Balancing the additional costs of purchasing and the vendor set dimension to reduce public procurement costs

The paper addresses the reduction of the total cost of purchasing in public procurement, focusing on tenders called for in the European Union and awarded by the Lowest Price (LP) criterion. Taking into account the main characteristic features of governmental purchasing (competition, prescribed procedures, and transparency) and building upon the related contributions in the literature, we present a probabilistic approach for evaluating and limiting the total cost of purchasing in public tenders awarded according to the LP criterion. The presented framework includes the evaluation of the so-called additional costs of purchasing (ACP), a part of the transaction cost that is typically considered in the related literature from a private organization perspective only. The approach can be applied to a generic transaction in any public tender issued according to the European legislation with the LP criterion. Considering the real case study of the public tender for maintenance works on a municipal sport facility in Bari (Italy), we take into account the costs of both transaction counterparts, i.e., the ACP regarding the contracting authority and those related to the firms involved in the tender. Applying the model to the case study, we underline the relevance of ACP for public tenders and show that, by inviting a suitable number of bidders to participate in the call, it is possible to save money both for the contracting authority and the involved competitors.     

Supplier selection with rank reversal in public tenders

For supplier selection in the public sector, the Weighted Sum Model is often used in combination with relative scoring methods that allow rank reversal. With rank reversal we refer to a changed order in the ranking of bids leading to a new winner, after removing or adding a non-optimal bid that does not win the original tender. In practice, an important reason indicated by practitioners for using methods that allow rank reversal is that it would rarely occur in practice. Based on an analysis of 303 Dutch public tenders, this research shows this is not true. In about 1 out of 5 the tenders, rank reversal occurs after adding non-optimal fictional bids to tenders that do not have quality thresholds. After removing bids, the rate is about 1 out of 40 if a curved relative scoring method is used. In addition, the research shows that rank reversal rates increase when (i) there is no quality threshold, (ii) the number of bids increases, (iii) bid price variance increases, and (iv) price weights are not very low or high. We argue that relative scoring methods that allow rank reversal should not be used in public procurement, or otherwise only in exceptional cases, as it conflicts with public procurement principles and leads to reduced overall bid value.     

最有利标的投标评选制度理论基础研究

自政府采购法实施以来,各级部门以最有利标的决标的采购案例数量有逐年增加的趋势。但最有利标的评选制度在实施中仍然受到外界严重质疑,因此,有必要针对现行最有利标的评选制度的理论基础及执行程序进行通盘了解,以作为日后改善的参考。文章参照多准则决策模式,解析最有利标的评选制度中,通过评委评分的方式,将企业所提供的异质性产品同质化的过程,辨别其重要因素及交互影响,以建立最有利标的评选制度的理论基础,同时根据现行法令规定及整体的采购生命周期观点,归纳分析目前最有利标的采购实务上可能造成评选制度危机的来源。     

Addressing the sustainable development through sustainable procurement: What factors resist the implementation of sustainable procurement in Pakistan?

Sustainable Public Procurement is an integral part of sustainable development because of ever increasing government expenditures. Most of the developing countries lack the required infrastructure which may support public sector sustainability. The aim of this study is to assess the critical factors which resist the implementation of sustainable procurement in public sector of Pakistan. We used Interpretive Structural Model to investigate and rank the interrelationships among different factors of sustainable procurement. With the help of literature and Likert scale instrument, we found twelve key barriers that resist sustainable procurement implementation. We also examined tender documents of 75 different public sector universities of Pakistan but found absence of sustainability element in the documents. External factors namely government legislation and stakeholders' pressure are found most critical barriers as compared to inter organizational factors. The study is also important to highlight the hurdles in the way of sustainable development. First, the government must introduce rules and regulations to implement the sustainable procurement. Stakeholders and donors must put pressure on organizations for adopting sustainable procurement. Sustainability education should be made mandatory part of curriculum and employees should be given regular training on sustainability. Further, public procurement policies at government and institutional levels are required to be revisited towards a circular economy.     

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.     

Systemic risk in major public contracts

This paper presents a novel approach to the characterisation of “systemic risk” in the context of public sector procurement and contracting. We argue that contemporary risk management practices in project and programme management exhibit a number of limitations. This is particularly relevant to public sector contracting, which, the authors postulate, would benefit from more sophisticated practices that are capable of dealing with risk ‘systemicity’. Drawing on a sample of public sector procurement exercises commissioned by the UK Ministry of Defence (MoD), the paper presents a multi-method approach that aims to increase our understanding of complex outsourcing contracts. The results suggest a need for more appropriate methods of risk analysis, and discuss the practical implications.     

Does Green Public Procurement lead to Life Cycle Costing (LCC) adoption?

Life Cycle Costing (LCC) is rarely used in public procurement and public institutions have yet to fully understand its potential value for sustainable procurement. The new European Directive on Public Procurement is, however, designed to position LCC as central to sustainable sourcing. Although previous studies have identified positive correlations between Green Public Procurement Policies (GPP) and LCC, it is still unclear how public institutions can further adopt LCC practices by leveraging their experience of green sourcing. In this study an organizational learning theoretical perspective is taken to investigate the circumstances under which public administrations’ experience of GPP – considered as a way of integrating the dimension of environmental sustainability into the sourcing process – stimulates their LCC learning and capabilities – considered as a way to include the sustainability economic dimension. The goal is to understand if the adoption of GPP can stimulate the internalisation of LCC in public tenders. A multinomial logistic regression was conducted using a sample of 120 public administrations located in different countries. The results show that experience of GPP stimulates the internalisation of LCC at a public level, but only under specific conditions. The study contributes to the Sustainable Supply Management literature, being one of the first studies in the field adopting an organizational learning theoretical lens to review the role of experience as significant opportunity to develop capabilities. It also contributes to the organizational learning theory, by confirming that experience can aid learning but only in specific environmental contexts.     

How Governments Promote Monopolies: Public Procurement in India

Government officials exert tremendous power when they buy goods and services from private companies. By setting the terms and conditions under which public procurement takes place, public officials help determine which companies will thrive and which ones will fail. This is one of the important ways governments help create and sustain monopolies in the private sector. But since the bidding process to sell products or services to the government is supposed to be an open and fair competition, how does it become skewed toward businesses that already dominate markets? We examine a particular source of bias: the eligibility criteria for bidding in public procurement tenders. These criteria often allow a few large, private companies to bid on government contracts, but they exclude a large number of small and medium‐sized enterprises. We study the terms by which offers are solicited in India through tenders floated for transportation projects: roads, highways, bridges, and civil construction. We find that the eligibility criteria impose an unnecessarily heavy burden on small firms, potentially knocking them out of the competition and discouraging them from participating in other procurement processes. In this way, the process reinforces monopolies instead of breaking them up. While this study focuses on India, the results also apply to similar economies.     

公路工程评标模糊综合评价及其计算机化

针对公路工程评标中如何选择投标单位问题,文章论述了通过确定科学的评标指标体系,运用层次分析法和模糊综合评价方法,建立评标模型,并用计算机进行系统设计,借助于已开发的计算机软件运行,较目前使用的评标方法更加科学、公正、快捷。     

On the contribution of public procurement to entrepreneurship and small business policy

Public procurement in industrialized nations accounts for a significant share of gross domestic product; hence it is imperative for local, regional and national economic development to utilize this potential. However, previous discussions of entrepreneurship and small business policy have by and large marginalized public sector procurement. As a contribution to giving greater salience to the linkages between regional development, entrepreneurship and public procurement, this paper presents empirical results of a qualitative study into local government authorities in the United Kingdom. In particular, it draws out a range of enablers and barriers for sourcing from small- and medium-sized enterprises that were perceived by procurement managers. The focus on public sector procurement furthermore leads to a more systematic theoretical elaboration of entrepreneurship policy as being based on legal authority or the market or network effects from geographic proximity.     

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.     

模糊综合评判法在铁路项目评标中的应用

利用模糊数学能够解决不确定性问题的特性,运用模糊综合评判法进行评标。通过全面考虑评标因素,最后得出评标结果。结合工程实例说明这一计算过程,并与传统方法得出的评标结果进行比较。说明此方法具有较广的适用性,是一种较好的评价方法,为评标者提供可参考建议。     

Price/time/intellectual efficiency of procurement: Uncovering the related factors in Chinese public authorities

High efficiency is one of the important goals of public procurement (PP); however, research on PP efficiency is still not sufficient, especially in the context of developing countries. With a focus on the purchasing phase, this study measures three aspects of procurement efficiency of public authorities: price, time and intellectual efficiency. The relevant factors of these three aspects are explored and examined. 838 PP contracts in Chengdu city, China were collected in the first half of 2018 using a web crawler programme. Regression method is used to analyse the data. This study finds that the price efficiency of PP is negatively associated with the implementation of green public procurement (GPP) but is positively associated with the evaluation method (the weight of bidding price during evaluation) and the number of bidders. Time efficiency is negatively associated with GPP implementation. Intellectual efficiency is negatively associated with the size of the procurement. This study accomplishes the following: I. extends research to a still relatively unexplored context: developing countries; II. adds to the studies on public procurement efficiency; and III. investigates the influence of GPP implementation on PP efficiency in a developing country.     

比选采购在工程项目采购中的应用研究

比选采购只能适用于依法必须招标项目之外的采购项目，在实际采购过程中应用比较广泛，文中通过对比选采购在工程项目采购过程中应用现状分析，指出了存在的不足，针对不足提出了相应的应对措施。     

The clash of managerial and professional logics in public procurement: Implications for innovation in the health-care sector

This article addresses the enactment of public procurement and its influence on adoption and diffusion of innovation, using a case study of public procurement of a low-tech medical device innovation in Swedish healthcare. Based on interviews and documentation, the article illustrates the various perspectives of the different professions involved in the complex task of setting the requirement specification for the tender. The technology identities of the medical device (innovation) are constructed and negotiated by the actors: procurement administrators, health-care professionals and suppliers within the adoption space. Examining the enactment of the procurement process as part of the adoption space is a way to deepen our understanding of the social component within public procurement.     

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。     

Public–private partnership in Public Administration discipline: a literature review

Public–private partnerships (PPPs) have become popular tools to deliver infrastructure and public services around the world. As an innovative public procurement approach, PPPs have drawn considerable attention from academic circles. In order to enhance our knowledge of PPPs, the authors conducted a systematic literature review of articles published in international journals of the Public Administration (PA) discipline. Four main topics in this discipline are identified by means of social network analysis, including PPP concept, risk sharing amongst PPP participants, the drivers of PPP adoption, and PPP performance. Seven propositions about the four topics are summarized. Directions for future research are also considered.     

Relationship risk perception and determinants of the collaboration fluency of buyer–supplier relationships in public service procurement

Public service procurement effectiveness has been emphasized as a major challenge in recent years. Well-managed partnerships between buyers and suppliers are needed in this domain to achieve collaboration fluency and improve the effectiveness of procurement. The main objective of this study is to determine which issues managerial teams must emphasize when aiming to create a solid partnership based on pre-existing collaborative relationships. The originality of this study lies in the domain approached (public service procurement in social and healthcare services), as well as the variable it attempts to explain (collaboration fluency). The study investigates two major issues: firstly, how collaboration risk perception influences communication, trust, and the governance of a collaboration and, secondly, how these factors (communication, trust, and governance) affect collaboration fluency. The study is performed via a survey regarding the collaboration of the public sector with organizations from the private and third (non-profit) sectors within public service procurement. The empirical evidence was gathered with a structured online questionnaire that was sent to organizations from the private and third sectors that provide services in the social and healthcare domain. The results indicate that in collaborative relationships in public service procurement, the higher the perceived relationship risks are, the more positive effects they will have in terms of increasing trust, communication, and the quality of collaboration management. Furthermore, communication, governance, and administration have strong influences on collaboration fluency.     

Privatization of social care delivery – how can contracts be specified?

When contracting out services to private actors, public authorities must be able to ensure that the quality of services provided is satisfactory. Therefore, it is important to formulate precise quality requirements, thus making them possible to monitor. In the study, 1,005 quality requirements from public procurements of nursing homes were categorized, and their degree of monitorability assessed. The analysis showed that quality requirements related to ‘soft’ areas such as social activities typically were non-monitorable. The requirements were written in an imprecise, vague manner, thus making it difficult for the local governments to determine whether or not they were met.     

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.