The impact of scoring weights on price and quality outcomes: An application to the procurement of Welfare-to-Work contracts

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. This paper assesses the effects of changes in scoring weights in auctions, using a unique sample of biddings of private Welfare-to-Work (WTW) organizations to reintegrate groups of unemployed and disabled workers. WTW-organizations did not only bid on prices, but also received points for three proxies of the quality of their services: their reputation, a description of their intended methodology to reintegrate workers and the fraction of job placements they considered likely to achieve. We exploit the fact that the scoring weights of these items changed in the time period under consideration, while the broad classification of ('gross') worker types remained similar over time. Our estimation results show that increases in the scoring weights of the quality items result in higher price bids, particularly of WTW-firms that are bidding for the first time as entrants. For the WTW-firms that won the procurements, we find a higher weight for both the reputation and the methodology item to contribute to the job placement of workers.JEL Classification: D44, I38

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

“…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.…”

Selection of the Best Proposal using FAHP: Case of Procurement of IT Master Plan’s Realization

“…These purchases designated by the term "procurement" play a considerable economic role and have a significant economic weight [2] estimated at about 20% of global GDP [3]. The award of contracts is a sensitive area as the economic interests at stake are huge [3], [4].…”

Public or private job placement services—Are private ones more effective?

“…how important different criteria are in the tender selection process). Increasing the quality components resulted in higher priced bids, while increasing the weight of indicators for reputation and for intended integration plans improved placement rates [13].…”