Tendering theory revisited

Annals of Public and Cooperative Economics, 2007

IOP Conference Series: Materials Science and Engineering, 2020

The fundamental activities carried out by a contractor are estimating and submitting pricing proposal, therefore contractors are required to make decision during pricing of Bills of Quantities (BQ) regarding the most suitable pricing strategies to be applied. Despite numerous of study has been carried out to identify effective pricing strategies to allow competitive pricing, contractor choose no strategies but relied on their instinct and feeling. This study is conducted to identify the current pricing strategies used by contractors and to determine the internal and external variables in making pricing strategies decision. Target respondents for this study are estimator in Grade 7 contractors. Semi-structure interviews and content analysis method is used to analyse the obtained data. The findings show that the tender pricing strategies adopted are cost based pricing, hybrid pricing and the combination of cost based and historical price based strategies. On the other hand, top management decision and company strength and weaknesses are the two internal variables in making pricing decision. Besides, the external variables in selection of pricing strategies is owner's characteristics. Conclusively, this study can enhance the understandings on tender pricing strategies and outline the viable alternatives way to have a better position in project bidding.

Research in Transportation Economics, 2010

A key attribute of competitive tendering for the periodic selection of operators of subsidised public transport services is to secure the provision of specified services at efficient cost levels. This has proved particularly effective where services were previously provided by an inefficient monopoly operator. The arguments for the adoption of competitive tendering in preference to negotiation with the incumbent operator may be less clear-cut in other cases. Consideration is given to both theoretical and practical insights into the relative merits of competitive tendering and negotiation approaches in such situations. The limited literature on the topic is reviewed and insights and lessons identified. Influencing issues include prior conditions, the nature of the supplier market, features of contracts, negotiating and competitive tendering strategies and practice, accountability and transparency, and long-term market implications. The evidence suggests that 'one size does not fit all', and the choice will depend on specific circumstances. The relative merits of the two approaches for renewal of bus contracts are considered with regard to Adelaide, for contracts which have previously been awarded through competitive tendering. The paper draws out the main factors that could influence the authority's choice between the options, and discusses the relevance of the findings to other situations.

2007

Abstract: Additional Costs of Purchasing (ACP) are an important part of the whole cost of a transaction. However, the related literature usually addresses these costs from a private organization perspective only. In this paper we extend a previous contribution, proposing a model for a generic transaction including ACP, in a public tender context, and with particular regard to the European legislation.

Uncertainty about the cost of tendering has led to research being conducted to understand the cost of tendering within the Australian construction industry. This has involved reviewing work done in Australia and overseas as well as exploring the efforts within the construction industry to collect cost of tendering information. While there is currently awareness of the cost of tendering and that efforts should be taken to minimise this cost, there is little precise understanding of it in terms of value or how it happens. This paper explores the barriers to understanding the cost of tendering. Throughout the worldwide construction industry tendering is acknowledged to be complicated, adding considerable cost to construction. Efforts to understand the cost of tendering are confounded by issues that are both visible and invisible to formal accounting of the construction process. This paper intends to demonstrate the problems and their causes. Anecdotes are derived from the literature, observations of construction purchases, and interview data to demonstrate the barriers to understanding the cost of tendering. This is augmented by corresponding observations of other major purchases. Problems and causes are described in terms of these anecdotes. Because of the diverse activities undertaken by constructors and limitations of accounting categories, expenses associated with tendering are difficult to capture and quantify. These problems are explained through examples. Even in those cases where there are genuine intentions to capture costs of tendering there is a failure to do so. It appears that implementation difficulties are so insurmountable that either people do not bother or management redirects effort from collecting cost of tendering data. It is also shown that the expense of tendering and uncertainty of outcomes leads tenderers to engage in concealed behaviour to reduce the uncertainty and cost associated with tendering. That is, collusion. For this reason especially, it is concluded that tendering and associated costs need to be understood in greater detail.

2007

2001

Hughes, W., Hillebrandt, PM, Lingard, H. and Greenwood, DG (2001) The impact of market and supply configurations on the costs of tendering in the construction industry. In: CIB World Building Congress 2001: Performance in Product and Practice, 2-6 April 2001, Wellington New ...

International Journal of Public Sector Management

Purpose The purpose of this paper is to analyze how local and central authorities choose between lowest price and more complex scoring rules when they design supplier-selection mechanisms for public procurements. Five hypotheses are tested: a high level of cost uncertainty and highly non-verifiable quality makes the use of the lowest-price supplier-selection method less likely. Organizational habits and transaction-cost considerations influence the choice of mechanism. Strong quality concerns make complex rules more likely. Design/methodology/approach The analysis departures from normative theory (rational choice) and is based on the regression analysis and survey data comprising a gross sample of 40 contracting authorities and detailed information about 651 procurements. Findings More complex scoring rules are used more often when the authority is uncertain about costs and about delivered quality. Authority effects are also found to directly and indirectly influence the choice of s...

Journal of Business Ethics, 2000

The morality of tendering practices is an issue of economic and social significance, especially when large government contracts are involved. Criticisms are mostly concentrated around collusive tendering: illegal agreements between tenderers that result in seemingly competitive bids, price fixing or market distribution schemes that circumvent the spirit of free competition and defraud clients. Although collusion has been identified as an endemic malaise of tendering, its behavioural and moral dimensions have not been systematically studied before. The paper addresses this knowledge gap and describes part of an exploratory empirical investigation of the decision-making patterns utilised by estimators in Australia'slargest construction organisations.

RePEc: Research Papers in Economics, 2014

Departing from a simple normative theory for the choice between lowest price, highest quality (beauty contest) and more complex scoring rules, we empirically investigate the behavior of local and central authorities. We survey a gross sample of 40 contracting entities about perceived key characteristics of products bought in 651 public procurements and collect data on supplier selection methods for these procurements. We compare actual scoring rules with theoretical norms and analyze what product characteristics make deviation from the norm more or less likely. In addition, a control group of 275 authorities was surveyed about similar but hypothetical procurements. We find that more complex scoring rules are used more often when the authority is uncertain about costs and about delivered quality, in accordance with our hypotheses. However, authority effects are also found to directly and indirectly influence the choice of supplier-selection method, suggesting that tendering design is partially driven by local habits or institutional inertia.