Contract Bidding Research Articles

Do firms submit fewer tender bids with high inflation? An analysis of firms’ participation in public procurement in the EU

PurposeThis paper aims to explore the effect of sustained high inflation on public procurement participation in the European Union, both in terms of the average number of bids submitted and in the proportion of bids by small- and medium-sized enterprises (SMEs) out of all submitted bids.Design/methodology/approachRegression modelling, using contract award notices in the Tender Electronics Daily database between 2018 and 2022, at quarterly intervals.FindingsEach inflation point increase is associated with a decline in the average number of offers received per tender by 0.43%. A more marked reduction of 8.6% in the average number of offers and a decrease in 3.4 percentage points in the SME participation rate are observed for firms operating in sectors that experienced very high levels of inflation (>20% year-on-year rate of change), compared with a situation of low inflation (0–5%).Social implicationsClaims about difficulties in delivering public contracts for the set price should be taken with a grain of salt, unless businesses operate in sectors experiencing very high inflation levels. Measures to foster competition could also reduce price pressures.Originality/valueTo the best of the authors’ knowledge, this is the first study to quantitatively assess the association between high inflation and public procurement participation. Two methodological novelties are introduced: the operationalisation of sectoral-level inflation down to two-digit NACE codes, based mainly on producer prices; and a matching between two-digit NACE codes for inflation and the common procurement vocabulary codes to classify calls to bid for public contracts by economic activity.

Oil Company Investment in Offshore Windfarms: A Business Case

European petroleum majors have moved into offshore windfarm projects, with large investments and ambitious capacity and production targets. In aggressive bidding for Contracts for Difference in the UK, where oil companies have played a key part, we have seen the inflation-adjusted strike price fall 65% from 2015 to 2019. Researchers question whether LCOE will fall to the same extent and would like to see more research on the economic return of the companies making offshore wind investment. We address this by a transparent project economics analysis of the UK bottom-fixed Dogger Bank project. It is the largest offshore windfarm project in the world under development and the UK is the country with highest off-shore wind capacity. The project is owned by Equinor, SSE Renewables and ENI. Our analysis shows that the project is expected to be unprofitable. Several of the input variables, however, are subject to considerable estimation uncertainty. We also present a low case and a high case scenario. Decomposition of the high case reveals factors that can contribute to a profitable wind power industry. We discuss financial issues facing oil company investment portfolios combining low return/ low risk renewables and high return/high risk petroleum. Offshore windfarms are organised as special purpose vehicle (SPV) companies. We analyse the economic interactions between the SPVs and the oil companies, and address accounting and financial issues.

Proprietary Information Cost of Contracting with the Government

ABSTRACT We argue that contracting with the federal government involves significant proprietary information cost due to regulations requiring contractors to provide proprietary information, which may become available to outsiders via Freedom of Information Act (FOIA) requests. We provide evidence by showing that firms become more willing to bid for government contracts after a recent Supreme Court ruling on FOIA (Food Marketing Institute v. Argus Leader Media) that improved information protection for contractors and that this effect strengthens when the contracts entail higher proprietary information cost for contractors. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: K4; M4.

CVaR‐based method for optimizing the contract bidding strategy of PV power stations

AbstractWith the rapid development of the new power system, the proportion of renewable energy participating in the electricity market is constantly increasing, and the uncertainty of renewable energy power output and market clearing price brings risks to its participation in long‐term contract bidding. Therefore, a method of contract bidding involving bidding amount and bidding price of PV power station is proposed. Firstly, the multi‐order weighted Markov chain model is used to forecast the distribution of weather states in the trading cycle, and the fuzzy C‐means (FCM) method is used to cluster the joint samples of power output indicators and market clearing price indicators, and then Latin hypercube sampling is used to generate power output scenarios and market clearing price scenarios. Then, an optimization method for long‐term contract bidding strategy of PV power station considering conditional value at risk (CVaR) and transaction probability is established, and the model is divided into two stages and solved in an alternate iterative way. Finally, an example is used to verify that the constructed model enables PV power stations to effectively avoid risks and obtain more stable revenue.

Causes of Delay in Construction Projects in Nepal

Nepal, a developing nation with a population of over 29 million, heavily relies on the construction sector for its economic growth and development. However, delays in construction projects have adversely affected the country's national economy. This research aims to identify the main factors that contribute to construction project delays in Nepal and proposes solutions to address these issues. A detailed descriptive analysis was conducted by reviewing six selected journals. The findings indicate that inadequate planning, weak monitoring, poor site conditions, design changes, lack of construction materials, equipment, and manpower, low bidding of contracts, unrealistic contract durations, lack of coordination among team members, variation of quantities during project execution phases, climate change, inflation, natural calamities, rapid changes in government, strikes, holidays, insufficient budget allocation, and political and governmental issues are the primary causes of construction project delays in Nepal. These delays have significant implications for Nepal's economic growth and development. For example, delays in the construction of critical infrastructure, such as roads and bridges, can hamper access to essential services, hinder trade and commerce, and result in delayed project delivery, increased project costs, negative impact on the project's reputation or impression on donor agencies, stress among concerned authorities, negative impacts on economy and society, strained relationships, and communication breakdowns. To address these issues, all stakeholders, including the government, contractors, and project owners, must be involved in implementing the recommended solutions. The proposed solutions include improving planning and monitoring, ensuring availability of materials, equipment, and manpower, enhancing coordination among team members, realistic contract bidding and duration, and addressing political and governmental issues. The findings of this study have implications for other developing countries facing similar challenges in the construction sector. By implementing the recommended solutions, Nepal can overcome these obstacles and achieve its infrastructure development goals, promoting economic growth and improving the quality of life for its citizens. In conclusion, this research highlights the need for a coordinated effort by all stakeholders to address construction project delays in Nepal, which is critical for the country's progress and development.

Securing Commercial Satellites for Military Operations: A Cybersecurity Supply Chain Framework

The increased reliance on commercial satellites for military operations has made it essential for the Department of Defense (DoD) to adopt a supply chain framework to address cybersecurity threats in space. This paper presents a satellite supply chain framework, the Cybersecurity Supply Chain (CSSC) Framework, for the DoD in the evaluation and selection of commercial satellite contracts. The proposed strategy is informed by research on cybersecurity threats to commercial satellites, national security concerns, current DoD policy, and previous cybersecurity frameworks. This paper aims to provide a comprehensive approach for safeguarding commercial satellites used by the DoD and ensuring the security of their supporting components. Inspired by the National Institute of Standards and Technology (NIST) 800-171 requirements and the DoD’s future Cybersecurity Maturity Model Certification (CMMC) process, the two-part framework significantly streamlines the NIST requirements to accommodate small businesses. It also extends key NIST requirements to commercial-off-the-shelf (COTS) suppliers. The CSSC Framework complements the CMMC certification process by addressing the need for cybersecurity requirements for all subcontractors supporting a commercial space asset. The framework incorporates a scoring process similar to CMMC scoring, granting points to a subcontractor for meeting the cybersecurity requirements outlined by the framework. In addition, the framework creates a space architecture overview that details the overall bid score and establishes a matrix based on individual requirements. This model and matrix allow DoD acquisition personnel to closely analyze each contract bid, comparing the subcontractor's strengths and weaknesses to other bidders. The CSSC Framework will allow the DoD to apply NIST standards to subcontractors who do not meet the requirements for CMMC certification.

АЛГОРИТМ ВЫБОРА ТИПА КРЕДИТНОЙ ПОЛИТИКИ СТРОИТЕЛЬНОЙ ОРГАНИЗАЦИЕЙ

This article presents an algorithm for choosing the type of credit policy of a construction organization. The application of the developed algorithm allows the contractor to determine that the deferred payment by the customer leads to an increase in the period for the contractor to break even and at the same time delay the moment of making a profit in real money. A matrix for choosing the type of credit policy by the contractor is proposed, which is an effective tool for making decisions by the contractor on participation in contract bidding on the terms put forward by the customer based on the estimated indicators, both in case of a decrease in the contractor's business activity, in an unfavorable economic situation, and in conditions of economic growth.

A efetividade social e a concessão do saneamento à iniciativa privada: o caso do leilão da CEDAE no Rio de Janeiro, Brasil

Abstract Changes in the regulatory and legal framework for Brazil’s water and sanitation sector (Law 14,026, July 15, 2020) require competitive bidding for service contracts, even in cases where the provision of services was previously delegated to state-owned utilities under program contracts. The aim of this study was to identify the actors who benefited from these changes to the legislation and assess the social effectiveness of the privatization of water supply and sewerage services in the state of Rio de Janeiro by investigating the auction of services provided by the public utility CEDAE in four blocks comprising 35 municipalities in April 2021. We conducted an exploratory analysis of secondary data and used the systemic integration method to identify the main actors involved in the concession process and the role they played. It is concluded that federal, state, and municipal governments, the Brazilian Development Bank, and the concessionaires have gained from the concessions, while the percentage of low-income populations connected to the sewage collection or drainage network is lower and tariffs are higher in municipalities served by the private sector when compared to the municipalities encompassed by the auction.

Social effectiveness and private sanitation concessions: the CEDAE auction in Rio de Janeiro, Brazil

Changes in the regulatory and legal framework for Brazil's water and sanitation sector (Law 14,026, July 15, 2020) require competitive bidding for service contracts, even in cases where the provision of services was previously delegated to state-owned utilities under program contracts. The aim of this study was to identify the actors who benefited from these changes to the legislation and assess the social effectiveness of the privatization of water supply and sewerage services in the state of Rio de Janeiro by investigating the auction of services provided by the public utility CEDAE in four blocks comprising 35 municipalities in April 2021. We conducted an exploratory analysis of secondary data and used the systemic integration method to identify the main actors involved in the concession process and the role they played. It is concluded that federal, state, and municipal governments, the Brazilian Development Bank, and the concessionaires have gained from the concessions, while the percentage of low-income populations connected to the sewage collection or drainage network is lower and tariffs are higher in municipalities served by the private sector when compared to the municipalities encompassed by the auction.

Negotiating win-win payment terms between construction contractors and subcontractors

Outsourcing works to subcontractors has been a common practice in the construction industry. Because of the high competition in this industry, contractors always seek opportunities to reduce bid prices. This paper presents a process of negotiating win-win payment terms wherein the contractor offers shorter payment lags and in return solicits subsidized prices from subcontractors. Subsidized prices enhance the contractor's bid competitiveness while prompt payments reduce the subcontractors' financing costs. This provision, referred to here as “pay-before-paid”, represents a paradigm shift as opposed to the industry prevailing provision of “pay-when-paid”. A Genetic Algorithm (GA) model is proposed to assign project work packages to subcontractors based on the subsidized prices offered for contractor's predefined payment-lag options to minimize the contractor's bid price. Benchmarking the GA against the exhaustive enumeration proved the robustness of the GA. In addition, the scalability of the GA model was established by solving large-size problems.

STUDY ON THE RELATIONSHIP BETWEEN CROWDSOURCING TASK DESCRIPTION AND WINNING THE BID

STUDY ON THE RELATIONSHIP BETWEEN CROWDSOURCING TASK DESCRIPTION AND WINNING THE BID

Public procurement in construction. Suggestions for improvement

Introduction. The first article of the series showed the main results of the analysis of regulatory documents on the organization of tenders for construction and design work in leading foreign countries. The second article analyzes the main provisions of the domestic tender legislation concerning the construction, reconstruction and design of capital construction facilities. This article is the final article of the cycle; it proposes a concept for the public procurement for construction projects and works.
 
 Materials and methods. The authors tried not to touch on legal issues. They were mainly interested in organizational and economic problems faced by participants in the construction process. Therefore, various schemes of construction organization and models of behavior of participants in the created configurations of relationships were considered. New definitions of the basic concepts in the scope of normative documents are given.
 
 Results. As a result of the study, the rules of conduct of participants in tender procedures – customers and applicants (designers, contractors) are proposed. At the same time, three phases of the object’s life cycle are considered: preparation for bidding, bidding and execution of contracts. There are two main types of the subject of the contract –– complex and particular contracts. For the first time, it is proposed to limit the indirect costs of manufacturers of materials, structures and equipment, which can lead to curbing inflation in construction.
 
 Conclusions. It is advisable to initiate the development and adoption of a federal law on public procurement in the field of capital construction. It is necessary to consider the conclusion of complex contracts for the construction of facilities and private contracts for the performance of works, the supply of equipment and materials, and the provision of services. The contract with the technical customer should provide for a time reserve in comparison with the obligations of partial contractors.

Application of Fuzzy-TOPSIS Method in Supporting Supplier Selection with Focus on HSE Criteria: A Case Study in the Oil and Gas Industry

Supply chain management is an emerging topic in the oil and gas industry. There is higher exposure of contractors to undesirable incidents and supplier selection is a multicriteria decision problem (MCDM). A fuzzy-TOPSIS method was employed in the evaluation of three suppliers regarding four HSE criteria. This method was applied in a case study of the oil and gas industry involving a contractor bidding process. Results reinforced that fuzzy-TOPSIS is a versatile and suitable method for supplier selection problems, with low computational complexity and promoting a better user experience. This method contributes to greater effectiveness and agility in the selection processes of suppliers regarding HSE management. The fuzzy-TOPSIS model is suitable for supplier selection problems and some of the benefits of applying this method are that it allows the attribution weights according to the level of importance of each criterion and considers the complexity, subjectivity, and uncertainty of the decision process. One has determined that it was essential to have a robust and consistent process for weighting the criteria and defining the most appropriate linguistic variables.

Probing the Crisis of Regional Connectivity Instigated by the Natural Disasters, Mizoram, India

Mizoram, in eastern Himalayas of India, is educated but thinly populous young state of area 21081sq km with hilly forest cover of (≈90.68%) The major connectivity is by roads of length 8912km (2019) that connects India’s mainland, Myanmar and Bangladesh and about no rail tracks. The state is housed in various folds and faults over Indo-Burmese tectonic zone (Indo Eurasian plate tectonics), and housed adjacent to 950 Ridges. The booming craggy state is combatting with its road network progress due to frequent low magnitude tremors, landslides, floods, and heavy rainfalls.
 The data of earthquakes, landslides, rainfall, and road progress were collected, and analyzed. The connectivity growth is reported tough and challenging within forests, broken relief, frequent ghats roads, and deep gorges, in topography that hinders the progress in pavement growth. Present study focuses on the ameliorative measures of hill road construction in Mizoram by adhering to the IRC: 52-2019, changing modus operandi of national contract bids, amateurish engineering design, procurement policies, bidder’s expertise and commitment for execution.
 The non-availability menial labours and technocrats have stemmed many legal issues & disputes between the government and the contractors. Faulty planning, engineering design, executant’s approach, procurement policies and the contractor’s skill, contract administration and construction management, road safety challenges, contract documentation, and inability of deployed bidders needs to be improved in Mizoram. To cater the needs of up-gradation/ new constructions, the hurdles warrant cutting edge impulses through EIA, EMP, DPR, amateurish design, and updating procurement policies that should supersede the orthodox practices.

Challenges in Engineering Estimates for Best Value Design–Build Highway Projects

AbstractTraditional design–bid–build guidelines suggest that engineering estimates should be within +/−10% of the lowest contractor bid and recommend this value as a reference to identify anomalies...

Information feedback in construction contract bidding: Perceptions of Hong Kong contractors

Contractors learn from their experiences in which feedback information plays a key role to enable experiential learning in recurrent bidding. However, little is known about how contractors perceive and act in response to varying levels of bidding feedback information from construction clients. Focussing on construction procurement in Hong Kong, this exploratory study examines: (i) the level of bidding information feedback from public, private and quasi-government client groups, and (ii) the sources, types, uses and adequacy of bidding feedback information from these client groups from contractors’ perspective. Data was collected using online questionnaire. The results provide strong evidence that the respondents perceive bidding feedback information from the three client groups are inadequate. They have heavily relied on multiple and/or ‘unofficial’ sources for obtaining bidding feedback information. Nonetheless, there is suggestive evidence of different possible uses of bidding feedback information among the contractors, which could substantially affect bidding outcomes. This study provides a much-needed insight into clients’ information feedback conditions and how feedback information might be used by contractors in competitive bidding. The research implication for clients is that they should take into consideration contractors’ need for feedback information in their procurement design so as to enhance efficiency in their procurement practices.

Close Enough! Exploring the Consequences and Motivations Behind Estimates in Capital Budgeting

Analytic tools used for decision support require high quality data inputs in order to arrive at precise estimates. Using an extensive database from US government procurement contracts, we document that an over-representation of accepted contract bids end in a series of zeros. These ending-zero contracts show systematic differences in contract outcomes. They require more extensive revision and are less likely to have embedded options exercised, indicating weaker contract performance and requiring additional resources for renegotiation. We find support for the presence of ending zeros being associated with uncertainty in the contract solicitation. Ending zero contracts are more frequent for certain services, particularly research and development, and less frequent when the contract refers to standardized goods or services. We explore whether the presence of ending-zero bids and their associated weak outcomes is driven by small contracts, potentially unsophisticated bidding firms, or particular government agencies. Our results suggest that the specificity of the contract solicitation itself and the information it provides may be a driving factor and that government allocation of resources could improve with additional detail provided in contract solicitations.

Lead Arrangers in Syndicated Loans

In this paper, we model the first phase of the syndicated loan process by mapping it onto contract bidding theory. Our stylized cost model includes several costs components including the effort made by a candidate lender to be attractive to the borrower. This effort is then modeled as a function of a bidder-specific effect which encompasses past relationships, geographical proximity and industry relatedness as well as the presence of a full-underwriting clause. We also factor in the uncertainty associated with the transaction. We then empirically test the predictions of the model by analyzing the effect of past relationship, geographical and industrial specialization on the level of upfront fees that are reserved to lead arrangers only. All in all, our empirical results are consistent with the existing literature and the predictions of our stylized model.

Competition regulation in the contract bidding process on the example of the Moscow Foundation objects for the Renovation of Residential Development

Competition regulation in the contract bidding process on the example of the Moscow Foundation objects for the Renovation of Residential Development

Assessment of organizational and technological reliability of a construction organization during contract bidding

In the current system of contract bidding, there are a number of problems, one of which is the imperfection of the evaluation criteria by which applicants are selected. The article presents a methodology for assessing the organizational and technological reliability of a construction organization and its competitive offers for tenders for construction and installation works. It is proposed to use the indicator of its organizational and technological reliability as a criterion for evaluating a construction organization that claims to fulfill a construction order. To determine the reliability of a construction company, information about the intensity of development of capital investments is used. This indicator allows you to assess how much the bidder can ensure the maximum return on the construction equipment and workers used, reduce the cost of construction using modern construction materials and resource-saving technologies. Each construction and installation organization will have its own intensity of development of capital investments. It depends on the qualification of employees, the availability and use of a fleet of construction machines and mechanisms, construction production technologies, construction organization methods, etc. As an indicator that characterizes the relative change in the actual development of capital investments from the standard or calculated value, the capital investment development index is used. Using retrospective data on the speed of capital investment development for similar objects or using variant design of the construction process, curves of accumulated probabilities of capital investment development indices are constructed, which are used to determine the organizational and technological reliability of the contract bidder. The proposed assessment of the reliability of a construction organization allows the customer (investor) to choose a reliable partner – contractor that best meets their requirements.