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Open Day, 22 March 2012 PPP in Transport: Trends & Theory Market Competition and the design of tendering procedures STSM of Fabio Sciancalepore at University.

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Presentation on theme: "Open Day, 22 March 2012 PPP in Transport: Trends & Theory Market Competition and the design of tendering procedures STSM of Fabio Sciancalepore at University."— Presentation transcript:

1 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Market Competition and the design of tendering procedures STSM of Fabio Sciancalepore at University of the Aegean Fabio Sciancalepore, Politecnico di Bari Athena Roumboutsos, University of the Aegean Nunzia Carbonara, Politecnico di Bari

2 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Common Q:  How to design a tendering procedure which will improve competition in the market? or  How to call in more and “improved” offers? New Approach Q:  How to exploit all existing competition in the market through the tendering procedure ? or  The number of bidders in a particular market situation is given. How to a design the bidding process to suit this number? Research Question

3 Open Day, 22 March 2012 PPP in Transport: Trends & Theory  Purpose: To develop a “tool” to identify the optimum value tendering procedure, stemming from the existing level of competition in a PPP market.  Approach: Analytical models, initially proposed by McAfee & McMillan, are further investigated with respect to the various tendering procedures, by recalling the dynamics of transaction costs for competitors in PPP market. Overview

4 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Problem parameters  k: the transaction cost  Sector/subsector  Country  Project complexity  Project size  Tendering Process  Proxy time ∗ Tendering Process Tendering PhasesProcedure Pre-qualificationBinary Tender Evaluation Price Based Price & Threshold quality Scoring System NegotiationDialogue

5 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Bidding Equilibrium Models with Transaction Costs Lowest Price Where  π i = profit for the i-th bidder  θ i = production cost for the i-th bidder  k = transaction cost  F(θ) = cumulative density probability function  Production cost function

6 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Bidding Equilibrium Models with Transaction Costs Lowest Price with Quality Threshold Where  π i = profit for the i-th bidder  C(q i, θ i )= production cost for the i-th bidder  k = transaction cost  F(θ) = cumulative density probability function  Production cost function  Major Assumption: V(q) = q ½ (conservative approach)

7 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Unrealistic Market High Transaction Costs & Many Bidder Lowest Price Quality Threshold Competitive Market Uncompetitive Market Tender Process Guidance Tool

8 Open Day, 22 March 2012 PPP in Transport: Trends & Theory  A competitive market is achieved (practically for all ks) with a small number of bidders and quality criteria  Minimizing tender transaction costs (k) produces surplus for the bidders in the market  A surplus supports further market concentration  Contracting authority needs to request “more” to compensate for “surplus” Discussion

9 Open Day, 22 March 2012 PPP in Transport: Trends & Theory  Investigate further the “quality criterion” equilibrium  V(q) = q  V(q) = q 2  Estimations of k:  Sector/ Subsector specific  Country specific  Function of time, t Future Research

10 Open Day, 22 March 2012 PPP in Transport: Trends & Theory Thank you! Athena Fabio and Nunzia


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