Will Procurement Officials be Biased to Disregard Procurement Rules in Favor of a Low-priced, Albeit Defective, Bid?
-
Omer Dekel
and
Yoav Dotan
Abstract
To what extent are professional decision-makers in the field of public procurement susceptible to cognitive biases? Recent research found a bias in favor of the lower bidder when ranking competing bids (Dekel and Schurr 2014, “Cognitive Biases in Government Procurement – an Experimental Study with Real Bid Evaluators,” 10(2) Review of Law and Economics 169–200). In the present research we examine this question regarding another stage of the public procurement process – the qualification stage. To this end, we conducted a series of experiments with the participation of procurement officials in situations that closely resemble their daily work. Our main finding is that even though procurement officials are susceptible to a cognitive bias when they have to score competing bids, they overcome that bias when asked to decide whether to qualify faulty or questionable bids. We cautiously ascribe this difference to the different types of decision-making involved, and suggest further explorations of these insights.
Appendices
A Experiment 1 Form
Invitation for Bids 122/15 for the Supply of three Ship to Shore (STS) Container Cranes
Towards the opening of the new dock at Haifa Port, The Haifa Port Company Ltd., a government-owned company, issued an international invitation for bids (IFB) for the supply of three Ship-to-Shore (STS) container cranes.
The prior assessment as to the transaction cost is US$ 51 million.
[1st version: After the completion of the prerequisite review (and before scoring the technical part of the bids and opening the price envelopes) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
[2nd version: After the completion of the prerequisite review (and before the scoring of the technical part of the bids) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
| 2nd version only: Prior assessment: US$ 51 millionThe bid price | Complying with the European and the Canadian standards | The bidder has at least15 years’ experience in the field | The bidder sold at least twelve STS cranes in the last three years | Commitment to provide service to the acquired cranes for at least seven years | Comments | |
|---|---|---|---|---|---|---|
| Bid A | US$ 56,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid B | US$ 52,000,000 | V | V | V | V | The bid complies with the requirements. The bidder supplied cranes to the port in the past. |
| Bid C | US$ 52,000,000 | V | V | V (See comment) | V | The bid complies with the requirements. The bidder has 37 years of experience. |
| Bid D | US$ 50,000,000 | V | V | V (See comment) | V | The bidder has 32 years of experience in manufacturing cranes, and 17 years of experience in manufacturing STS cranes. |
| Bid E | US$ 60,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid F | US$ 48,500,000 | See comment | V | V | V | The bidder complies only with the European standard; anticipates receiving the Canadian standard within 10 days. |
| Bid G | US$ 57,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid H | US$ 54,500,000 | V | V (See comment) | V | V | The bid complies with the requirements. The bidder gave a 10-year guarantee. |
[1st version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and opening of the price envelopes):]
[2nd version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and choosing of the CB winner):]
| Bid A | Bid B | Bid C | Bid D | Bid E | Bid F | Bid G | Bid H |
B Experiment 2 Form
Invitation for Bids 122/15 for the Supply of three Ship to Shore (STS) Container Cranes
Towards the opening of the new dock at Haifa Port, The Haifa Port Company Ltd., a government-owned company, issued an international invitation for bids (IFB) for the supply of three Ship-to-Shore (STS) container cranes.
The prior assessment as to the transaction cost is US$ 51 million.
[1st version: After the completion of the prerequisite review (and before scoring the technical part of the bids and opening the price envelopes) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
[2nd version: After the completion of the prerequisite review (and before the scoring of the technical part of the bids) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
| 2nd version only: Prior assessment: US$ 51 millionThe bid price | Complying with the European and the Canadian standards | The bidder has at least15 years’ experience in the field | The bidder sold at least twelve STS cranes in the past three years | Commitment to provide service to the acquired cranes for at least seven years | Comments | |
|---|---|---|---|---|---|---|
| Bid A | US$ 56,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid B | US$ 52,000,000 | V | V | V | V | The bid complies with the requirements. The bidder supplied cranes to the port in the past. |
| Bid C | US$ 52,000,000 | V | V | V (See comment) | V | The bid complies with the requirements. The bidder has 37 years of experience. |
| Bid D | US$ 48,500,000 | V | V | See comment | V | The bidder has 32 years of experience in manufacturing cranes, but only 8 years of experience in manufacturing STS cranes. |
| Bid E | US$ 60,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid F | US$ 50,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid G | US$ 57,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid H | US$ 54,500,000 | V | V (See comment) | V | V | The bid complies with the requirements. The bidder gave a 10-year guarantee. |
[1st version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and opening of the price envelopes):]
[2nd version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and choosing of the CB winner):]
| Bid A | Bid B | Bid C | Bid D | Bid E | Bid F | Bid G | Bid H |
C Experiment 3 Form
Invitation for Bids 122/15 for the Supply of three Ship to Shore (STS) Container Cranes
Towards the opening of the new dock at Haifa Port, The Haifa Port Company Ltd., a government-owned company, issued an international invitation for bids (IFB) for the supply of three Ship-to-Shore (STS) container cranes.
The prior assessment as to the transaction cost is US$ 51 million.
[1st version: After the completion of the prerequisite review (and before scoring the technical part of the bids and opening the price envelopes) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
[2nd version: After the completion of the prerequisite review (and before the scoring of the technical part of the bids) the following table was presented to the contracting committee members, in order to decide which bids will be passed on to the IFB’s next stage.]
| 2nd version only: Prior assessment: US$ 51 millionThe bid price | Complying with the European and the Canadian standards | The bidder has at least15 years’ experience in the field | The bidder sold at least twelve STS cranes in the last three years | Commitment to provide service to the acquired cranes for at least seven years | Comments | |
|---|---|---|---|---|---|---|
| Bid A | US$ 56,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid B | US$ 52,000,000 | V | V | V | V | The bid complies with the requirements. The bidder supplied cranes to the port in the past. |
| Bid C | US$ 52,000,000 | V | V | V(See comment) | V | The bid complies with the requirements. The bidder has 37 years of experience. |
| Bid D | US$ 50,000,000 | V | V | See comment | V | The bidder has 32 years of experience in manufacturing cranes, but only 8 years of experience in manufacturing STS cranes. |
| Bid E | US$ 60,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid F | US$ 48,500,000 | See comment | V | V | V | The bidder complies only with the European standard: anticipates receiving the Canadian standard within 10 days. |
| Bid G | US$ 57,000,000 | V | V | V | V | The bid complies with the requirements. |
| Bid H | US$ 54,500,000 | V | V (See comment) | V | V | The bid complies with the requirements. The bidder gave a 10-year guarantee. |
[1st version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and opening of the price envelopes):]
[2nd version: Circle the bids that you would advance to the next stage (which involves the scoring of the technical parts and choosing of the CB winner):]
| Bid A | Bid B | Bid C | Bid D | Bid E | Bid F | Bid G | Bid H |
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Articles in the same Issue
- The Tragedy of the Uncommons
- Mere Preparation
- Binding and Non-Binding Contracts: A Theoretical Appraisal
- How Status Seeking may Prevent Coasean Bargaining
- Will Procurement Officials be Biased to Disregard Procurement Rules in Favor of a Low-priced, Albeit Defective, Bid?
- Does the Appeals Process Reduce the Occurrence of Legal Errors?
- Choosing Whether to Comply with a General Duty or with a Specification Standard
Articles in the same Issue
- The Tragedy of the Uncommons
- Mere Preparation
- Binding and Non-Binding Contracts: A Theoretical Appraisal
- How Status Seeking may Prevent Coasean Bargaining
- Will Procurement Officials be Biased to Disregard Procurement Rules in Favor of a Low-priced, Albeit Defective, Bid?
- Does the Appeals Process Reduce the Occurrence of Legal Errors?
- Choosing Whether to Comply with a General Duty or with a Specification Standard
