Full disclosure of tender evaluation models: Background and application in Portuguese public procurement

Public procurement rules in the European Union require that public contracting authorities must publish all tender evaluation criteria and its weights in advance. In order to define sound weights, the authors argue that the scoring rules for all evaluation criteria must be defined beforehand. Furthermore, the authors further argue that those scoring rules should also be published, in order to provide much more relevant and meaningful information for tenderers when preparing their tenders. Based on these evidences, the Portuguese Public Contracts Code compels public contracting authorities in Portugal to publish the comprehensive tender evaluation model in advance. This paper presents the Code, outlines the feasibility of establishing such a model in advance, addresses detailed instructions on how to go about in developing and applying it, and submits that existing European provisions on public procurement could yet go further in ensuring effective transparency, competition and best value for money tenders.     

Transaction costs, relational contracting and public private partnerships: a case study of UK defence

This paper is concerned with the economics of public private partnerships (PPPs)/private finance initiative (PFIs) and in particular the role of transaction costs and the importance of trust in relational contracting. The discussion is illustrated by reference to the UK defence sector. The paper begins by discussing the nature of PPPs/PFIs before moving on to consider how the economics of contracting literature can shed light on their strengths and weaknesses. The transaction cost literature is reviewed alongside a resource-based perspective of procurement decisions. The concepts of trust and reputation are then considered in the context of minimising procurement transaction costs. The theoretical framework developed is then applied and illustrated through a case study of UK defence contracting, in an attempt to assess whether the use of PPPs will necessarily lead to improved economic efficiency. The case study highlights both the scope of PPPs/PFIs and their potential transaction costs in defence procurement, with the normal perils in terms of contracting given information asymmetry, asset specificity and the resulting scope for opportunistic behaviour.     

Agency costs and audit quality: evidence from France

The IFRS mandatory adoption in European countries is an excellent context from which to assess the validity of accounting choice theory, which postulates that information asymmetry, contractual efficiency (agency costs) and managerial opportunism reasons could drive the choice. With this aim, we test the impact of these factors to explain the adoption of fair value for investment properties (IAS 40) in the real estate industry, taking into account the ‘revaluation’ option offered by IFRS1 and using historical cost without revaluations as a baseline category for comparison purposes. We select a sample of European real estate companies from Finland, France, Germany, Greece, Italy, Spain and Sweden, all first-time adopters of the IFRS. Using a multinomial logistic model, we show that information asymmetry, contractual efficiency and managerial opportunism could account for the fair value choice. Particularly, the most significant findings are that size as a proxy of political costs reduces the likelihood of using fair value while market-to-book ratio is negatively associated with the fair value choice. On the other hand, leverage, another typical proxy of contracting costs, seems not to influence the choice. This evidence confirms the current validity of traditional accounting choice theory even if it reveals, in such a context, the irrelevance of the usual relations between accounting choice and leverage.     

The challenge of using standard contracts in public–private partnerships

A call for an increased use of standard contracts in public–private partnerships (PPPs) for infrastructure development is noticeable in practice. These contracts are expected to simplify and improve procurement by creating opportunities for learning, lower transaction costs, and better competition. This paper delineates standard contracts in PPP as a new venue for research and unfolds their potential impact. Here lies an important challenge since the benefits of standardization are not as straightforward as they look at first sight, particularly when taking into account the tension between the powerful, control-oriented role of contracting authorities and the need for contingent, informal contracting.     

Tender evaluation and supplier selection methods in public procurement

The EU procurement directives stipulate that public contracts be awarded to the lowest bidder or to the bidder with the economically most advantageous tender; the latter requiring that a scoring rule be specified. We provide a simple theoretical framework, based on standard microeconomic theory, for tender evaluation (scoring and weighing) and discuss the pros and cons of methods such as highest quality (beauty contest), lowest price and price-and-quality-based evaluations. We argue that the most common method, price-to-quality scoring, is inappropriate 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 tends to impose particular and unjustified non-linearity in bid prices. The alternative quality-to-price scoring method, where money values are assigned to different quality levels, is a better alternative. However, when the cost of quality is relatively well-known and several providers can offer optimal quality, lowest price is the preferable supplier selection method, while beauty contests may be preferred when purchasing budgets are inflexible.     

Revisiting agency and transaction costs theory predictions on vertical financial ownership and contracting: electronic integration as an organizational form choice

This paper provides an organizational economics foundation to guide managers in matching the comparatively more efficient organizational mode with transactional characteristics such as: (1) the degree of (human capital) asset specificity involved in the transaction, (2) the degree of uncertainty surrounding the transaction, and (3) the number of trading partners (suppliers and buyers) in the vertical supply chain. The key role of technology, and more specifically the e‐business infrastructure and its effects on organizational mode choice, is highlighted. The main results from this analysis suggest that changes in information technology are changing the nature of transaction costs leading to more efficient management through an electronic integration solution thus favoring contracting and outsourcing than would have been technologically possible when Williamson's Markets and Hierarchies (Markets and Hierarchies: Analysis and Antitrust Implications. Free Press: New York, 1975) was published. It is emphasized that the transaction cost economics principles are durable but that the breathless advances in information technology, especially in the past decade, have comparatively favored lower transaction costs of markets over hierarchies. Copyright © 2006 John Wiley & Sons, Ltd.     

无标底招投标的博弈分析

无标底招投标是我国建筑行业中招标发展的必然趋势,也是科学合理的招标方式采用无标底的招标方式,可以有效的利用博弈论的有关知识更好地分析自己和竞争对手的投标价。     

Uncovering the hidden transaction costs of market power: A property rights approach to strategic positioning

A central construct in competitive strategy research is market power, the ability to raise price above marginal cost. Positioning research focuses on attempts to build, protect, and exercise market power. However, this approach contains hidden assumptions about transaction costs. Parties made worse off by the exercise of market power can negotiate, bargain, form coalitions, and otherwise contract around the focal firm's attempts to appropriate monopoly profits—depending on transaction costs. We build on property rights economics to explain how transaction costs affect positioning and offer propositions about successful positioning in an environment with transaction costs.     

基于博弈论的供应链伙伴关系交易成本研究

在大部分的工业行业领域,物流的成本能占到生产总成本的一半左右,做好生产活动的供给工作,降低交易成本,对于制造商和供应商意义重大。文章通过研究制造商和供应商之间的博弈,分析了供应商伙伴关系减少交易成本的过程,并提出了供应商伙伴关系减少交易成本的措施。     

供应链合作关系间交易成本的博弈分析

在大部分的工业行业领域,物流的成本能占到生产总成本的一半左右,做好生产活动的供给工作,降低交易成本,对于制造商和供应商意义重大。文中通过研究制造商和供应商之间的博弈,分析了供应商伙伴关系减少交易成本的过程,并提出了供应商伙伴关系减少交易成本的措施。     

Joint decision of procurement lot-size,supplier selection,and carrier selection

The joint decision making of procurement lot-size, supplier selection, and carrier selection has potential to reduce buyer's purchasing expenditures. Furthermore, the total logistics cost can also come down through economies of scale in the purchasing and transportation costs, and reduction in supply chain disruptions such as rejections and late deliveries. We study a procurement setting in which a buyer needs to purchase a single product from a set of suppliers over finite discrete time periods to satisfy service level requirements. The suppliers offer all-unit quantity discounts, and transportation cost depends on carrier capacity as well as geographical location of suppliers. This paper proposes an integer linear programming model to simultaneously determine the timings of procurement, lot-sizes, suppliers and carriers to be chosen so as to incur the least total cost over the planning horizon. A numerical example is included to demonstrate the effectiveness of the proposed model in establishing tradeoffs among purchasing cost, transaction cost, and inventory holding cost. Sensitivity analysis has been carried out to understand the effects of the model parameters on the purchasing decisions and total cost. Managerial insights of this study serve as a reference for decision makers to develop effective procurement strategies.     

Monetary general equilibrium with transaction costs

Commodity money arises endogenously in a general equilibrium model with separate budget constraints for each transaction. Transaction costs imply differing bid and ask (selling and buying) prices. The most liquid good—with the smallest proportionate bid/ask spread—becomes commodity money. General equilibrium may not be Pareto efficient. If zero-transaction-cost money is available then the equilibrium allocation is Pareto efficient. Fiat money is an intrinsically worthless instrument. Its positive price comes from acceptability in paying taxes, and its use as a medium of exchange is based on low transaction cost.     

Option hedging theory under transaction costs

The problem of option hedging in the presence of proportional transaction costs can be formulated as a singular stochastic control problem. Hodges and Neuberger [1989. Optimal replication of contingent claims under transactions costs. Review of Futures Markets 8, 222–239] introduced an approach that is based on maximization of the expected utility of terminal wealth. We develop a new algorithm to solve the corresponding singular stochastic control problem and introduce a new approach to option hedging which is closer in spirit to the pathwise replication of Black and Scholes [1973. The pricing of options and corporate liabilities. Journal of Political Economy 81, 637–654]. This new approach is based on minimization of a Black–Scholes-type measure of pathwise risk, defined in terms of a market delta, subject to an upper bound on the hedging cost. We provide an efficient backward induction algorithm for the problem of cost-constrained risk minimization, whose associated singular stochastic control problem is shown to be equivalent to an optimal stopping problem. This algorithm is then modified to solve the singular stochastic control problem associated with utility maximization, which cannot be reduced to an optimal stopping problem. We propose to choose an optimal parameter (risk-aversion coefficient or Lagrange multiplier) in either approach by minimizing the mean squared hedging error and demonstrate that with this “best” choice of the parameter, both approaches have similar performance. We also discuss the different notions of risk in both approaches and propose a volatility adjustment for the risk-minimization approach, which is analogous to that introduced by Zakamouline [2006. European option pricing and hedging with both fixed and proportional transaction costs. Journal of Economic Dynamics and Control 30, 1–25] for the utility maximization approach, thereby providing a unified treatment of both approaches.     

The New Competition in Broadcasting: Trick or Treat?

The broadcasting reforms of the 1990s attempted to combine increased competition with the preservation of the public service ideal. The reforms were called into question when it became clear that the production quality was being undermined by poor information flows and excessive transaction costs. For competition in broadcasting to flourish, closer attention needs to be paid tothe institutional preconditions of effective contracting.     

Transaction costs, capital-gains taxes, and housing demand

The paper considers the effect of transaction costs—particularly in the form of capital-gains taxes—on the aggregate demand for owner-occupied housing. The framework is an overlapping-generations model, where consumers can avoid the transaction costs (taxes) by keeping the same house for both periods of life. The first part of the paper analyzes the consumer's choice problem. It distinguishes between costs that are fixed irrespective of the size of the house bought or sold, and costs such as capital-gains taxes that are related to the house value. It is shown that higher transaction costs have lock-in effects, inducing consumers to keep the same house for both periods. Also it is found that under a wide variety of circumstances the amount of housing demanded will increase as the household is being locked in. Finally, the paper looks at the effects on aggregate demand from an increase in capital-gains taxes. It is shown that an increased rate of taxation decreases demand for low tax rates. But for high tax rates, when lock-in effects become important, one generally gets the opposite effect; high tax rates tend to increase housing demand.     

Do Private Prisons Really offer Savings Compared with their Public Counterparts?

Private contracting of public services has been alleged to reduce costs. We address the critical question of whether private contracting really saves money, using the US prison privatisation experience as an example. Although the consensus in the literature identifies such savings, we raise economic issues of incomplete contracting, asymmetric information and moral hazard, which complicate matters. We discuss explicit, implicit, and agency costs that show that measuring the savings and quality impact of private contracting is more challenging than the literature suggests, and often inconclusive. This may suggest caution in designing solutions to cost pressures.     

The number of securities giving the maximum return in the presence of transaction costs

An essential element of any realistic investment portfolio selection is the consideration of transaction costs. Our purpose, in this paper, is to determine the maximum return and the corresponding number of securities to buy giving such return, whenever practical constraints features related to budget, buy-in thresholds, and transaction costs are taken into consideration. Dealing with the portfolio selection and optimization problem in the point of view of individual investors, we will arrive to get an analytic result, leading to a new and simple alternative solution to heuristic algorithms. Moreover, this result can be considered as another approach to integer optimization.     

Sector choices for public service delivery The transaction cost implications of executive turnover

The question of whether private firms should contract out for products and services or provide them internally (i.e. become more vertically integrated) has been a topic that has concerned scholars for many years. This article argues that the transaction costs in local contracting choices are linked to the characteristics of political systems that influence political and administrative uncertainty. Our analysis examines the transaction costs that result from executive turnover. Specifically, we are concerned with how uncertainty resulting from turnover in leadership positions in city government affects the ability of a municipality to negotiate contracts, make credible commitments to suppliers and faithfully uphold and enforce contracts once they are in force. We find that manager turnover reduces the likelihood of contracting with private sector providers. Mayor turnover has the opposite effect increasing contracting with both government and for-profit providers.     

Low cost country sourcing and its effects on the total cost of ownership structure for a medical devices manufacturer

In this paper, we describe a total cost of ownership (TCO) method as an activity-based costing (ABC) application along the value chain to measure and analyse the costs of international sourcing activities. We further describe the method's implementation for a manufacturer of high-tech medical devices. For this case study, we analyse the effects of shifting purchasing volume from traditional procurement market suppliers to low cost country suppliers on the cost structure of purchasing projects. We find that particularly costs at component and supplier level gain importance over traditionally dominating unit level costs. Furthermore, we identify low cost country sourcing as a decision with extensive impact on value chain entities other than purchasing. Finally, a considerable part of costs in low cost country sourcing accrue at the beginning of a purchasing project due to problems stemming from unsatisfactory initial quality, language barriers and intercultural communication.     

浅析我国电力设备市场招标问题与对策

本文就现今我国电力设备在市场中展现的各种特点以及我国加入了WTO之后所面临的各种新形势为基础,针对我国电力设备在市场招标过程中的问题,提出了一系列的应对措施,其中包括招标组织的成立、招标计划的设计、招标程序的规范以及对招标评审的各种灵活要求,这些措施和要求的规范都是为了能够使招标工作在开展过程中能更科学,保证招标能够公开、公平、公正,科学合理的招标体系能够使电力建设的迫切需要被最大限度满足,并且能最大化降低工程建设的造价。