Showing papers on "Procurement published in 2012"

Politically Connected Boards of Directors and the Allocation of Procurement Contracts

Abstract: This paper analyzes whether political connections of the boards of directors of publicly traded companies in the United States affect the allocation of government procurement contracts. It focuses on the change in control of both House and Senate following the 1994 election and finds that companies with boards connected to the winning (losing) party experience a significant and large increase (decrease) in procurement contracts after the election. The results remain significant after controlling for industry classifications as well as for several other company characteristics. The findings highlight one of the main avenues through which corporate political connections add value to U.S. companies.

Modern Construction Management

Abstract: Preface Acknowledgements 1 Introduction Section One: 2 Planning Techniques 3 Work Study 4 Activity Sampling 5 Incentives 6 Cost Control 7 Plant Management Section Two: 8 Company Organization 9 Contractual Arrangements 10 Market Planning 11 Estimating and Tendering 12 Competitive Bidding 13 Budgetary Control 14 Cash Flow and Interim Valuations 15 Economic Assessments 16 Financial Management 17 Quality Management Section Three: Worked Examples Questions Solutions Index

Managers and Students as Newsvendors

Abstract: We compare how experienced procurement managers and students solve the newsvendor problem. We find that managers broadly exhibit the same kind of pull-to-center bias as students do. Also, managers use information and task training no better than students. The performance of managers is positively affected by the level of their education and their level in the organizational hierarchy. We discuss implications for theory and for how ordering might be improved in practice. This paper was accepted by Teck Ho, decision analysis.

Learning on a budget: posted price mechanisms for online procurement

Abstract: We study online procurement markets where agents arrive in a sequential order and a mechanism must make an irrevocable decision whether or not to procure the service as the agent arrives. Our mechanisms are subject to a budget constraint and are designed for stochastic settings in which the bidders are either identically distributed or, more generally, permuted in random order. Thus, the problems we study contribute to the literature on budget-feasible mechanisms as well as the literature on secretary problems and online learning in auctions.Our main positive results are as follows. We present a constant-competitive posted price mechanism when agents are identically distributed and the buyer has a symmetric submodular utility function. For nonsymmetric submodular utilities, under the random ordering assumption we give a posted price mechanism that is O(log n)-competitive and a truthful mechanism that is O(1)-competitive but uses bidding rather than posted pricing.

Optimal demand response: Problem formulation and deterministic case

Abstract: We consider a set of users served by a single load-serving entity (LSE). The LSE procures capacity a day ahead. When random renewable energy is realized at delivery time, it manages user load through real-time demand response and purchases balancing power on the spot market to meet the aggregate demand. Hence, optimal supply procurement by the LSE and the consumption decisions by the users must be coordinated over two timescales, a day ahead and in real time, in the presence of supply uncertainty. Moreover, they must be computed jointly by the LSE and the users since the necessary information is distributed among them. In this chapter, we present a simple yet versatile user model and formulate the problem as a dynamic program that maximizes expected social welfare. When random renewable generation is absent, optimal demand response reduces to joint scheduling of the procurement and consumption decisions. In this case, we show that optimal prices exist that coordinate individual user decisions to maximize social welfare, and present a decentralized algorithm to optimally schedule a day in advance the LSE’s procurement and the users’ consumptions. The case with uncertain supply is reported in a companion paper.

Procurement challenges in the South African public sector

Abstract: This article reports on an exploration of challenges experienced in the field of procurement within the South African public sector. To institute procurement best practices, a supply chain management system was adopted in South Africa in 2003. The procurement process was granted constitutional status and has been used to address past inequitable policies and practices. It promotes aims which are, arguably, secondary to the primary aim of procurement. For the exploration, a conceptual analytical approach was employed and some of the key guiding pillars of public procurement in South Africa divulged. The challenges restraining effective and efficient implementation of public procurement are also revealed. The article concludes by recommending the development of competency through customised (separate) training materials and programmes, the involvement of stakeholders in the bidding process and the employment of good strategic sourcing practices.

Procurement for sustainable local economic development

Abstract: Purpose – The paper seeks to demonstrate how local entities, such as cities and counties, can use environmentally preferable purchasing plans as a tool in developing the local green economy First, the authors focus specifically on either the rise of economic development programs through buy‐local efforts, or the focus on environmental sustainability through green procurement programs Second, the authors discuss how locally driven, environmentally preferable purchasing could be used as a strategy to marry these goals together and utilize procurement as a tool to achieve green local economic developmentDesign/methodology/approach – This research used qualitative methods to examine both procurement for economic development through the use of buy local campaigns, in addition to environmentally preferable procurement policies that have been used to bolster environmental quality in communitiesFindings – Green local economic development can be achieved by melding together procurement programs previously sing

Using a Dual-Sourcing Option in the Presence of Asymmetric Information About Supplier Reliability: Competition vs. Diversification

Abstract: We study a buyer's strategic use of a dual-sourcing option when facing suppliers possessing private information about their disruption likelihood. We solve for the buyer's optimal procurement contract. We show that the optimal contract can be interpreted as the buyer choosing between diversification and competition benefits. Better information increases diversification benefits and decreases competition benefits. Therefore, with better information the buyer is more inclined to diversify. Moreover, better information may increase or decrease the value of the dual-sourcing option, depending on the buyer's unit revenue: for large revenue, the buyer uses the dual sourcing option for diversification, the benefits of which increase with information; for small revenue, the buyer uses the dual sourcing option for competition, the benefits of which decrease with information. Surprisingly, as the reliability of the entire supply base decreases, the buyer may stop diversifying under asymmetric information (to leverage competition), whereas it would never do so under symmetric information. Finally, we analyze the effect of codependence between supply disruptions. We find that lower codependence leads the buyer to rely less on competition. Because competition keeps the information costs in check, a reduction in supplier codependence increases the buyer's value of information. Therefore, strategic actions to reduce codependence between supplier disruptions should not be seen as a substitute for learning about suppliers' reliabilities.

Establishing and weighting decision criteria for building system selection in housing construction

Abstract: A lack of value-based decision criteria leads to an inability to effectively compare prefabrication and off-site production with conventional construction, which inhibits the realization of benefits of off-site approaches. This paper develops value-based decision criteria and quantifies their relative importance for assessing building technologies systematically. The research employed a multimethodological strategy within a broad case-study-based design, with six large house-building organizations in the United Kingdom. These companies together accounted for more than one-tenth of new-build home completions in the United Kingdom. More than 50 criteria were developed, grouped under cost, time, quality, health and safety, sustainability, process, procurement, and regulatory and statutory acceptance. Cost was ranked most important, which, coupled with time and quality, predominated technology selection in these companies. Sustainability, process, and procurement were weighted lower, whereas health and safety and regulatory and statutory acceptance were deemed compulsory, hence offering no trade-off opportunity. A lack of incorporating innovative sustainable technology into corporate strategy was observed. The developed criteria and the systematic process should help house-building organizations manage technological innovation and hopefully achieve more informed corporate decisions.

Public procurement vs private purchasing: Is there any foundation for comparing and learning across the sectors?

Abstract: Purpose – Compared with the private sector, the public sector's procurement process differs in several respects. The purpose of this paper is to analyze the possibility for mutual learning and the value between the public and private sectors and also to identify both drivers and barriers for benchmarks between the two sectors.Design/methodology/approach – The paper is based on in‐depth literature reviews of comparisons between private and public procurements. The paper is, furthermore, derived from two case studies: one in a chain perspective and another that concerns public‐private innovation.Findings – Extant literature contains limited contributions that compare public procurement practice with private purchasing practice. Using tendering to regulate procurement is troublesome and may hamper the possibility to learn and gain value measured on a broader scale. Wider collaboration may provide more possibilities to learn and gain value.Research limitations/implications – The empirical part of the paper re...

Supply-Side Story: Risks, Guarantees, Competition, and Information Asymmetry

Abstract: The risk of supply disruption increases as firms seek to procure from cheaper, but unproven, suppliers. We model a supply chain consisting of a single buyer and two suppliers, both of which compete for the buyer's order and face risk of supply disruption. One supplier is comparatively more reliable but also more expensive, whereas the other one is less reliable but cheaper and faces higher risk of disruption. Moreover, the risk level of the unreliable supplier may be private information, and this lack of visibility increases the buyer's purchasing risk. In such settings, the unreliable supplier often provides a price and quantity (P&Q) guarantee to the buyer. Our objective is to study the underlying motivation for the guarantee offer and its effects on the competitive intensity and the performance of the chain partners. Our model also includes a spot market that can be utilized by any party to buy or to sell. The spot market price is random, partially depends on the available capacity of the two suppliers, and has a positive spread between buying and selling prices. We analytically characterize the equilibrium contracts for the two suppliers and the buyer's optimal procurement strategy. First, our analysis shows that P&Q guarantee allows the unreliable supplier to better compete against the more reliable one by providing supply assurance to the buyer. More importantly, when information asymmetry risk is high, use of a guarantee may enable the unreliable supplier to credibly signal her true risk, thereby improving visibility into the chain. This signal can also be used by the buyer to infer the expected spot market price. In spite of these benefits, a guarantee offer in an asymmetric setting may not always be desirable for the buyer. Rather, it can reduce competition between the suppliers, resulting in higher costs for the buyer. This paper was accepted by Martin Lariviere, operations management.

Outsourcing and Offshoring of Business Services: Challenges to Theory, Management and Geography of Innovation

Abstract: Massini S. and Miozzo M. Outsourcing and offshoring of business services: challenges to theory, management and geography of innovation, Regional Studies. Drawing on an original survey, this paper discusses the trends and challenges posed by the outsourcing and offshoring of business services. It documents and analyses the increasing offshoring of business services (administrative services, call centres, information technology services, procurement, and product development) from the United States and Europe to less developed countries, the functions offshored, the size of offshorers, their destination, and the delivery models, and it explores the role of information and communication technologies and the development of both large global services suppliers and entrepreneurial ventures in developed and less developed countries. The paper derives implications regarding outsourcing decisions, the globalization of high value-adding activities, such as product development and innovation, raising issues of evolvi...

Achieving the Green Building Council of Australia's World Leadership Rating in an Office Building in Perth

Abstract: The issues influencing the construction of Western Australia’s first six-star Green Star energy-rated commercial office building are examined. Green Star is a comprehensive, national, voluntary environmental rating system that evaluates the environmental design and construction of buildings and is undertaken by the Green Building Council of Australia. A six-star rating signifies “world leadership” in environmentally sustainable design and construction. The case study presented in this paper describes how a client acted as a catalyst for driving the sustainability agenda. The client’s key drivers for implementing sustainable technologies were procurement and organizational resources. Existing building regulations and a lack of government incentives were identified as being the main barriers to implementing sustainable technologies. The case findings presented provide an opportunity for clients and practitioners to learn from the experiences of others who have, and continue to address the environmen...

Design Error Costs in Construction Projects

Abstract: Design errors can adversely influence project performance and can contribute to failures, accidents, and loss of life. Although there has been a considerable amount of research that has examined design error causation, little is known about design error costs. With increasing emphasis placed on the use of nontraditional forms of procurement methods as a result of various government reports and the advent of Building Information Modelling there is a general perception that design error costs will be significantly less than those projects procured by traditional means. By using a questionnaire survey, estimates for design error costs were obtained from 139 projects. The mean direct and indirect costs for design errors were revealed to be 6.85 and 7.36% of contract value, respectively. Design error costs were found not to significantly vary with procurement method and project type used. Although the research provides invaluable insights into practitioners’ perceptions of design errors costs, their ac...

Reputation, Competition, and Entry in Procurement

Abstract: Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

Public-Private Partnerships Versus Traditional Procurement: Innovation Incentives and Information Gathering

Abstract: A government agency wants a facility to be built and managed to provide a public service. Two different modes of provision are considered. In a public-private partnership, the tasks of building and managing are bundled, whereas under traditional procurement, these tasks are delegated to separate private contractors. The two provision modes differ in their incentives to innovate and to gather private information about future costs to adapt the service provision to changing circumstances. The government agency's preferred mode of provision depends on the information gathering costs, the costs of innovation efforts, and on the degree to which effort is contractible.

Sustainability and local food procurement: a case study of Finnish public catering

Abstract: Purpose – The aim of the paper is to present how sustainability as a concept supports the use of locally‐sourced food in public catering, and the issues that arise from that policy objective and their implications for suppliers and purchasers.Design/methodology/approach – First, the paper explains the characteristics of local food chains and the concept of sustainability based on a literature review. It then outlines the stages of the food procurement process in public food catering in Finland, focussing on the delivery of potatoes from a local producer to a public caterer providing school meals. The case study identifies the dimensions of sustainability.Findings – First, the criteria defining sustainability remain unclear. Second, to overcome the cost disadvantages brought about by its small‐scale production and high delivery costs, locally‐sourced food should add some extra value. Short food supply chains have advantages over long ones, however, they are not sustainable per se.Research limitations/impli...