Competitive Bidding Process Research Articles

‘A highly successful model’? The rail franchising business in Britain

A crucial feature of rail privatisation in Britain was franchising. Passenger services were franchised in competitive bidding processes to train operators which were meant to function with declining subsidy. The article adopts the framework of social cost-benefit analysis to examine rail privatisation’s impact on three key groups; consumers, producers and the government. It establishes that privatisation did not achieve all the supposed benefits. Further, franchising only appears to be profitable through the use of calculative accounting practices, whereby franchised train operators are portrayed as discrete business entities, whereas they are supported by very substantial, ongoing direct and indirect government subsidies.

Modelling contractor’s bidding decision

Abstract The authors aim to provide a set of tools to facilitate the main stages of the competitive bidding process for construction contractors. These involve 1) deciding whether to bid, 2) calculating the total price, and 3) breaking down the total price into the items of the bill of quantities or the schedule of payments to optimise contractor cash flows. To define factors that affect the decision to bid, the authors rely upon literature on the subject and put forward that multi-criteria methods are applied to calculate a single measure of contract attractiveness (utility value). An attractive contract implies that the contractor is likely to offer a lower price to increase chances of winning the competition. The total bid price is thus to be interpolated between the lowest acceptable and the highest justifiable price based on the contract attractiveness. With the total bid price established, the next step is to split it between the items of the schedule of payments. A linear programming model is proposed for this purpose. The application of the models is illustrated with a numerical example. The model produces an economically justified bid price together with its breakdown, maintaining the logical proportion between unit prices of particular items of the schedule of payment. Contrary to most methods presented in the literature, the method does not focus on the trade-off between probability of winning and the price but is solely devoted to defining the most reasonable price under project-specific circumstances. The approach proposed in the paper promotes a systematic approach to real-life bidding problems. It integrates practices observed in operation of construction enterprises and uses directly available input. It may facilitate establishing the contractor’s in-house procedures and managerial decision support systems for the pricing process.

Profit-Driven Prosecution and the Competitive Bidding Process

Prosecutors are the most powerful organs of the criminal justice system, enjoying discretion in decision-making far beyond that of law enforcement officials, defense attorneys, and judges. Perhaps due to this exceptional position, contemporary understandings and perceptions of criminal prosecutors have tended to be largely positive; evidence of such a normative understanding of the prosecutor and its role may be found from a variety of sources, from (other) law review articles to pop cultural touchstones in television and movies. The prevailing “prosecutorial norm” in the public consciousness embodies 1) a full-time government employee, 2) who devotes all of their time and professional energies to criminal prosecution, and 3) tries to somehow do or affect some vague notion of “justice.” Such norms, however, are regularly challenged and flouted when the prosecutorial function is outsourced. While the outsourcing of nearly every function of the criminal adjudicative process has attracted great attention among scholars and policymakers, a greater critical lens must be focused on prosecutors.The hazards of prosecutorial outsourcing have largely been neglected because existing prosecutorial scholarship focuses on the United States Attorney or district attorneys’ offices in large, metropolitan areas. Not all prosecutorial offices are created equal, however. Cities, towns, and other small political subdivisions throughout the country frequently hire prosecutors on a part-time basis through a competitive bidding process, releasing requests for proposals (RFPs) in an effort to procure bids. This practice, however, may be observed not only in small or rural municipalities, but also in cities located near larger population centers. Examples of such municipalities include Ferguson, Missouri, or Kyle, Texas. Such local governments often work with budgets that are not expansive enough to hire a full-time city attorney or prosecutor. Beyond demonstrating the qualifications the applicant attorneys or firms vying for a prosecution contract may have to serve as good prosecutors, applications from such applicants must also demonstrate cost effectiveness by detailing what budget and compensation is required during the term of service specified by the RFP.While engaging in a competitive bidding process may seem like a smart way to handle the problem of governmental waste and financial inefficiencies, it introduces a host of challenges and negative externalities. This Article sheds light on the problems caused by introducing an overtly economic calculation (how cheaply and how profitably the prosecutorial function may be fulfilled) into the criminal adjudicative process. This practice not only flouts American Bar Association and National District Attorney Association prosecutorial standards, but also undermines the prosecutorial norms described above in ways that are likely to destabilize confidence — and the social cohesion born of such confidence — in local criminal justice systems. This practice has the risk, however, of expanding beyond the reach of non-metropolitan jurisdictions to larger counties, cities, and local governments as budgets continue to shrink across the board and devolution and privatization continue to be advanced as cure-alls to economic woes.

Overcoming Barriers to Scaling Up Sustainable Alternative Food Systems: A Comparative Case Study of Two Ontario-Based Wholesale Produce Auctions

Conventional food systems are viewed by the literature as unsustainable in that they provide consumers with convenience while disconnecting them from producers thus leading to environmental and social problems. By contrast, sustainable or “alternative” food systems are viewed as correcting such problems. Wholesale produce auctions, which are well established in the Old Order Mennonite community, are physical sites where large quantities of produce are sold through a competitive bidding process to local buyers. These are seen as a way of better connecting producers and consumers and thus realizing a more sustainable food system. However, this potential has not been tested. Therefore, this paper explores two produce auctions in southwestern Ontario, Canada, using an interview based methodology (N = 48) and demonstrates that despite wholesale produce auctions offering many opportunities to promote the benefits of alternative food systems, produce auctions are limited in that they fail to provide a practical and functional way of distributing food to individual consumers. Overall, this research highlights what appears to be a tension in the alternative food systems literature: producers and consumers may be simultaneously looking for the sustainability benefits associated with “alternative food systems” without wanting to sacrifice any of the convenience found in conventional food systems.

Lessons learned from Ontario wind energy disputes

Issues concerning the social acceptance of wind energy are major challenges for policy-makers, communities and wind developers. They also impact the legitimacy of societal decisions to pursue wind energy. Here we set out to identify and assess the factors that lead to wind energy disputes in Ontario, Canada, a region of the world that has experienced a rapid increase in the development of wind energy. Based on our expertise as a group comprising social scientists, a community representative and a wind industry advocate engaged in the Ontario wind energy situation, we explore and suggest recommendations based on four key factors: socially mediated health concerns, the distribution of financial benefits, lack of meaningful engagement and failure to treat landscape concerns seriously. Ontario's recent change from a feed-in-tariff-based renewable electricity procurement process to a competitive bid process, albeit with more attention to community engagement, will only partially address these concerns. Ontario, Canada, has seen a number of policy measures introduced since 2009 to increase wind energy production. This Perspective explores the impacts and implications of those policies on wind energy disputes in terms of health, financial benefit, community engagement and the landscape.

Willingness to pay for orthodontic treatment in Kingdom of Saudi Arabia, Riyadh Province

Aim: The purpose of this interview-based questionnaire study is to evaluate the patients' and parents' perspectives on orthodontic treatment and parent's willingness to pay (WTP) for orthodontic treatment of their child in Riyadh City. Research Hypothesis: The higher the socioeconomic status and the severity of the child's malocclusion, the more willing the parents are to pay. Materials and Methods: Data were collected from 171 patients and their parents who were personally surveyed from several dental centers. Two different questionnaires were used: one was for the patients who rated their satisfaction with their occlusion and the other was for the parents who were asked to approximate the amount of Saudi Riyal (SR) they would be willing to invest for the treatment of their children's malocclusion. The WTP was calculated using the competitive bidding process, with a median price of 10,000 SR. Results: A total of 171 families and their children with malocclusion were interviewed, of which 71.6% of the parents disagreed to a statement that 10,000 SR/- is a fair amount for the orthodontic treatment. Approximately 47% have responded that their child needed orthodontic treatment. However, a high proportion of parents, i.e., 71.4% were willing to pay more amounts for advanced kind of treatment for their children. Conclusion: The median price used in this study was unacceptable to many parents; however, those parents who found it acceptable were willing to pay more for advanced treatment procedures. Orthodontists in Saudi Arabia should educate the public to what it entitles to achieve a healthy, functional, and esthetically pleasing occlusion.

Competitive Bidding Exercise for the First Track Gas-Fired Power Plant in Prai Malaysia; Revenue Assessment for a New Plant

Competitive bidding exercise for a new power generation has been introduced in 2011 to bring Malaysia Electricity Supply Industry (MESI) into competitive electricity market. The competitive bidding process is an auction based mechanism organized by Energy Commission (EC) Malaysia. EC has successfully completed two auctions; 1) international competitive bidding exercise (Track 1) for a new capacity in Prai Penang, Malaysia and 2) restricted tender (Track 2) for the renewal of operating licenses of the first generation Independent Power Producer (IPP) and Tenaga Nasional Berhad (TNB) power plants. The Track 1 has won by Tenaga Nasional Berhad (TNB) for a 1,071 MW CCGT power plant, at a levelised tariff of 34.7 sen/kWh. On the other hand Track 2 has been awarded to Genting Sanyen Power and Segari Energy Ventures for another 10 years extension and TNB Pasir Gudang for another 5 years extension. This paper discusses the competitive bidding exercise implemented in Malaysia for new power plants. It also evaluates the revenues of TNB from the Track 1 bidding exercise. Sensitivity analysis is performed to study the impact of uncertainty in the fuel price, capacity rate financial and fixed and variable operating rate on the revenue of the plant. Result shows that the changes in the fuel price are the largest source of uncertainty for business investment in power plant and biggest variable in determining levelised.

Sasan Power Ltd.

Sasan Power project was part of Governments bold new program of adding 50000 MwH generation capacity by means of setting up 12 new Ultra Mega Power Plants to meet the increasing energy demands of the economy. Initially Sasan Power Ltd was incorporated as a Special Purpose Company (SPC), wholly owned by the Power Finance Corporation (PFC). The SPL was responsible for activities like site selection, obtaining coalmines wherever applicable, acquiring land, obtaining various clearances & approvals to expedite the developments. Located at Pithead, the coal-fired plant would have capacity of 4000 MwH using super critical technology. The PFC carried out an International Competitive Bidding process and awarded SPL to the Reliance Power who quoted the lowest levelised tariff of Rs. 1.19 per unit. Subsequently Reliance Power had built and commissioned Sasan Power Plant and would supply electricity as per the long term Power Purchase Agreement with 14 procurers. In UMPP program, the Ministry of Power recognized the need to move away from cost plus approach for tariff determination to further encourage private sector investment. The program had many distinctive advantages as compared to traditional Independent Power Plants using subcritical technology in terms the scale, efficiency, consultative process used for development of the plants. However the UMPP dream have soured in more then one-way ranging with the tariff determination, rising fuel cost, delays, cost escalations, environmental clearances for mining, fuel procurement and so on. The case provides opportunities for understanding the development in power sector and the issues the Sponsors and the regulators faced in implementing the ambitious Sasan Ultra Mega Power plant. The case illustrates the unique opportunities created in the Indian power industry by changes in regulations; technology and structure of power plants. The formations of shell companies that would transferred to private parties to built own and operate ultra mega power plants strategically located at ports or pithead. Long term Power Purchase Agreements with multiple utilities would be signed. The program marked a new era of use of super critical technology, ultra mega scale to significantly lower the cost of energy resulting in to very competitive fixed levelised tariffs as against the cost plus tariff used traditionally. The issue is to estimate the value – attractiveness of the investment and associated opportunities and why did the program fail?

The effect of tenure on auditor realization rates

Purpose – The purpose of this study is to test whether the realization rate on audit engagements increases with auditor tenure in competitive markets, suggesting the presence of initial audit lowballing. Design/methodology/approach – Using regression analysis, we test this hypothesis with fee- and cost-related data from a sample of local governments audited by a single audit firm. Based on representations of the firm, we classify the audit market for the 127 cities, counties and school districts in our sample as competitive and the audit market for the 93 special district audits as non-competitive. Findings – As hypothesized, we find that in the competitive market, the realization rate on audit engagements increases with auditor tenure but does not do so in the non-competitive audit market. Research limitations/implications – We cannot identify the specific engagements which were subject to a competitive bidding process, so we rely on the auditor’s representation of competitiveness by entity type. Originality/value – To our knowledge, the central prediction of audit pricing models that the auditor’s realization rate increases with auditor tenure has not been tested in real audit markets because proprietary cost data are rarely available. Testing this prediction is the primary contribution of this paper.

Value-Based Reimbursement: The Banner Health Network Experience

Many organizations in healthcare are moving rapidly to adopt value-based reimbursement (VBR) models that reward value instead of volume. By shifting a significant percentage of clinical and financial risk from payers to providers, VBR programs can help reduce costs significantly, improve the quality of care, and increase efficiency. The experience of Banner Health Network (BHN) with VBR in commercial and government plans indicates that a large health system can transition to VBR with renewed focus on quality, cost efficiencies, population health management tactics, and member engagement. In December 2011, BHN was selected in a competitive bid process as one of 32 organizations to participate in a Centers for Medicare & Medicaid Services (CMS) value-based demonstration initiative called the Pioneer accountable care organization (ACO). As a Pioneer ACO with consistent and positive results, BHN, based in Phoenix, Arizona, has demonstrated that VBR can lead to results that are beneficial to the member, the healthcare organization, and the community. BHN has been a top performer in returning shared savings to Medicare while improving appropriate service utilization and performance on quality metrics. The development of simultaneous commercial ACO products was a requirement of the Pioneer agreement with CMS, as well as a clear goal for BHN. The initial period of ACO partnership formation revealed an uncomfortable reality: Payers and providers would need to collaborate and share information as never before. Further, many payers were uncertain about working closely with providers who were working simultaneously with other payers on similar partnerships. Before long, however, there were enough successful VBR arrangements to allay these initial payer anxieties. Today, BHN has high-value network arrangements with nearly every major payer in Arizona.

Developing a Virtual Laboratory for Construction Bidding Environment Using Agent-Based Modeling

Abstract The competitive construction bidding process is a highly unstructured decision-making problem where contractors have to take several factors into consideration, weigh their relative importance, and consequently make bidding decisions within the constraints of bounded information, limited time, and uncertainty about the market constituents. The bidding models presented in the literature help identify the different bidding objectives a contractor would consider but fail to capture all the complexities of this mechanism and its dynamics. This paper presents an agent-based construction bidding model that allows modeling different bidding strategies of contractors, observing their interaction and learning over time, and detecting emergent market behavior and bidding patterns. This model is used to simulate a variety of bidders competing against each other under a low-bid tendering approach in order to study the effect of different bidding parameters on their optimal markup decision, long-term financia...

IT 서비스 프로젝트 계약서 위험 요인 평가 체크리스트

최근 한국의 대규모 IT 서비스 프로젝트의 수익률은 저하되고 있는 것으로 파악된다. IT 서비스 프로젝트의 수익률을 저하시키는 가장 큰 이유는 프로젝트와 관련된 여러 위험 요인들이 프로젝트의 일정 지연 및 비용 초과를 초래한 것으로 파악 된다. 이러한 일정 지연 및 비용 초과 현상을 방지하기 위해서는 프로젝트의 위험 요인들을 계약 체결 전에 식별하는 것이 매우 중요하다. 왜냐하면 발주사와 개발사간 계약 조건 협상 시 식별된 위험 요인들을 제거할 수 있기 때문이다. 본 연구에서는 IT 서비스 프로젝트의 특성으로 인해 프로젝트 수행 과정에서 발생할 수 있는 계약 위험 요인들을 사전에 파악하고 평가할 수 있는 체크리스트를 제시하고, 이를 실제 금융 산업의 IT 서비스 프로젝트에 적용하여 그 효과를 확인하고자 하였다. 적용 사례를 분석한 결과 IT 서비스 프로젝트의 위험 요인들을 식별하고 제거하는데 본 연구에서 제시된 체크리스트가 효과가 있음을 확인하였다. Risk factors are the reason behind cost overruns and delays in long-term large-scale IT service projects. Major risks originate from the integration of complex IT system components, including software, hardware, and solutions; the competitive bidding process; the turnkey and firm-fixed price nature of contracts; and the project execution environment. We have identified several risk factors such as delay in acceptance, low quality of deliverables, delay in payment, adding and changing requirements and scope, unclear definition of roles and responsibilities of the buyer and supplier, and unclear procedures of change and quality management during the project execution phase. One needs to manage risks proactively before signing the contract. In order to weed out or lower the risk factors well in advance, we need to identify and remove risk factors contained in contract clauses and attached contract documents. We propose a checklist for assessing IT service project contracts. To validate the checklist's utility, we applied it to an IT service project in the finance industry. The results show that the checklist is effective in identifying and removing risk factors pertaining to IT service projects.

Average Bid Method – An Alternative to Low Bid Method in Public Sector Construction Procurement in Nepal

Federation of Contractor Associations of Nepal (FCAN) has asked the government to amend the law so that bidders quoting the average price would be awarded the contract. The competitive bidding process for awarding construction contracts in Nepal is based on the low bid method. According to this method, the construction firm submitting the lowest bid receives the right to the construction contract. Promoting competition amongst contractors and maintaining transparency are the clear benefits but delays in meeting the contract duration, increment of the final project cost, tendency to compromise quality, and adversarial relationship among contracting parties are the major drawbacks.As alternative of low bid method, some countries are using Average bid method.In this method, contract is awarded to the contractor whose price is closest to the average of all bids submitted. It is assumed that with a fair price they would conform to quality requirements of the project, would complete on time, and would not have adversarial relationships with the consultant of the employer. Awarding tenders to the lowest bidders is the major reason behind lingering construction projects and failure in meeting its standards in Nepal. To avoid such problems, Average bid Award system may be practiced by public agencies for procurement of works in Nepal.DOI: http://dx.doi.org/10.3126/jie.v10i1.10888Journal of the Institute of Engineering, Vol. 10, No. 1, 2014,pp. 125–129

Comparison of Concrete Properties determined by Destructive and Non-Destructive Tests

Federation of Contractor Associations of Nepal (FCAN) has asked the government to amend the law so that bidders quoting the average price would be awarded the contract. The competitive bidding process for awarding construction contracts in Nepal is based on the low bid method. According to this method, the construction firm submitting the lowest bid receives the right to the construction contract. Promoting competition amongst contractors and maintaining transparency are the clear benefits but delays in meeting the contract duration, increment of the final project cost, tendency to compromise quality, and adversarial relationship among contracting parties are the major drawbacks.As alternative of low bid method, some countries are using Average bid method.In this method, contract is awarded to the contractor whose price is closest to the average of all bids submitted. It is assumed that with a fair price they would conform to quality requirements of the project, would complete on time, and would not have adversarial relationships with the consultant of the employer. Awarding tenders to the lowest bidders is the major reason behind lingering construction projects and failure in meeting its standards in Nepal. To avoid such problems, Average bid Award system may be practiced by public agencies for procurement of works in Nepal.DOI: http://dx.doi.org/10.3126/jie.v10i1.10889Journal of the Institute of Engineering, Vol. 10, No. 1, 2014, pp. 130–139

The Quasi-Markets of Social Services: The Competitiveness of Russian Nonprofit Organizations Against For-Profit Organizations and Public Providers

This paper explores the competitive bidding process in eight regions of Russia where local governments entered into. The bidding documents have been analyzed in terms of the type of provider ownership, public or private, levels of nonprofit activity, and nonprofit competitiveness. The findings indicate considerable discrepancies between the numbers of competitive tenders for social services in the regions in question. The types of social services that local governments procure vary significantly from region to region. It is suggested that these differences are an essential factor in nonprofit participation. The most active nonprofit involvement is found in regions where procured services are that which the nonprofits usually produce. The results reveal a substantial lack of competition in Russian social service quasi-markets. In many cases, nonprofit organizations can be competitive in terms of competitive bidding in Russia; however, this result raises questions about the quality of social services procured by local and regional authorities.

Correlating the quantity and bid cost of unit price items for public road projects

In the United States, the majority of public road projects are constructed using the Design-Bid-Build (DBB) method. DBB projects are procured by government agencies typically through the competitive bidding process. In DBB projects, the early estimates of probable cost of road projects is one of the major factors in making decision regarding which projects proceed to the bidding stage. The final cost of the project will be fixed based on the bid amount of the contractor. If the cost of the project can be estimated based on the bid cost from the historical data, the estimated amount will be more accurate. This study attempted to determine the bid cost of projects by analyzing the bid data of 151 DBB road projects undertaken by the Clark County Department of Public Works in southern Nevada from 1991 through 2008. The total value of construction was equivalent to $841 million when converted into a June 2011 base cost. This study developed regression models to predict a future project’s bid cost of unit price items, based on the quantities of items. The validation of models also showed that these models predicted the unit bid cost accurately. These models will assist in assessing the effect of quantity in accurately estimating the cost of the unit price items and reduce variances that result in large discrepancies between engineers’ estimates and actual bid-award amounts.

Entrepreneurial innovations and taxation

Stimulating entrepreneurship is high on the policy agenda of many countries. We study the effects of tax policies on entrepreneurs' choice of riskiness (or quality) of an innovation project, and on their mode of commercializing the innovation (market entry versus sale). Limited loss offset provisions in the tax system induce entrepreneurs innovating for entry to choose projects with inefficiently little risk. The same distortion does not arise when entrepreneurs sell their innovation in a competitive bidding process to an incumbent before the uncertainty is revealed. Tax systems which systematically favor market entry of entrepreneurs can thus lead to welfare losses due to inefficient quality choices, despite leading to more competition in the product market.

Where Do Unique Synergies Come From? An Investigation of the Resource-based View of Acquisitions

Although unique synergies are widely acknowledged to be crucial for acquirers’ profitability, their origin remains elusive. Theories linking unique synergies with resource similarity or complementary differences do not receive consistent support in the literature. Analyzing a sample of technology acquisitions demonstrates that two factors help complement our understanding of acquisitions and their performance implications. First, ‘one-size-fits-all’ theories of acquisition performance are unlikely to hold true for all acquisitions given that resources vary in the way they generate synergies when recombined. Second, studies need to account for the competitive bidding process implicit in acquisitions as acquirers profit by outperforming other bidders in the amount of synergy created. Overall, this study brings clarity to the literature by exploring the antecedents of value creation and capture in acquisitions.

An estimation model for the heating and cooling demand of a residential building with a different envelope design using the finite element method

Building envelope design is considered one of the typical energy-saving techniques. Building envelope serves as the physical separator between building’s interior and exterior environment so as to maintain indoor thermal comfort. To achieve building sustainability, this research aims to develop an estimation model for the heating and cooling demand of a residential building with a different envelope design using the finite element method. This research was conducted in three steps: (i) selection of building envelope design elements affecting the heating and cooling demand of a multi-family housing unit; (ii) establishment of a standard database for the heating and cooling demand by building envelope design through energy simulation; and (iii) implementation of the finite element method for estimating the heating and cooling demand by building envelope design. The proposed model was validated compared to the simulation results and the actual data. Regarding the comparison with the simulation results, the average error rate for the heating and cooling demand was determined to be 1.09% and 6.61%, respectively. Also, regarding the comparison with the actual data, the average error rate for the heating and cooling consumption was determined to be 4.95% and 5.77%, respectively. The proposed model could allow an architect or a construction manager to easily and accurately estimate the heating and cooling demand of a residential building with a different envelope design in the early design phase. It could also be useful for contractors in a competitive bidding process to analyze the alternatives.

Decision support model for establishing the optimal energy retrofit strategy for existing multi-family housing complexes

The number of multi-family housing complexes (MFHCs) over 15yr old in South Korea is expected to exceed 5 million by 2015. Accordingly, the demand for energy retrofit in the deteriorating MFHCs is rapidly increasing. This study aimed to develop a decision support model for establishing the optimal energy retrofit strategy for existing MFHCs. It can provide clear criteria for establishing the carbon emissions reduction target (CERT) and allow efficient budget allocation for conducting the energy retrofit. The CERT for “S” MFHC, one of MFHCs located in Seoul, as a case study, was set at 23.0% (electricity) and 27.9% (gas energy). In the economic and environmental assessment, it was determined that scenario #12 was the optimal scenario (ranked second with regard to NPV40 (net present value at year 40) and third with regard to SIR40 (saving to investment ratio at year 40). The proposed model could be useful for owners, construction managers, or policymakers in charge of establishing energy retrofit strategy for existing MFHCs. It could allow contractors in a competitive bidding process to rationally establish the CERT and select the optimal energy retrofit strategy. It can be also applied to any other country or sector in a global environment.