Bidding for Complex Projects: Evidence from Italian Government’s Acquisitions of IT Services

Weight Values, Scoring Rules and Abnormally Low Tenders Criteria in Multidimensional Procurement: Effects on Price

“…The estimates on PSR_indep remain small and statistically insignificant, although the estimate obtained in the subsample with n included in x hints at the possibility suggested by Albano, Dini, and Zampino (2009), that independent PSRs lower the price paid by inducing more aggressive bidding. The estimates on PSR_convex have become negative and, in the case presented in column (3), larger in absolute value and statistically significant at 5 percent.…”

“…The PSRs numbered 6, 8, 9, 12, and 16 are such that S i only depends on A and b i , so that each bidder can calculate its price score in advance (i.e., before the bidding phase takes place). This type of PSR is called independent by Albano, Dini, and Zampino (2009). The other PSRs listed in Table 2 are of the interdependent type, as the price score of any bidder 1( also depends on the other bidders' price offers and hence cannot be calculated in advance.…”

“…For Dini, Pacini, and Valletti (2006), interdependent PSRs give stronger incentives on price competition as participants, by bidding low, increase the likelihood to get the highest score reducing at the same time the score obtained by all other competitors. On the other hand, Albano, Dini, and Zampino (2009) argue that independent PSRs stimulate price competition as a supplier can calculate in advance the change in its score associated to a variation in the offered price. This issue is explored in the sample using the dummy variable PSR_indep, which indicates that the PSR is of the independent type.…”

“…Procurement including non-monetary dimensions (quality for brevity) in addition to price has been called multidimensional (McAfee and McMillan, 1987), multi-attribute (Staschus et al, 1991), or best value (Peckinpaugh and Goldstein, 1992). As argued by Dini, Pacini, and Valletti (2006), in multidimensional procurement it is unlikely that the same bidder offers both the cheapest price and the highest quality, as high-quality products are typically more costly to produce (although see Albano, Dini and Zampino, 2009). Hence, an essential element of multidimensional procurement is 56 jorge gonzález chapela a method for combining a quote's price and quality dimensions into a total score.…”

“…The empirical literature on multidimensional procurement includes comparisons of quality scores induced by different types of PSRs (Albano, Dini and Zampino, 2009), of winning bids delivered by rigid/flexible evaluation systems (Cameron, 2000) and by lowest price/MEAT awarding mechanisms (Lundberg, 2006;Lewis and Bajari, 2011), of price bids resulting from varying price weights (Iimi, 2013;Koning and van de Meerendonk, 2014), and of bidding competitiveness as influenced by price weights, PSRs, and abnormally low tenders criteria (ALTC) (Ballesteros-Pérez et al, 2016) 3 . But with the exception of Koning and van de Meerendonk (2014), who also provide some evidence on the effect of price weights on the winning bid, and Ballesteros-Pérez et al 2016, not many authors have looked into the practical effects that characteristics of the WF such as the price weight, the PSR, and the ALTC criterion exert on the winning bid, that is, on the price paid by the buyer.…”