Wild Bids. Gambling for Resurrection in Procurement Contracts

Calveras, Aleix; Ganuza, Juan José; Hauk, Esther

doi:10.1023/b:rege.0000028013.76488.44

Cited by 60 publications

(58 citation statements)

References 10 publications

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“…He may lack experience in auctions or may have miscalculated the costs and the return needed to recoup its funding [45][46]. There have also been cases in which a low bid was deliberately submitted to oust a competitor, protect a company's position in the market or gain access to a new market [47][48], a phenomenon known as predatory pricing [49].…”

Section: Introductionmentioning

confidence: 99%

A Methodology to Detect the Deviations of the Project's Budget Compared to Market Prices

Bargues¹,

González-Cruz²,

González-Gaya³

et al. 2015

ujm

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The budget of a project reflects the cost of the investment needed to build an infrastructure, install a system or acquire new materials or supplies. A well-formulated budget in accordance with market prices, allows contractors to prepare offers according to their technical, economic and financial characteristics. On the other hand, it avoids current philosophies that aim to get the contract at any price. Philosophies subsequently used to point out problems and claims during the execution of the project (contradictory prices, delays, etc.) in order to recover some or the entire economic bid carried out during the tendering. In this paper a simple and fast methodology is developed to check if the tendering price is in accordance with market prices, so that the economic viability of the project is not at risk. The application of the methodology on a sample of projects allows us to check the influence of the type of project (civil or building) on the characteristics of the budget. It also allows us to point out the insufficient economic endowment of the projects as the start of the subsequent problems during the execution of the work.

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Section: Introductionmentioning

confidence: 99%

A Methodology to Detect the Deviations of the Project's Budget Compared to Market Prices

Bargues¹,

González-Cruz²,

González-Gaya³

et al. 2015

ujm

View full text Add to dashboard Cite

show abstract

“…Although such special rules curb competition in auctions and are often criticized for affecting the transparency and fairness of auction, our results suggest the necessity of these special rules in public procurement auctions. Calveras et al (2004) show that when cost is common but uncertain for firms, firms with a small amount of initial cash can make a profit by bidding low and declaring bankruptcy if the cost is found to be high in the second-price auction. By conducting experiments, Cox et al (1996) discover that too-low bids in the first-price auction under post-auction cost uncertainty lead to cost overruns.…”

Section: Introductionmentioning

confidence: 99%

Auctions for Public Construction with Corner-Cutting

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: This paper reports the theoretical and experimental results of auctions for public construction in which firms cut corners. We show that winning bids and qualities of the constructed buildings are both zero in equilibria if there are at least two firms whose initial cash balances are zero. The experimental results support that firms with zeroinitial cash balance win and that the winning bids and the qualities of the constructed buildings are considerably low. Terms of use: Documents in EconStor mayJEL classification: C92; D44; L15

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“…There are many reasons to explain this behavior: the bidder may be in desperate need of the contract, even though it may turn into a financial loss [17]. He may lack experience in auctions or may have miscalculated the costs and the return needed to recoup its funding [18][19].…”

Section: Introductionmentioning

confidence: 99%

Abnormally Low Tenders in Non-pricing Criteria: the Need for Control

Bargues¹,

González-Cruz²,

González-Gaya³

2016

ujm

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As public procurement accounts for approximately 10 to 15% of gross domestic product (GDP) in developed countries, tendering mechanisms should be clearly defined in order to avoid any actions that could endanger the basic principle that all bidders should be on equal terms. An Abnormally Low Tender (ALT) is defined as an offer too low to provide a normal level of profit and that cannot be explained on the basis of construction methods, the technical solution chosen, the originality of the work, or the favorable conditions of the tenderer. Public bodies are well aware of the risk of accepting an offer that cannot be carried out and despite the difficulty of detection recommendations for their prevention usually focus on the price criterion. Most tenders are awarded to the economically most advantageous tender (EMAT), which is assessed by various criteria (including price), though other criteria often have equal or greater weight in the final decision. The method used in this research study is divided into two main phases. First, the score of the bidders is obtained for criteria evaluated by formulae other than price, based on the contract terms of three case studies, after which new scores for these award criteria are obtained from ALT formulae, then, the results of both scoring methods are analyzed. This paper defends the need to control abnormally low tenders by means of award criteria evaluated by formulae other than those of price.

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Wild Bids. Gambling for Resurrection in Procurement Contracts

Cited by 60 publications

References 10 publications

A Methodology to Detect the Deviations of the Project's Budget Compared to Market Prices

A Methodology to Detect the Deviations of the Project's Budget Compared to Market Prices

Auctions for Public Construction with Corner-Cutting

Abnormally Low Tenders in Non-pricing Criteria: the Need for Control

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