Multi-Contract Tendering and Package Bidding in Procurement

HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006

25 Pages Posted: 20 Apr 2006

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Nicola Dimitri

University of Siena - Department of Economics

Riccardo Pacini

University of Rome "Tor Vergata"

Marco Pagnozzi

Università di Napoli Federico II; CSEF

Abstract

In practical activity, the procurer can often decide to split the supply of a product in multiple contracts, or lots. This paper surveys some competitive tendering procedures for multiple contracts and discusses how the choice of the most appropriate format of competitive tendering for the procurer should depend upon the costs that suppliers face in serving the contracts. In particular, a group of contracts is characterized by strong positive (negative) complementarities when the cost of serving them as a group is considerably lower (higher) than the sum of the costs of serving each of them alone. With both positive and negative complementarities in order to maximize savings, and obtain high quality standards for the procured goods and services, the buyer should introduce package bidding allowing suppliers to bid for sets of contracts as well as for single ones. Besides reducing suppliers' exposure to the risk of being awarded the "wrong" combination of contracts, package bidding allows to divide the supply in smaller lots without preventing large producers from exploiting economies of scale, thereby favoring smaller suppliers' participation and a more efficient allocation of the contracts.

Keywords: Procurement, complementarities, package bidding

JEL Classification: H57, D44, D81

Suggested Citation

Spagnolo, Giancarlo and Dimitri, Nicola and Pacini, Riccardo and Pagnozzi, Marco, Multi-Contract Tendering and Package Bidding in Procurement. HANDBOOK OF PROCUREMENT, Nicola Dimitri, Gustavo Piga, Giancarlo Spagnolo, eds., Cambridge University Press, 2006 , Available at SSRN: https://ssrn.com/abstract=896744

Giancarlo Spagnolo (Contact Author)

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Nicola Dimitri

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy

Riccardo Pacini

University of Rome "Tor Vergata" ( email )

Via Columbia 2
Rome, 00133
Italy
+393392560385 (Phone)

HOME PAGE: http://www.economia.uniroma2.it

Marco Pagnozzi

Università di Napoli Federico II ( email )

Department of Economics
Via Cinthia (Monte S. Angelo)
Napoli, 80126
Italy
+39 081 675099 (Phone)
+39 081 7663540 (Fax)

HOME PAGE: http://www.csef.it/people/pagnozzi.htm

CSEF

Italy

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