Examining the effects of source selection method on procurement outcomes

Abstract

Purpose The purpose of this research is to explore the effects of supplier selection method on key procurement outcomes such as procurement lead time (PLT), supplier performance and buyer team size. Design/methodology/approach Data were collected from a sample of 124 archival contract records from the US Department of Defense. A multiple regression model and multivariate analysis of covariance/analysis of covariance models were used to test the effects of source selection method on pertinent procurement outcomes. Findings The trade-off (TO) source selection method increases PLT, as does the number of evaluation factors and the number of proposals received. Substantially larger sourcing teams are also associated with the TO source selection method. Nonetheless, the TO method results in better supplier performance. Practical implications TO source selections yield superior supplier performance than low-bidder methods. However, they are costly in terms of time and personnel. Any assessment of supplier value should consider not only the price premium for higher performance but also the transaction costs associated with the TO method. Originality/value Very little research addresses a buying team’s evaluation of supplier-offered value ex ante and whether that value assessment materializes into actual value-added supplier performance. Low bidder tactics are pervasive, but price (i.e. sacrifice) is only one component of value. Benefits from superior supplier performance may yield greater overall value. If value is critical to the buyer, a TO source selection method – versus a low-bidder approach – is the appropriate tool because of higher supplier performance ex post.

Contractual procurement alternatives of air force contingency pharmaceuticals: a cost-benefit analysis

“…Williamson (2010) describes that humans are limited in their rationality due to complexities found in the business environment. According to the theory of information processing, when there is uncertainty in a given task or environment, there is a larger need for ensuring information processing to obtain desired outcomes (Landale et al, 2017a(Landale et al, , 2017b. Information processing can be improved through multiple avenues, including lateral relationships to share information (Landale et al, 2017a(Landale et al, , 2017b.…”

“…According to the theory of information processing, when there is uncertainty in a given task or environment, there is a larger need for ensuring information processing to obtain desired outcomes (Landale et al, 2017a(Landale et al, , 2017b. Information processing can be improved through multiple avenues, including lateral relationships to share information (Landale et al, 2017a(Landale et al, , 2017b. Transaction cost economics suggests that when the resulting effects of bounded rationality greatly influence organizational transactions, organizational integration efforts or information sharing, could be used to ensure the value of transactions is captured (Pint and Baldwin, 1997).…”

“…In Fiscal year (FY) 19, the breakdown of contingency pharmaceutical purchases shows the utilization of the PPV contract over 70% of the time in pharmaceutical procurement actions (JMAR, 2019). A key outcome measure of various types of government contracts is supplier performance (Landale et al, 2017b). Supplier performance in the PPV contract is measured by fulfilment metrics.…”