A Comparative Study of Formulas for Choosing the Economically Most Advantageous Tender

51 Pages Posted: 6 Jul 2015

See all articles by Przemyslaw Stan Stilger

Przemyslaw Stan Stilger

University of Manchester - Manchester Business School

Jan Siderius

Negometrix

Erik M. van Raaij

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Date Written: July 5, 2015

Abstract

Choosing the best bid is a central step in any tendering process. If the award criterion is the economically most advantageous tender (EMAT), this involves scoring bids on price and quality and ranking them. Scores are calculated using a bid evaluation formula that takes as inputs price and quality, and their respective weights. The choice of formula critically affects which bid wins. We study 38 such formulas and discuss several of their aspects, such as how much the outcome of a tender depends on which formula is being used, relative versus absolute scoring, ranking paradox, iso-utility curves, protection against a winner with an extremely high price, and how a formula reflects the weights of price and quality. Based on these analyses, we summarize the (dis)advantages and risks of certain formulas and provide associated warnings when applying certain formulas in practice.

Keywords: Tendering, Bid evaluation formulas, Bid selection

Suggested Citation

Stilger, Przemyslaw Stan and Siderius, Jan and van Raaij, Erik M., A Comparative Study of Formulas for Choosing the Economically Most Advantageous Tender (July 5, 2015). Available at SSRN: https://ssrn.com/abstract=2626934 or http://dx.doi.org/10.2139/ssrn.2626934

Przemyslaw Stan Stilger

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Jan Siderius (Contact Author)

Negometrix ( email )

Rijnzathe 4
De Meern, 3454 PV
Netherlands

Erik M. Van Raaij

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
Rotterdam, 3000 DR
Netherlands

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