A Comparative Study of Formulas for Choosing the Economically Most Advantageous Tender
51 Pages Posted: 6 Jul 2015
Date Written: July 5, 2015
Choosing the best bid is a central step in any tendering process. If the award criterion is the economically most advantageous tender (EMAT), this involves scoring bids on price and quality and ranking them. Scores are calculated using a bid evaluation formula that takes as inputs price and quality, and their respective weights. The choice of formula critically affects which bid wins. We study 38 such formulas and discuss several of their aspects, such as how much the outcome of a tender depends on which formula is being used, relative versus absolute scoring, ranking paradox, iso-utility curves, protection against a winner with an extremely high price, and how a formula reflects the weights of price and quality. Based on these analyses, we summarize the (dis)advantages and risks of certain formulas and provide associated warnings when applying certain formulas in practice.
Keywords: Tendering, Bid evaluation formulas, Bid selection
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