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12 - Scoring rules
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- By Federico Dini, Junior Researcher CONSIP Research Unit, Rome, Italy, Riccardo Pacini, PhD Student in Economics University of Rome Tor Vergata, Italy, Tommaso Valletti, Reader at Tanaka Business School Imperial College London, UK
- Edited by Nicola Dimitri, Università degli Studi, Siena, Gustavo Piga, Università degli Studi di Roma 'Tor Vergata', Giancarlo Spagnolo, Stockholm School of Economics
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- Book:
- Handbook of Procurement
- Published online:
- 04 November 2009
- Print publication:
- 28 September 2006, pp 293-321
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Summary
Introduction
Competition for procurement contracts is widely recognized to have a multidimensional nature. The buyer often cares about both the price and other non-monetary attributes, including various measures of quality. The typical mechanism that can be used in these circumstances is a scoring-based competitive bidding. In such a competitive bidding format, participants bid for price and non-price attributes (quality). The buyer then selects the winner using a scoring rule that weights price and quality, with the aim of achieving best value for money. Hence, scoring competitive bidding involves the choice of a scoring rule that allows the buyer to rank offers and to determine the final contractor. Scoring competitive bidding can be more costly to design and run than price-only mechanisms, since it requires the evaluation of potentially complex quality attributes. However, it also guarantees more flexibility when handling the trade-off between price and quality.
In this chapter we investigate several practical issues concerning scoring rules that should inform the choices of private and public procurers. First, we examine how the procurer should choose the scoring rule according to her preferences. This explains how to solve the possible tension between low prices and high quality. Second, we describe different scoring rules and we analyse their properties paying particular attention to features such as simplicity, predictability and ability to promote competition. We identify the settings where a particular scoring rule is likely to work better than others do, providing some practical conclusions.
7 - Division into lots and competition in procurement
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- By Veronika Grimm, Research Assistant University of Cologne, Germany, Riccardo Pacini, PhD Student in Economics University of Rome Tor Vergata, Italy, Giancarlo Spagnolo, Head of the Research Unit at Consip, Italy: Visiting Associate Professor of Economics Stockholm School of Economics, Matteo Zanza, Consultant at Arthur D. Little Global Management, Italy
- Edited by Nicola Dimitri, Università degli Studi, Siena, Gustavo Piga, Università degli Studi di Roma 'Tor Vergata', Giancarlo Spagnolo, Stockholm School of Economics
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- Book:
- Handbook of Procurement
- Published online:
- 04 November 2009
- Print publication:
- 28 September 2006, pp 168-192
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Summary
Introduction
A buyer always has the choice to procure a good or service with a single contract or divide it into several contracts. On the one hand, large firms and centralized public procurement agencies often find it optimal to divide supply into smaller, local lots because of the transportation costs linked to geographical dispersion. On the other hand, complementarities between different parts of the contract would suggest advantages from bundling them. But the division into lots has other important effects. By specifying the size of each lot, the division of a supply contract determines which potential suppliers have sufficient capacity to participate in each separate competitive tendering (for at least one lot), and which do not. By influencing participation, the division into lots has an important impact on the participants’ behaviour and on the final outcome. The division into lots also determines how a procurement contract can be ‘split’ among potential competitors, hence how easy it is for bidders to achieve and sustain implicit or explicit collusive agreements to share the supply at inflated prices.
Existing economic analysis provides only limited guidance when it comes to deciding the number of lots into which a supply contract should be divided, and deciding about their sizes. The reason is that standard textbooks usually consider cases with a fixed number of objects.
8 - Multi-contract tendering procedures and package bidding in procurement
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- By Nicola Dimitri, Professor of Economics University of Siena, Italy, Riccardo Pacini, PhD Student in Economics University of Rome Tor Vergata, Italy, Marco Pagnozzi, Assistant Professor of Economics at the University of Naples, Italy, Giancarlo Spagnolo, Head of the Research Unit at Consip, Italy: Visiting Associate Professor of Economics at the Stockholm School of Economics, Sweden
- Edited by Nicola Dimitri, Università degli Studi, Siena, Gustavo Piga, Università degli Studi di Roma 'Tor Vergata', Giancarlo Spagnolo, Stockholm School of Economics
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- Book:
- Handbook of Procurement
- Published online:
- 04 November 2009
- Print publication:
- 28 September 2006, pp 193-219
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Summary
Introduction
In practical procurement, the most common way to purchase multiple supply contracts – of different types, say, or for different geographical areas – is probably the simultaneous sealed-bid competitive tendering of several distinct contracts. In this competitive bidding procedure, when tenders are only economic, suppliers make a separate bid for each contract and each contract is awarded to the supplier who makes the lowest bid, at a price equal to his bid. Typically, the chance that a supplier is awarded a particular contract is independent of the bids he submits on any other contract.
This simple way of awarding supply contracts may be appropriate when the cost of supplying each contract is independent of which other contracts a supplier is serving. But, in reality, a supplier's cost of serving a contract often depends on how many, and which, other contracts he also supplies. When this is the case, the procurer should allow suppliers to submit offers that can take such relations into account. For example, when the average cost of serving two adjacent regions is substantially lower than that of serving just one of the two areas – say because part of the fixed investment required can be used for both areas – bidders should be allowed to tender offers whose conditions are valid only if they are awarded the service contracts for both adjacent regions.
6 - Information and competitive tendering
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- By Gian Luigi Albano, Senior Economist at the Consip Research Unit, Italy, Nicola Dimitri, Professor of Economics University of Rome Tor Vergata, Riccardo Pacini, PhD student in Economics University of Naples, Italy, Giancarlo Spagnolo, Head of the Research Unit at Consip, Italy: Visiting Associate Professor of Economics at the Stockholm School of Economics, Sweden
- Edited by Nicola Dimitri, Università degli Studi, Siena, Gustavo Piga, Università degli Studi di Roma 'Tor Vergata', Giancarlo Spagnolo, Stockholm School of Economics
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- Book:
- Handbook of Procurement
- Published online:
- 04 November 2009
- Print publication:
- 28 September 2006, pp 143-167
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Summary
Introduction
As stressed in the previous chapter by Bajari and Tadelis, it would be optimal for a procurer wishing to buy a sufficiently standardized, and contractually well-specifiable, good or service to elicit competition among potential suppliers. There are, however, many mechanisms she could use to elicit such competition. This chapter discusses and provides practical indications on how to choose between a sealed bid tendering and a dynamic auction to allocate procurement contracts between competing suppliers. It then suggests simple strategies to keep under control the duration of dynamic procurement auctions when this is a concern for the procurer.
A crucial factor to consider in the optimal choice of a tendering format is the nature of uncertainty and the size of different types of costs the selected supplier will face when serving the contract. Therefore we begin with an example of such uncertain costs.
Consider a procurement for cleaning services of a large company's or public administration's buildings. The contract may specify a variety of services including the cleaning of offices, corridors, halls and more demanding tasks such as the sanitation of laboratories. The contract also establishes that the contractor(s) will be paid a fixed amount of money per unit of surface (€/m2) regardless of the nature of the building. Therefore the unit price coincides across categories of surface, whereas the cost of performing the same task in different environments may vary substantially.
48. High Energy Astrophysics
- Riccardo Giacconi, Catherine Cesarsky, G. Clark, F. Pacini, P. A. G. Scheuer, E. E. Salpeter, R. A. Sunzaev, J. Truemper, L. Woltjer, Q. Qu
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- Journal:
- Transactions of the International Astronomical Union / Volume 19 / Issue 1 / 1985
- Published online by Cambridge University Press:
- 25 April 2016, p. 695
- Print publication:
- 1985
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In view of the broad range of topics covered by Commission 48 and the consequent inevitable overlap with other commissions, it is not feasible to produce a comprehensive self-contained report. The commission therefore restricts its report to a selected list of accessible recent review articles and conference reports, where up-to-date summaries of various topics can be found. Such a list is given below.
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