Showing papers on "Procurement published in 2015"

Flood Risks and Impacts: A Case Study of Thailand’s Floods in 2011 and Research Questions for Supply Chain Decision Making

Abstract: This paper investigates the impact of floods on the global economy through supply chains, and proposes measures for the related supply chain risk. We examine Thailand’s 2011 flood since it is a notable example of the impact of floods both on industries and the whole economy. The protracted floods affected the primary industrial sectors in Thailand, i.e., the automotive and electronics industries, with a devastating impact on the whole economy. The impact of natural hazards on the global supply chain is increasing. However, the impact on each firm that is exposed is different depending on how well they are prepared and how they respond to the risks. Designing supply chains in a more resilient way will ultimately reduce risks to the economy. Comparing different supply chains and industries’ structure in Thailand, this study identifies the factors in private investment decision- making, such as locations of facilities, alternate locations of production, the diversified sources of procurement, emergent assistance from other partner companies in the same supply chain, and degree of the recovery of customers and proposes a hypothesis and related questions for future research.

The Simple Microeconomics of Public-Private Partnerships

Abstract: We build on the existing literature in public-private partnerships (PPP) to analyze the main incentive issues in PPPs and the shape of optimal contracts in those contexts. We present a basic model of procurement in a multitask environment in which a risk-averse firm chooses noncontractible efforts in cost reduction and quality improvement. We first consider the effect on incentives and risk transfer of bundling building and management stages into a single contract, allowing for different assumptions on feasible contracts and information available to the government. Then we extend the model in novel directions. We study the relationship between the operator and its financiers and the impact of private finance. We discuss the trade-off between incentive and flexibility in PPP agreements and the dynamics of PPPs, including cost overruns. We also consider how institutions, and specifically the risk of regulatory opportunism, affect contract design and incentives. The conclusion summarizes policy implications on the desirability of PPPs.

Drivers of supplier sustainability: : moving beyond compliance to commitment

Abstract: Mounting pressure for sustainable business practices has led to a greatly increased focus on highlighting sustainability drivers throughout the supply chain. While the literature has concentrated on why downstream original equipment manufacturers (OEMs) and retailers become �sustainable,� much less is known regarding why and how upstream suppliers implement sustainability practices. Based on findings from a cross-case analysis of eight first-tier (FT) suppliers and an integration of resource dependency theory (RDT), this study explores the drivers and mechanisms of FT supplier engagement in sustainable supply chain management. Suppliers need to understand the sustainability priorities of customers and stakeholders to derive the effective focus and depth of further upstream integration with subsuppliers. Therefore, the integration between the two functions that manage the relevant external interfaces, namely marketing (downstream and stakeholder communication) and procurement (upstream), appears to be the essential cornerstone to move beyond FT supplier compliance to actual commitment to sustainability practices. We present findings on how (1) stakeholder-related, (2) process-related, and (3) product-related drivers influence the choice and effectiveness of the procurement�marketing integration (PM integration) mechanisms. Stakeholder pressures are considered to be the principal drivers of sustainability efforts. However, on their own, they rarely provide sufficient grounds for permanent and embedded PM integration initiatives at FT suppliers. Evidence suggests that suppliers' commitment to PM integration is motivated by the opportunity to leverage sustainability initiatives in their product offerings and sustainability certificates recognizable by customers and secondary stakeholders.

Life Cycle Critical Success Factors for Public-Private Partnership Infrastructure Projects

Abstract: Public-private partnerships (PPPs) have been widely used in the procurement of economic and social infrastructure projects. Since the operation of more and more PPP projects, there have been a number of explorations on the factors that contribute to their success. Project success is often expressed by the quality of the product and project management success. Bearing in mind these perspectives, the critical success factors (CSFs) of PPP infrastructure projects under the auspices of the project management success perspective are identified and examined. A life-cycle CSF framework with embedded “learning mechanisms” is developed. The proposed framework will enable public and private sector stakeholders to possess an ameliorated understanding of the factors that are critical to successfully implementing a PPP contract strategy.

Best Practices Handbook for the Collection and Use of Solar Resource Data for Solar Energy Applications

Abstract: This report presents detailed information about solar resource data and the resulting data products needed for each stage of a solar energy project, from initial site selection to systems operations. It also contains a summary of solar forecasting and its development throughout the last few years. The U.S. Department of Energy's Solar Energy Technologies Office, project developers, engineering procurement construction firms, utility companies, system operators, energy suppliers, financial investors, and others involved in solar energy systems planning and development will find this handbook to be a valuable resource for the collection and interpretation of solar resource data. This handbook is expected to be used as a reference during each project stage.

From sustainability commitment to performance: The role of intra-and inter-firm collaborative capabilities in the upstream supply chain

Abstract: Organisations increasingly see sustainability as an important element of their business strategies, and the role of purchasing and supply functions is critical in translating sustainability commitment into performance. Yet, the impact of sustainability commitment on purchasing processes and routines, as well as the effect of such capabilities on performance, remains empirically under-explored. From a Resource-Based perspective, we argue that commitment to sustainability leads purchasing and supply functions to develop intra-and inter-firm collaborative capabilities, and that in turn these capabilities deliver improved performance. Based on survey data from 383 procurement executives in ten European and North American countries, we use structural equation modelling to empirically test our hypotheses. Our results provide strong support for the hypothesised links between sustainability commitment and both intra-and inter-firm collaborative capabilities; and between inter-firm collaborative capabilities and environmental and social, and cost performance. Conversely, our data do not support the hypothesised links between intra-firm collaborative capabilities and both aspects of performance. In our discussion, we reflect on both confirmatory and conflicting findings in relation to theory and practice, before examining the study's limitations and opportunities for future research.

Optimal bidding strategy of electricity retailers using robust optimisation approach considering time-of-use rate demand response programs under market price uncertainties

Abstract: In restructured electricity markets, the electricity retailers try to obtain the consumers' electricity demand at the minimum cost of different resources such as self-generating facilities, bilateral contracts and pool market purchases. Hence, more attention should be paid to the demand response programs (DRPs) which aim to electricity procurement cost reduction. Owing to the uncertain nature of pool prices and the price fluctuation in the pool markets, the uncertainty modelling is inevitable for retailers. In this study, a robust optimisation approach is proposed for decision making of electricity retailers. Meanwhile, considering the effect of DRP on total procurement cost, an optimal bidding strategy is proposed of electricity retailers with the time-based model of DRP in the electricity market. For this purpose, a collection of robust mixed-integer linear programming (RMILP) problem should be solved in the proposed method. Rather than using the forecasted prices as inputs, the upper and lower limits of pool prices are considered for the uncertainty modelling. The range of pool prices is sequentially partitioned into successive nested subintervals, which permits formulating the RMILP problems. The results of these problems give sufficient data to obtain an optimal bidding strategy for electricity retailers considering DRP. Detailed analysis is performed to delineate the proposed method.

Renewable energy gathers steam in South Africa

Abstract: South Africa׳s Renewable Energy Independent Power Producers Procurement Programme (the REI4P) is an extensive initiative to install 17.8 GW of electricity generation capacity from renewables – wind, solar, biomass, biogas and hydropower – over the period 2012–2030. Although at the outset the REI4P seemed an expensive option, designed only to deflect criticism of South Africa׳s high carbon footprint and excessive dependence on coal-based electricity generation, the escalating costs of the latter, the rapidly falling costs of photovoltaic and wind power, and the increasingly competitive bidding process of the REI4P have changed this prospect. At the conclusion of round three, the weighted cost of energy has reached a 23% discount to the cost of new coal-based generation and a 28% discount to global renewable energy prices. The bidders׳ commitments to local employment creation have similarly increased from 11 to 18 jobs/MW. The programme is now well placed to deliver on a broad range of objectives, including regional development and black economic empowerment. However, maximum benefit from the REI4P will not be secured without some revision to aspects of the bidding and procurement process. More specifically, the local content provisions need to be tightened to drive higher levels of local manufacturing.

An assessment of public procurement of timber buildings

Abstract: The construction and use of buildings in the EU accounts for half of the EU’s extracted materials and energy consumptions, and a third of greenhouse gas emissions. In the past decade, the construction sector has responded to such concerns by focusing on post production energy efficiency. However, new findings indicate that upstream construction processes influence emissions significantly – necessitating a shift in focus to include material choices and building processes. Nonetheless, despite environmental concerns, such a shift to more sustainable and innovative building methods has been slow to get underway within Sweden. To address environmental demands and low innovation rate, the construction sector requires deep structural change. To understand the dynamics of these deep structural changes, this thesis assesses the Swedish construction sector using a novel heuristic socio-technical theory, the multi-level perspective (MLP). This theory assesses a sector from multiple dimensions and moves beyond technological fixes or behavior changes, incorporating the key elements of change including policy, industry structure, markets, culture and science. Within an MLP framework, the focal innovation is timber based multi-story timber building approaches: in Sweden, such multi-storey timber building methods can be considered an innovative and sustainable construction technique. Moreover, publically owned facility management organizations were the focal actors and procurement actors are expected to play a key role in the transition towards the reduction of GHG. Accordingly, this thesis uses a socio-technical framework, investigating a transition from onsite concrete building methods to timber based building. That is, this thesis introduces MLP analytical framework to assess change in the Swedish construction section with focus on timber building. The study draws on multiple methods and a case study framework. Secondary data was used to assess the national construction sector and a mix of semi-structured interviews and secondary data for studying three cases; the municipalities of Vaxjo, Skelleftea and Falun. The overall aim was to assess how timber based building can become more mainstream. Using MLP, national multi-level interactions between macro changes and the mainstream practices have been illustrated and assessed. Moreover, three local timber building cases have been investigated in depth, illustrating how public actors developed timber building at the local scale. In the studied cases, public actors have developed timber building markets by articulating visions and expectation in order to attract and guide niche producers of timber solutions. Examples of such articulation processes include formulation and implementing timber building strategies and articulation of functional needs in public procurement processes. Public actors within the studied cases also build social networks, involving local industry, research institutions, and public actors. Moreover, all three municipalities participate actively in formal national timber networks. The local cases also illustrate valuable lessons learned regarding on multiple dimensions such as technology, organization, market demand, policy, and infrastructure requirements. Examples of local lessons illustrated in this thesis are local SME developments and thereby increased competition, innovative public procurement practices, and organizational changes in the public administrations. The study shows that MLP is a useful framework for investigating deep structural changes within the multi-storey construction sector. It highlights barriers, drivers and pathways of a deep structural transition towards more environmentally sustainable timber based building.

Political Connections and Allocative Distortions

Abstract: This paper exploits a unique institutional setting to examine the effects of firms' political connections on the allocation of government procurement contracts. After winning the presidential election in Korea in 2007, the new president, Lee Myung Bak, appoints several members of his networks as CEOs of state-owned firms. In turn, these state firms allocate significantly more procurement contracts to private firms with a CEO from the same network. The systematically poor execution of contracts allocated to connected firms suggests that contracts are misallocated. Back of the envelope calculations suggest that each dollar in contract volume transferred from non-connected to connected firms leads to a cost of 17-26 cents to the economy, resulting in a total annual cost of about 0.21-0.32% of GDP.

Optimal Demand Bidding for Time-Shiftable Loads

Abstract: Time-shiftable loads have recently received an increasing attention due to their role in creating load flexibility and enhancing demand response and peak-load shaving programs. In this paper, we seek to answer the following question: how can a time-shiftable load, that itself may comprise of several smaller time-shiftable subloads, submit its demand bids to the day-ahead and real-time markets so as to minimize its energy procurement cost? Answering this question is challenging because of the inter-temporal dependencies in choosing the demand bids for time-shiftable loads and due to the coupling between demand bid selection and time-shiftable load scheduling problems. Nevertheless, we answer the above question for different practical bidding scenarios and based on different statistical characteristics of practical market prices. In all cases, closed-form solutions are obtained for the optimal choices of the price and energy bids. The bidding performance is then evaluated in details by examining several case studies and analyzing actual market price data.

Sourcing with Deferred Payment and Inspection under Supplier Product Adulteration Risk

Abstract: We study the deferred payment and inspection mechanisms for mitigating supplier product adulteration, with endogenous procurement decision and general defect discovery process. We first derive the optimal deferred payment contract, which reveals that either entire or partial deferral can arise, depending on the moral hazard severity and the information accumulation rate. Because of the supplier's incentive to adulterate, the optimal procurement quantity under deferred payment generally is smaller than the first-best quantity. We then investigate the inspection mechanism and characterize the equilibrium. We find that under the inspection mechanism, the optimal procurement quantity is no less than the first best. A comparison between these two mechanisms shows that the deferred payment mechanism generally can outperform the inspection mechanism when either the market size is small or the profit margin is low. However, we find that these two mechanisms can also be complementary, for which we characterize a necessary condition

CONTESTED TERRAIN: The Role of Preferential Policies in Opening Government and Corporate Procurement Markets to Black-Owned Businesses

Abstract: Since 1969, the procurement powers of government have been used proactively to assist minority-owned businesses. Originating in the U.S. Small Business Administration, the practice of targeting procurement contracts to minority-owned business enterprises (MBEs) has expanded throughout government and corporate America. Compared to other minorities, Black-owned firms have been the most active participants. Preferential procurement has been controversial for decades, and its effectiveness for assisting bona fide MBEs has been repeatedly questioned. “Front-company” abuses have received abundant media attention; allegations of reverse discrimination have inspired legal challenges; the judiciary has often thrown out procurement preferences targeted to minorities. Less attention has focused on understanding whether racially targeted procurement preferences have assisted minority-owned businesses.As the multi-billion dollar government and corporate procurement market opened up, employment in Black-owned firms operating in the impacted industries soared. Growing access to procurement opportunities encouraged firm creation and expansion. Government entities operating successful programs actively screened out front firms, eased bonding requirements, downsized and unbundled contracts, and paid MBE vendor invoices promptly. In the process, they effectively lowered key barriers limiting MBE participation in mainstream procurement markets. Well-designed and administered programs succeeded because they created a less discriminatory environment, thus allowing talented entrepreneurs to build large firms. Problems notwithstanding, preferential procurement programs have been highly successful, and this success is a reflection of declining barriers unleashing the creativity of new generations of Black entrepreneurs.

Optimal demand bidding for time-shiftable loads

Abstract: Time-shiftable loads have recently received an increasing attention due to their role in creating load flexibility and enhancing demand response and peak-load shaving programs. In this paper, we seek to answer the following question: How can a time-shiftable load, that itself may comprise of several smaller time-shiftable subloads, submit its demand bids to the day-ahead and real-time markets so as to minimize its energy procurement cost? Answering this question is challenging because of the inter-temporal dependencies in choosing the demand bids for time-shiftable loads, and also due to the coupling between demand bid selection and time-shiftable load scheduling problems. Nevertheless, we answer the above question for different practical bidding scenarios and based on different statistical characteristics of practical market prices. In all cases, closed form solutions are obtained for the optimal choices of the price and energy bids. The bidding performance is then evaluated in details by examining several case studies and analyzing actual market price data.

When Does Regulation Distort Costs? Lessons from Fuel Procurement in U.S. Electricity Generation

Abstract: This paper evaluates changes in fuel procurement practices by coal- and gas-red power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I nd that deregulated plants substantially reduce the price paid for coal (but not gas), and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion.

Infrastructure Public–Private Partnerships in the Developing World: Lessons from Recent Experience

Abstract: Seeking to address inefficient and costly infrastructure delivery, governments over the past two decades have turned to public–private partnerships (PPPs) to build and operate infrastructure. The key characteristic of PPPs is the outsourcing and ‘bundling’ of project delivery components (for example, design, build, finance, operate), structured to incentivise the builder-operator to incorporate long-term operating cost considerations in the design and construction phases of a project and reduce coordination costs. This article reviews the benefits and drawbacks of PPPs and the experience to date, focusing in particular on developing economies. Relative to traditional procurement, PPPs are complex, and require governments to anticipate and plan for contingencies and conduct monitoring and enforcement of long-term contracts. We argue that institutional capacity is a key determinant of PPP success and in mitigating potentially welfare-reducing contract renegotiations evident in the Latin American exp...

Review of Contemporary Construction Procurement Practices

Abstract: Procurement is a key process in a construction project that creates and manages contacts. Procurement activities span from identification of requirements to project closeout, making it a perfect mode for integrating organizational strategic directions. Lately, the strategic importance of procurement has been widely acknowledged by academics as well as industry professionals. Construction procurement is a complex process with a large number of available options and directions. Ad hoc statistics show that modern initiatives such as sustainability, life-cycle costing, and standardization are getting integrated with procurement. However, there is no unified view in the construction industry on procurement as a project process. This paper presents a comprehensive review of traditional and emerging procurement practices in the construction industry. The current procurement practices are analyzed by separating into three segments; processes, methods, and policies. Furthermore, strengths and weaknesses of...

Contingent sourcing under supply disruption and competition

Abstract: With the increasing awareness of the serious consequences of supply disruption risk, firms adopt various kinds of strategies to mitigate it We consider a supply chain in which two suppliers sell components to two competing manufacturers producing and selling substitutable products Supplier U is unreliable and cheap, while Supplier R is reliable and expensive Firm C uses a contingent dual-sourcing strategy and Firm S uses a single-sourcing strategy We study the implications of the contingent sourcing strategy under competition and in the presence of a possible supply disruption The time of the occurrence of the supply disruption is uncertain and exogenous, but the procurement time of components is in the control of the firms We show that supply disruption and procurement times jointly impact the firms’ buying decisions We characterise the firms’ optimal order quantities and their expected profits under different cases Subsequently, through numerical computations, we obtain additional managerial ins

The impact of size on small and medium-sized enterprise public sector tendering

Abstract: This article examines the relationship between firm size and public sector tendering The findings show that size, measured by employee number, significantly influences small and medium sized enterprises’ (SMEs) tendering resources, behaviour and success; as such, micro-enterprises are resource-disadvantaged, tender less often and have lower success rates compared to small and medium-sized firms These findings indicate that SMEs are heterogeneous tenderers, and point to the need for more focused research on how SME characteristics influence ability and willingness to tender

Opportunism and honest incompetence - Seeking explanations for noncompliance in public procurement

Abstract: This article utilizes agency theory to explain maverick buying in governmental agencies, that is, noncompliance to centrally negotiated frame agreements. Traditional agency theory assumes the agent to be an opportunistic self-interest seeker. A complementary view of agency problems portrays man as an honest, yet not fully competent, actor; both agents and principals may be burdened by "honest incompetence." We apply both perspectives on principal-agent relationships to study maverick buying in government procurement and link agency problems to three governance mechanisms: monitoring, training, and guidance. We find that guidance and training help to reduce governmental employees' noncompliance, but output monitoring does not. Our findings further indicate that maverick buying is related to goal incongruence and two different types of information asymmetry: Agency problems may arise not only because the agent has information the principal is not aware of but also because the principal may have information the agent is not aware of. Future research in public management using agency theory to study instances of hidden action could benefit from applying a similar dual lens to behaviors previously examined as purely opportunistic.