Estelle Cantillon, 2008.
"Properties of Scoring Auctions,"
ULB Institutional Repository
2013/172674, ULB -- Universite Libre de Bruxelles.
- Francesco Decarolis, 2009.
"When the Highest Bidder Loses the Auction: Theory and Evidence from Public Procurement,"
2009 Meeting Papers
130, Society for Economic Dynamics.
- 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.
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