Multidimensional Auctions for Public Energy Efficiency Projects: Evidence from Japanese Esco Market

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Policy Research Working Paper 6485Competitive bidding is an important policy tool to procure goods and services from the market at the lowest possible cost. Under traditional public procurement systems, however, it may be difficult to purchase highly customized objects, such as energy efficiency services. This is because not only prices but also other nonmonetary aspects need to be taken into account. Multidimensional auctions are often used to evaluate multidimensional bids. This paper examines the bidding strategy in multidimensional auctions, using data from This paper is a product of the Sustainable Development Departmen, Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world.

Facilitating ESCO market development through value co-creation: role of utility sector intermediaries

“…Being distinctly different from competitive ESCO procurement practices in other parts of the world (e.g. Bleyl et al, 2013;Iimi, 2013;Nolden et al, 2016), there are no tendering or bidding processes for selecting the ESCO in Sharjah. The selection and award criteria highly favour an ESCO's flexibility and experience of the building type.…”

“…The ESCOs primarily operate under the EPC arrangement. The EPC is a complex and longterm service contract that transfers risks from the client to the ESCO, with the latter responsible for operating and maintaining the newly installed systems for a period ranging from 5 to 30 years (Iimi, 2013;Sorrell, 2007). The ESCO model is unique in that the ESCO typically assumes the project performance risk, with remuneration linked to energy savings achieved (Bertoldi et al 2006;Garbuzova-Schlifter and Madlener 2013).…”

“…Garbuzova-Schlifter & Madlener, 2013) and Japan (e.g. Iimi, 2013). However, there is a lack of research on the ESCO market in developing countries, especially in the Middle East.…”

Sustainable Public Procurement Policies on Promoting Scientific and Technological Innovation in China: Comparisons with the U.S., the UK, Japan, Germany, France, and South Korea

“…Japan encourages manufacturers to develop products that have less impact on the environment, and to enhance environmental awareness in PP [20]. To build an environmentally friendly and sustainable society eventually, Japan influences manufacturers of environmentally friendly products based on demand [21].…”

Weight Values, Scoring Rules and Abnormally Low Tenders Criteria in Multidimensional Procurement: Effects on Price

“…The empirical literature on multidimensional procurement includes comparisons of quality scores induced by different types of PSRs (Albano, Dini and Zampino, 2009), of winning bids delivered by rigid/flexible evaluation systems (Cameron, 2000) and by lowest price/MEAT awarding mechanisms (Lundberg, 2006;Lewis and Bajari, 2011), of price bids resulting from varying price weights (Iimi, 2013;Koning and van de Meerendonk, 2014), and of bidding competitiveness as influenced by price weights, PSRs, and abnormally low tenders criteria (ALTC) (Ballesteros-Pérez et al, 2016) 3 . But with the exception of Koning and van de Meerendonk (2014), who also provide some evidence on the effect of price weights on the winning bid, and Ballesteros-Pérez et al 2016, not many authors have looked into the practical effects that characteristics of the WF such as the price weight, the PSR, and the ALTC criterion exert on the winning bid, that is, on the price paid by the buyer.…”