University of Twente Student Theses

Identifying transaction costs in Best Value Procurement tenders in public civil engineering projects : How are the transaction costs classified in Best Value tenders and how high are they in comparison to Most Economically Advantageous Tender?

Pol, B. van de (2018) Identifying transaction costs in Best Value Procurement tenders in public civil engineering projects : How are the transaction costs classified in Best Value tenders and how high are they in comparison to Most Economically Advantageous Tender?

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Abstract:	Over the past decade there has been an increase in the number of public clients who apply the Best Value Procurement whilst tendering for the public civil engineering project. Best Value Procurement is used by the client in order to find the expert among several vendors who can execute the project on time and within budget. Currently the transaction costs of vendors are increasing, because clients are focussing more on quality and price instead of only price. This shift causes an increase in the transaction costs for vendors, because vendors have to show to the client how the quality will be implemented and maintained throughout the project. However, it is unclear how the transaction costs are identified for vendors in a Best Value tender. This study identifies the transaction costs of vendors in Best Value tenders and how Best Value influences the transaction costs of a vendor in the tender phase. A case study research is used to identify and analyse these transaction costs. This is assessed in seven civil engineering projects, which present the diversity of the public civil engineering industry. A conceptual framework of the transaction costs is constructed, and it is used to classify the transaction costs for vendors. The transaction costs that are the highest for a vendor in a Best Value tender are identified as: (1) hiring experts, and (2) preparation of interviews. First, vendors often hire Best Value experts in order to assist the vendor during the tender, because vendors often do not have experience in working with Best Value tenders. Best Value experts are also hired to help the vendor prepare for the interviews with the client and/or with writing the tender documents. The preparation of interviews is often intense for the key officers who do the interview, because they must understand and explain every single aspect of the vendors plan for the tender. To add the project objectives of a Best Value tender are often to abstract for a vendor. Furthermore, it is difficult for a vendor to find the correct verifiable performance information in order to participate in a Best Value tender. As a result, the transaction costs for a vendor in Best Value tender a seven to ten times higher to a MEAT tender when compared to numbers from a study that researched the transaction costs of MEAT tenders in the Netherlands.
Item Type:	Essay (Master)
Faculty:	ET: Engineering Technology
Subject:	56 civil engineering
Programme:	Construction Management and Engineering MSc (60337)
Link to this item:	https://purl.utwente.nl/essays/76614
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