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Evaluating quality or lowest price: Consequences for small and medium-sized enterprises in public procurement
Södertörn University, School of Social Sciences, Economics.
2017 (English)In: Journal of Technology Transfer, ISSN 0892-9912, E-ISSN 1573-7047, Vol. 42, no 5, p. 1143-1169Article in journal (Refereed) Published
Abstract [en]

This study investigates the effect of evaluating the most economically advantageous tender (MEAT) in public procurement rather than lowest price. According to the European Union (EU), evaluations based on MEAT, rather than lowest price, give an advantage to small and medium-sized enterprises (SMEs) in winning public procurement contracts because such firms are viewed as sources of innovation. Thus, MEAT as an evaluation criterion is recommended throughout the EU. Using procurement data from Sweden, I find no significant effect on SME participation in procurement calls for tender as a result of the use of MEAT in firm evaluations. However, large firms significantly increase their participation when MEAT is evaluated. Even more importantly, micro, small and medium-sized firms' probability of winning procurement contracts significantly decreases when MEAT rather than lowest price is used as an evaluative criterion. Thus, evaluation in terms of MEAT increases large firms' bids and success rates; hence, this policy is counterproductive. The reasons SMEs are disadvantaged as a result of evaluations based on MEAT are, however, not examined in this paper and require further research.

Place, publisher, year, edition, pages
2017. Vol. 42, no 5, p. 1143-1169
Keywords [en]
Public procurement; SMEs; Innovation; Quality evaluation; Most economically advantageous tender
National Category
Economics
Identifiers
URN: urn:nbn:se:sh:diva-28621DOI: 10.1007/s10961-016-9477-4ISI: 000410897900008Scopus ID: 2-s2.0-84963652738OAI: oai:DiVA.org:sh-28621DiVA, id: diva2:862634
Note

Som manuskript i avhandling. As manuscript in dissertation.

Available from: 2015-10-22 Created: 2015-10-23 Last updated: 2018-04-05Bibliographically approved
In thesis
1. Essays on quality evaluation and bidding behavior in public procurement auctions
Open this publication in new window or tab >>Essays on quality evaluation and bidding behavior in public procurement auctions
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

In this dissertation, I investigate how different aspects of the procurement process and evaluation affect bidding behavior.

In essay 1, we attempt to map public procurements in Sweden by gathering a representative sample of procurements. We find that framework agreements and multiple-contract procurements represent a very large share of total government spending. The total value procured by government authorities, municipalities and counties accounts to 215 BSEK yearly, which we believe is an underestimate due to data issues.

Essay 2 suggests a simple method for of estimating bidding costs in public procurement, and are empirically estimated to be approximately 2 percent of the procurement value using a comprehensive dataset and approximately 0.5 percent for a more homogeneous road re-pavement dataset. Our method provides reasonable estimates with, compared to other methods, relatively low data requirements.

Essay 3 investigates the effect of quality evaluation on small and medium-sized enterprises (SMEs). Contrary to common belief, SMEs’ participation does not increase when evaluating quality, and their probability to win procurements decreases compared with that of large firms.

In essay 4, the bidders’ decision to apply for a procurement review “appeal” is investigated. Contrary to procurers’ beliefs, evaluating quality is found not to have any statistically significant effect on the probability of appeals. Instead, I empirically confirm theoretical prediction of the 1st runner-up’s decision to claim the evaluation to be redone, as well as free-riding in appealing.

In essay 5, we test whether spatial econometrics can be used to test for collusion in procurement data. We apply this method on a known cartel and test during and after the period the cartel was active. Our estimates support the proposition that spatial econometrics can be used to test for collusive behavior.

Place, publisher, year, edition, pages
Örebro: Örebro university, 2015. p. 20
Series
Örebro Studies in Economics, ISSN 1651-8896 ; 29Södertörn doctoral dissertations, ISSN 1652-7399 ; 113
Keywords
public procurement, quality evaluation, bidding behavior, cartels, SMEs, transaction cost, litigation, spatial econometrics
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:sh:diva-28617 (URN)978-91-7529-095-9 (ISBN)
Public defence
2015-11-12, MB503 Södertörns Högskola, Alfred Nobels allé 7, Flemingsberg, 10:00 (English)
Opponent
Supervisors
Available from: 2015-10-23 Created: 2015-10-23 Last updated: 2015-10-23Bibliographically approved

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Stake, Johan Y.

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