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Bidding for Complex Projects: Evidence From the Acquisitions of IT Services

Gian Luigi Albano, Federico Dini and Roberto Zampino
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Gian Luigi Albano: Italian Public Procurement Agency (Consip S.p.A.)
Federico Dini: Italian Public Procurement Agency (Consip S.p.A.)
Roberto Zampino: Italian Public Procurement Agency (Consip S.p.A.)

No 2008.86, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Competitive bidding (as auctions) is commonly used to procure goods and services. Public buyers are often mandated by law to adopt competitive procedures to ensure transparency and promote full competition. Recent theoretical literature, however, suggests that open competition can perform poorly in allocating complex projects. In exploring the determinants of suppliers’ bidding behavior in procurement auctions for complex IT services, we find results that are consistent with theory. We find that price and quality do not exhibit the classical tradeoff one would expect: quite surprisingly, high quality is associated to low prices. Furthermore, while quality is mainly driven by suppliers’ experience, price is affected more by the scoring rule and by the level of expected competition. These results might suggest that (scoring) auctions fail to appropriately incorporate buyers’ complex price/quality preferences in the tender design.

Keywords: Procurement Auctions; Scoring Rules; IT Contracts; Price/Quality Ratio (search for similar items in EconPapers)
JEL-codes: D44 D86 H51 H57 (search for similar items in EconPapers)
Date: 2008-10
New Economics Papers: this item is included in nep-com and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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