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Best Value for Money in Procurement

Author

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  • Nicola Dimitri

    (Professor of Economics, University of Siena (IT) and Research Fellow, Maastricht School of Management (NL))

Abstract

Recent years witnessed a gradual change on how to evaluate successful procurement, in both the private ad the public sector. Indeed from a price-only criterion for measuring success, decisions shifted to a multi-criteria approach where various dimensions of quality, as well as price, are considered. The most common way to express such shift is to say that procurement should deliver “best value for money” (BVM). That is, to award the contract, both monetary and non-monetary components of an offer are to be considered. Whether in competitive bidding or negotiations BVM is typically formalized by a scoring formula, namely a rule for assigning dimensionless numbers to different elements of an offer, often expressed in different units of measurement. The contract would then be awarded according to the total score obtained by an offer. This paper discusses the notion of BVM and some typical forms of scoring rules, as a way to formalize the procurer’s preferences.

Suggested Citation

  • Nicola Dimitri, 2012. "Best Value for Money in Procurement," Working Papers 2012/02, Maastricht School of Management.
    • Handle: RePEc:msm:wpaper:2012/02
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    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2012-02.pdf
    File Function: First version, 2012
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    References listed on IDEAS

    as
    1. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 69-85, March.
    2. Krishna, Vijay, 2009. "Auction Theory," Elsevier Monographs, Elsevier, edition 2, number 9780123745071.
    3. Fernando Branco, 1997. "The Design of Multidimensional Auctions," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 63-81, Spring.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Arvate, Paulo Roberto & Barbosa, Klênio & Gambardella, Dante, 2013. "Generic-branded drug competition and the price for pharmaceuticals in procurement auctions," Textos para discussão 333, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

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