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

40 Pages Posted: 18 Nov 2008

See all articles by Gian Luigi Albano

Gian Luigi Albano

Consip S.p.A. - The National Central Purchasing Body; LUISS "G. Carli", Department of Economics and Finance

Federico Dini

Italian Public Procurement Agency (Consip S.p.A.)

Roberto Zampino

Consip S.p.A/Consip ltd. (The National Central Purchasing Body)

Date Written: October, 31 2008

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

JEL Classification: D44, D86, H51, H57

Suggested Citation

Albano, Gian Luigi and Dini, Federico and Zampino, Roberto, Bidding for Complex Projects: Evidence from the Acquisitions of IT Services (October, 31 2008). FEEM Working Paper No. 86.2008. Available at SSRN: https://ssrn.com/abstract=1292831 or http://dx.doi.org/10.2139/ssrn.1292831

Gian Luigi Albano (Contact Author)

Consip S.p.A. - The National Central Purchasing Body ( email )

Via Isonzo, 19/E
Rome, 00198
Italy
+39 06 85449.627 (Phone)

LUISS "G. Carli", Department of Economics and Finance ( email )

Via O. Tommasini 1
Rome, Roma 00100
Italy

Federico Dini

Italian Public Procurement Agency (Consip S.p.A.) ( email )

00198 Roma
Italy

Roberto Zampino

Consip S.p.A/Consip ltd. (The National Central Purchasing Body) ( email )

Research Unit
Via Isonzo, 19/E
Roma, RM 00198
Italy

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