Tender evaluation through efficiency analysis for public construction contracts

Abstract

Given the European Public Procurement Directive 2014/24/EU, policymakers have ordered the inclusion of various criteria, such as the price, life-cycle costs, environmental, and social aspects, in the evaluation of tenders for public construction projects. Consequently, the relevance of non-monetary award criteria has gained significant value. However, the established evaluation formulas, which are used to obtain the best value for money procurement, have resulted in legal disputes. The existing evaluation formulas exhibit mathematical weaknesses, wherein scoring indices do not express economic efficiency adequately. Thus, a conflict is observed between the political requirement of non-monetary award criteria and their evaluation by contracting authorities. To overcome such dilemma, an extensive literature review is conducted. Specifically, this study explores the essential problems of existing evaluation formulas and develops a more reliable method. The technique from the field of efficiency analysis, i.e., Data Envelopment Analysis (DEA), is adopted in this study. For contract awarding, the DEA is extended by introducing a decision theoretical framework. For public procurement, the proposed method combines two advantages. First, the proposed method ensures the derivation of a robust tender ranking given that with respect to clients’ preferences, irrelevant and insufficiently tailored tenders do not influence the scoring. Second, the proposed method supports the intention of policy makers to promote public goals, such as sustainable aspects. By disclosing the strengths and weaknesses of bidders with respect to their competitors, all bidders can obtain a precise overview of their performance regarding the award criteria. In sum, the proposed method allows a targeted improvement of certain criteria values in future tenders and consequently leads to an enhancement of public goals.