A Comparative Study of Formulas for Choosing the Most Economically Advantageous Solicitation
By Jan Siderius, Przemyslaw S. Stilger, and Erik M. Van Raaij
Jan Siderius, MSc., is the CEO of Negometrix, Utrecht, the Netherlands, and Member of the EU Expert Group on eProcurement. His interest and research is in public and private electronic tendering with a focus on the most economically advantageous tender calculation methods.
Please note that “tender” is the European term for a “solicitation”.
ABSTRACT. Choosing the best bid is a central step in any tendering process. If the award criterion is the most economically advantageous tender (MEAT), 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.
To read Jan’s full article published inthe JoPP, click the link below: