Procurement Contracting With Time Incentives Case Study
5.4.2 Procurement Contracting with Time Incentives: Theory and Evidence. By Gregory Lewis and Patrick Bajari
Lewis and Bajari asserted that in public procurement, social welfare often depends on quick delivery of goods. They gave an example of a highway construction where slow completion impacted negatively on commuters; and in response, highway departments awarded some contracts using scoring auctions as an incentive for accelerated delivery. They did comparative analysis on a data they gathered and found out that where the scoring was used contracts were completed 30-40% faster, thus exceeding the welfare gains to commuters.
In the introduction to their submission Lewis and Bajari stated that procurement at the public sector accounts for …show more content…
Then used it to analysed data gathered on contracts awarded by California Department of Transport and found that the policy raises commuter welfare by substantially more than the change in procurement costs.
In their conclusion Lewis and Bajari acknowledged the large amount of money the US government spend on procurement. And stated it relied on the traditional contracting approach which specified every dimension of the good to be procured, and then relied on some competitive mechanism to award the procurement contract. They argued that that the auctions often used in the U.S. federal procurement has the advantage of picking the cheapest contractor who can deliver the specified good, but in the absence of repeat contracting, leaves no incentive for that contractor to out-perform and deliver a better than required good.
They suggested that scoring auctions such as the A+B design, allow for contracts to be awarded on multiple factors such as money and time. And this ultimately enhances efficiency by providing incentives for accelerated contract …show more content…
And that, organisations that focused on continuous improvement of their relationships with suppliers and distributors are better disposed at satisfying their customers. Their results also supported the usefulness of the theory of cooperation and competition in bringing to the fore, the conditions under which these trusting, continuous improvement relationships are developed.
They also suggested that cooperative goals, and not competitive or independent ones, are important factors for fruitful relationships between supply chain organizations. Cooperative goals make organisations and partners believe they have solid foundations to rely on and trust each other; and can take actions that contribute to their mutual benefit. Their study suggests that acknowledging the strategic importance of a partner may encourage more efforts to grow a cooperative
Lewis and Bajari asserted that in public procurement, social welfare often depends on quick delivery of goods. They gave an example of a highway construction where slow completion impacted negatively on commuters; and in response, highway departments awarded some contracts using scoring auctions as an incentive for accelerated delivery. They did comparative analysis on a data they gathered and found out that where the scoring was used contracts were completed 30-40% faster, thus exceeding the welfare gains to commuters.
In the introduction to their submission Lewis and Bajari stated that procurement at the public sector accounts for …show more content…
Then used it to analysed data gathered on contracts awarded by California Department of Transport and found that the policy raises commuter welfare by substantially more than the change in procurement costs.
In their conclusion Lewis and Bajari acknowledged the large amount of money the US government spend on procurement. And stated it relied on the traditional contracting approach which specified every dimension of the good to be procured, and then relied on some competitive mechanism to award the procurement contract. They argued that that the auctions often used in the U.S. federal procurement has the advantage of picking the cheapest contractor who can deliver the specified good, but in the absence of repeat contracting, leaves no incentive for that contractor to out-perform and deliver a better than required good.
They suggested that scoring auctions such as the A+B design, allow for contracts to be awarded on multiple factors such as money and time. And this ultimately enhances efficiency by providing incentives for accelerated contract …show more content…
And that, organisations that focused on continuous improvement of their relationships with suppliers and distributors are better disposed at satisfying their customers. Their results also supported the usefulness of the theory of cooperation and competition in bringing to the fore, the conditions under which these trusting, continuous improvement relationships are developed.
They also suggested that cooperative goals, and not competitive or independent ones, are important factors for fruitful relationships between supply chain organizations. Cooperative goals make organisations and partners believe they have solid foundations to rely on and trust each other; and can take actions that contribute to their mutual benefit. Their study suggests that acknowledging the strategic importance of a partner may encourage more efforts to grow a cooperative