Challenges of Electronic Reverse Auctions in Construction Industry—A Review

Tomáš Hanák,Ivan Marović,Nikša Jajac

doi:10.3390/economies8010013

Tomáš Hanák, Ivan Marović + Show 1 more

Open Access

https://doi.org/10.3390/economies8010013

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Abstract

The innovation of construction procurement by means of electronic reverse auctions is a controversial subject of discussion among both researchers and practitioners. This paper consolidates and critically discusses current knowledge concerning the adoption and use of electronic reverse auctions in the light of specific features of the construction industry. A systematic literature review has been employed to select papers indexed in Scopus and Web of Science databases. The findings of the study indicate that studies are addressing especially five main areas, i.e., suitability of electronic reverse auction (eRA) for construction tenders, related drivers and barriers, ethical considerations, savings potential and bidding behavior, and bid distribution. Accordingly, the authors are suggesting three directions in which future research should focus on mutual interaction of electronic reverse auctions and long-term effects on construction project outcomes.

Highlights

Public spending efficiency is considered as a crucial step towards preventing the expansion of government expenditures
A considerable portion of public expenditures is spent on construction investments, such as roads, railways, hospitals, educational facilities, utilities, water management structures, etc
The development, maintenance, and improvements of the above-mentioned public infrastructure are very costly, any measure that contributes to the enhanced efficiency of public construction investments is welcome

Summary

Introduction

Public spending efficiency is considered as a crucial step towards preventing the expansion of government expenditures. A considerable portion of public expenditures is spent on construction investments, such as roads, railways, hospitals, educational facilities, utilities, water management structures, etc. The development, maintenance, and improvements of the above-mentioned public infrastructure are very costly, any measure that contributes to the enhanced efficiency of public construction investments is welcome. This issue is becoming even more important during the economic crisis because the construction industry belongs to the first affected sectors of the national economy. Taking into consideration that the construction sector possesses a high multiplier effect, slowdown in construction investments causes an undesirable consecutive decline in other related industries (Kozumplíková et al 2017). According to Eurostat (2019), the construction industry creates 5.54% of the gross added value of all NACE (Nomenclature des Activités Économiques dans la Communauté Européenne, European industry standard classification system (in English)) activities in EU 28 countries, which is 783,834.2 million EUR

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