Leeds Beckett University

School of the Built Environment & Engineering

MSc Degree in Project Management

Research Topic

Impact of Procurement strategy of lowest price

bidding selection on Project Performance.
Prepared by
Ahmed A. El zawawi
Student ID: C7161589

Supervised by
John Heathcoat

Leeds Bekett University ©2016

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Table of Contents
Chapter I ................................................................................................................................................... 5
Introduction ............................................................................................................................................... 5
1.1 Introduction ...................................................................................................................................... 5
1.2 Background ....................................................................................................................................... 5
1.3 Research Aim .................................................................................................................................... 6
1.3.1 Research objectives: .............................................................................................................. 6
1.3.2 Research Question................................................................................................................. 7
1.3.3 Research hypothesis .............................................................................................................. 7
1.4 Rationale of Research ....................................................................................................................... 7
1.5 Scope and Limitations ....................................................................................................................... 8
1.6 Structure of Dissertation ................................................................................................................... 8
Chapter II....................................................................................................................................................... 9
Literature Review .......................................................................................................................................... 9
2.1 Introduction ...................................................................................................................................... 9
2.1 Procurement .................................................................................................................................... 9
2.2.1 Procurement Decision Making. ................................................................................................... 10
2.2.2 Direct & indirect procurement: ............................................................................................... 10
2.2.3 The strategic importance of procurement: .............................................................................. 11
2.3 Project Procurement Process.......................................................................................................... 12
2.3.1 Best Value for Money (B.V.M). ............................................................................................. 14
2.3.2 Factors Affecting B.V.M. ....................................................................................................... 15
2.4 Contracting strategies. .................................................................................................................... 16
2.4.1 Tendering/ Bidding Process in Procurement. ............................................................................. 16
2.4.2 Tender Evaluation Methods........................................................................................................ 18
2.4.2.1M.E.A. T Procedure: ................................................................................................................ 19
2.4.2.2 Pre-Qualification Questionnaire (PQQ) model. ...................................................................... 20
2.4.3 Need of Bids in Procurement. ..................................................................................................... 21
2.4.4 Disadvantages of lowest bid framework. ............................................................................ 22
2.4.5 Price as a choice Criteria. .................................................................................................... 23
2.5 Strategic Negotiation with bidders. ................................................................................................ 24
2.5.1 Negotiation Cycle. .................................................................................................................. 25
2.5.2 Best Alternative to a Negotiated Agreement (B.A.T.N.A): .................................................... 26
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2.6 Contract management. .................................................................................................................. 27

2.7 Supply Chain Management in Procurement: .................................................................................. 29
2.7.1 Game Theory Application in Procurement ............................................................................. 29
Chapter III.................................................................................................................................................... 32
Research Methodology. .............................................................................................................................. 32
3.1 Introduction. ................................................................................................................................... 32
3.2 Research Philosophy. ..................................................................................................................... 32
3. 3 Research Approach. ....................................................................................................................... 33
3.4 Research Technique. ...................................................................................................................... 33
3.5 Research Strategy. ......................................................................................................................... 34
3.6 Sampling Process. ........................................................................................................................... 35
3.7 Data Collection. .............................................................................................................................. 35
3.7.1 Primary Data Sources: ............................................................................................................... 35
3.7.2 Secondary Sources. ............................................................................................................ 36
3.8 Data Analysis. .................................................................................................................................. 36
3.9 Time Horizon. ................................................................................................................................. 37
3.10 Ethical Measures. ........................................................................................................................... 37
Limitation. ................................................................................................................................................... 37
Chapter IV................................................................................................................................................... 39
Data Analysis. ............................................................................................................................................. 39
4.1 Introduction. .................................................................................................................................... 39
4.2 Demographic Data Analysis . ......................................................................................................... 39
4.2.1 Experience........................................................................................................................... 39
4.2.2 Experience sector. ............................................................................................................... 40
4.2.3 Project Position. .................................................................................................................. 41
4.3 Opinions about project procurement bidding process. .................................................................. 41
4.3.1 Cost Minimization in choice of lowest bid ......................................................................... 42
4.3.2 Advice for project managers ....................................................................................................... 46
Chapter V .................................................................................................................................................... 49
Conclusion ................................................................................................................................................... 49
5.1 Introduction. ................................................................................................................................... 49
5.2 Conclusion. ...................................................................................................................................... 49
5.3 Recommendations. ......................................................................................................................... 50
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5.4 Future Implications of the Research. .............................................................................................. 51

References. ................................................................................................................................................. 52
Appendix A- Questionnaire. ........................................................................................................................ 58
Appendix B- Glossary................................................................................................................................. 59
Appendix C- ............................................................................................................................................ 60
Appendix C- Original responses to the research questions.............................................................. 60
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Chapter I
Introduction.

1.1 Introduction.
Improvement in procurement is one of the optimal goals in project management due to its
significant impacts in costs and quality of projects. The importance of procurement process is not
only desired in public projects what considered equality important in private projects as well.
The manufacturing, construction, and other major industries projects include systematic
procedures and specific department that deal with procurement. Currently, the major form of
procurement contracts awarding to agencies and companies is based on low bid strategies in
form of public tender offers. According to Bedford (2009), the dependence of procurement is
found rarely on price only, the other factors like quality, durability, and time duration are also
important. Therefore, in low price bidding system, the concerns of quality and time associated
with provided service and goods have a viable impact on final decision of contractors’ selection.
Another concern is the structure of buying process that the consideration of project costs and
other factors should be incorporated in the competition of suppliers for procurement contracts
achievement.
In view of the importance of procurement department to projects success and future stranding,
the evaluation of current low price bidding system and its impact on the future costs and
performance is done in this thesis. The review of current procurement strategies to receive best
value for money and future sustainability is part of this research. The research is conducted for
procurement departments of manufacturing, oil and gas, health care, construction, and IT sector
projects. The major emphasis of the research is in the area of procurement decision making and
the impacts of low cost bids on the project future costs and performance for various industries.

1.2 Background
Procurement process is one of the basic elements in project management and determines success
of projects in terms of cost and quality of material or service used. The organizations are more
interested in keeping the cost low through competitive bidding of suppliers. Several methods are
used to allocate and select the supplier s like low bid and average bid methods in public and
private projects. The supplier firms qualify through lowest or average bids are entitled to supply
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the designated items in a specific time period. The terms of the contracts vary with respect to the
industries and companies’ specific requirements.
Presently, lowest bid awarding system, is mostly prevailing in major industries but the
consequences of low bid awarding are also important to consider. In view of Laychluh (2013),
the practices of lowest bid awarding are established and become customary due to the saving of
projects costs like in construction and manufacturing industries where material costs are basic in
whole project estimation. The studies like Bedford (2009) and Carr (2005) asserted that lowest
bid method s preferred through publicly announced contracts to minimize corruption and fraud.
In addition, Herbsman and Ellis, (1992) explained the benefits of lowest bid system as it
increased the competition amongst contractors, lowered the suppliers costs, and increased
innovation in procurement processes. On the other hand, the contractors also benefit from open
tender and lowest bids system as the bribery and corruptions costs are minimized and merit
signifies more in the respective industry. The research of Asker and Cantillon (2010) discussed
the significance of lowest bid procurement in public projects as an important criterion to increase
transparency and reduce corruption to save public money.
However, the inherent flaws of awarding bids on lowest cost are also considerable. As the
settlement of lowest prices, sometimes even lower than the buyer estimation would raise the
doubts of material quality and dependence on supplier market performance (Laychluh 2013).
The prospective delays in project completion due to issues of procurement are also one of the
major concerns in finalizing the lowest bids contractors. According to Chua (2000), high
variations in future costs, compromise on material and service quality, and possible conflicts in
future relationship of contractor and buyer are major drawbacks of lowest bid system.

1.3 Research Aim

The research Aim is to test and examine the assumption of the effectiveness of traditional
procurement process involving the awarding of procurement contract on the basis of lowest
bid in project practice. The research is conducted on multiple industries procurement bid
awarding processes in UK.

1.3.1 Research objectives:

The secondary objectives of this research are as follows:
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1. To review the literature on the procurement strategy and tendering process in industrial
projects.
2. To analyse the concepts of game theory and their implications on procurement strategy
through literature review.
3. To assess the opinions of project managers on bidding practices in procurement department
of multiple industries projects.
4. To compare the findings of literature review and primary research outcomes.
5. To recommend strategies to increase the effectiveness of bidding process in procurement
division of projects.

1.3.2 Research Question

The research question rose from the above objectives is as follows:
1. How can the project cost be minimised if the Customer/Client chooses the lowest bidder
from the trending process outcomes?

1.3.3 Research hypothesis

On the basis of above introduction and research objectives, following assumption is
H1: “If Project contractor is paid more at the start of the project, the project will cost less in
procurement projects”,
H0: “If Project contractor is paid less at the start of the project, the project will cost more in
procurement projects”.

1.4 Rationale of Research

Decrease in the potential projects costs is one of the premium objects of indi8ustrial projects.
Therefore, use of various means to select qualified contractors through transparent and
unconventional methods is important to evaluate in general. As a result, this research considers
the priorities and consequences of lowest bid processes for procurement divisions in various
industrial projects. The implications of cost increase, comprises on project quality ad contractors’
relationships in future are some major concerns in it. Hence, the research is important in
discussing the vast literature with specific areas of bidding efficiencies and procurement
mechanisms t reduce costs of projects without compromising on other aspects.
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1.5 Scope and Limitations

The scope of the research is broad and it considers procurement division decision making
processes in all major industries projects as introduced earlier. The limitation of the research is
the limited access to the project managers and the small sample size of participants for primary
research. The other limitation is the extensive use of secondary data and limited primary data.
Further, the results are limited to the specific are of low price bidding and its consequences in
procurement projects of considered industries.

1.6 Structure of Dissertation

The dissertation is classified in five chapters as explained below:

1. Chapter one is based on the introduction, background, aims and objectives of the
research. The hypothesis and research questions are also part of this chapter along with
the scope and rationale of research.
2. Chapter two is comprised on the critical review of literature on procurement processes,
bidding and tendering systems, and the business models that hold the various forms of
bid selection in multiple industries.
3. Chapter three is the research methodology that explains research methods used in
collection of primary and secondary data, analysis, and presentation of the findings of the
research.
4. Fourth chapter is the analysis and research outcome discussion of primary data and its
discussion with the help of the findings of secondary data analysis in literature review.
5. The fifth chapter will conclude the research conclusion and recommendations to the
project managers.
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Chapter II

Literature Review

2.1 Introduction
This chapter is comprised on the critical review of literature on procurement and tendering
practices in project management. The scholarly articles and books are used to collect and analyse
relevant and updated information on designated topics of this research.

2.1 Procurement
The term procurement does not cover the single action or process but entails many fields
involved in supply chain management (Santema et al 2011). In simple terms, procurement is
purchasing, acquiring of goods and services through tendering or through bid process. In
procurement process the needs are met of the purchaser at the best cost in terms of quantity,
quality time and location (Slone 2004). Procurement provides a wide range of benefits, as it does
not only minimize the cost but also helps in supporting the organizational objectives such as
product innovation and market expansion. When procurement is adopted widely in organization
it provides better efficiency and better match with desired goods and services. The procurement
decision making is distributed in following corporate structure in large organizations.

Source: Project Managers Guide (2014)

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2.2.1 Procurement Decision Making.

When procurement process is up to date, helps to ensure that the organization’s supply chain
management will be able to navigate through any unforeseen roadblock such as natural disasters,
labour shortage/surplus, economic volatility, financial problems (Burguet et al 2012). When
optimized an efficient procurement process it gives a clear difference between successful
vendors from underachieving vendors. The difference between quality vendors will not only
improves the overall supply chain but may lead to compensation from the low-quality vendors
from failing to deliver within agreed upon parameters. Procurement can be divided into three
major divisions: raw material and production goods repair and operating MRO supplies,
maintenance and capital goods and services.

Procurement
divisions

raw material and maintenance, repair capital goods and

production goods and operating (MRO) services

Source: designed by Author

Furthermore: Tuck (2002) asserted that flaws in procurement management in projects lead to
excess of inventory, shortage of material/ parts, or lack of capitalization of suppliers’ capacity
and volume discounts on right time. Involvement in large amount of data makes procurement
decision making more complex and effectiveness in this process is required to accurate selection
and finalization of supplier contracts (Tuck 2002).

2.2.2 Direct & indirect procurement:

Direct procurement is the third party goods and services that are either the part of or either used
in the manufacturing of goods and services. While indirect procurement is defining goods and
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services in categories that will help in supporting the organization’s process. Direct items are
such as raw material which will go through the production process and will come out as the end
product. This will lead to a very significant impact on the overall production cost; despite they
don’t have any connection with the finished goods. In indirect procurement the product and
services does not result directly into the end product but it realizes profitable end product
(Morgan 2004).

A standout amongst the most regularly utilized terms as a part of any generation or assembling
industry is "MRO". Support, repair, and operations (MRO) are a piece of day by day exercises
that creation commercial enterprises share in, and in this manner, procurement of any essential
thing for the utilization of these exercises is significant to the smooth operations of the business
(NRX 2008). Despite the fact that the materials and administrations that are termed MRO don't
go straightforwardly into the final results of the assembling or creation process, they are
important to acknowledge beneficial final items (Dursun et al 2010).

2.2.3 The strategic importance of procurement:

Procurement implication directly impacts on the overall cost of carrying out the decision. In
private sector the role of procurement is seen as reducing raw material prices and cost and
providing the best source of supply. While in public sector the profit and loss is not declared
publically. In public sector there is need to maximize the output in terms of teaching and
research. According to Walker and Rowlinson (2008), the important issues affected procurement
decision making process is environmental, leadership, culture, economics, and socio-political
issues in the organization. Morgan 2004) argued that the strategic influence of procurement
decisions ids largely linked with the creation of value for the other departments and an
inappropriate decision can lead the claims like time and cost over run in the production and other
related departments. Similarly, the research of Jagger (1995) emphasized the use of optimal
solutions that help the company to meet performance targets and achieve minimal cost target at
highest efficiency.
Li et al (2013) asserted that suitable method is important for making procurement more
successful is amplifying the utilization of accessible advances. In a MRO Buying Report article
in 2001, Albert Keal, noticed that the utilization of innovation will assume a colossal part in
procurement by lessening lead-times and exchange costs, and furnishing acquiring with ability to
influence high volumes (Li et al 2013). Utilizing innovation deliberately is important to
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strengthen and upgrade procurement. An extremely compelling procurement methodology will

enhance operational respectability, which is pivotal for enhanced assembling speed and
profitability. Besides, a fruitful procurement arrangement will drive down creation cost and
enhance general deciding item quality.

2.3 Project Procurement Process.

The process of procurement management in projects is characterized as the management of

relationships of organization and its suppliers to order, receive, assess, and qualify the required
material/ services through the purchasing department (UN 2010). Due to the highly diverse and
rapidly evolving environment of industries, Tookey et al., (2001). argued that success of
procurement can be achieved to a limited degree and the items which considered important for
project executions are ordered and reviewed on priority basis. Contractual basis is used to
manage the supplier relationships with a structured approach of awarding a contract in both
public and private projects. The main goal of this process is the assurance of timely delivery of
required items in view of the project specifications and requirements. These requirements are set
by the purchasing department and subject to the approval of project manager. The five major
steps are included in procurement process as shown in Fig. 2.2 below:

Fig. 2.2: Project Procurement Process.

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Source: My MG (2015)

1. Specification. The stage includes the communication of purchasing division with the
project director/manager to finalize the list of procurement items with their required
specifications. The items in the list are required to approve before announcement to the
external suppliers.
2. Selection. This stage in procurement process involves the selection of potential vendors
who can qualify to supply the tendered material/ services. ‘Suppliers selection criteria’ is
important to formulate at this stage on the basis of factors like quality, delivery modes
and time, payment options, and past performance of suppliers with the project.
3. Contracting. The communication of purchasing department with suppliers on settlement
of payment and other aspects like delivery time and quality specifications. This phase
assures the on-time delivery of required items in accordance with provided specifications.
Procurement contract is developed and duly signed by both buyers and suppliers. Another
important document is detailed schedule of delivery in accordance with project
requirements.
4. Controlling. The selection of contractor is followed by effective control of procurement
division on the payment and delivery procedures. Regular communication with suppliers,
delivery procedure tracking, and checking the specifications of delivered items against
the provided list are some major activities of controlling.
5. Measurement. The use of success indicators to assess the complete procurement process
efficiency is the final step of this process. The setting up of proper system of performance
management is responsibility of project manager. Important activities conducting in this
phase are meetings, workshops, and formal performance evaluation. Feedback from the
evaluation outcomes will assist in management of future procurement processes.

Though, the structured approach of procurement process explained above is found useful in
many industries like construction, oil and gas, IT, and other sectors, but the evolution of
procurement requires addition of new stages in every industry. Walker and Rowlinson, (2008)
suggested change in the procurement process to survive in industry. Tookey et al (2001)
supported the use of different routes in procurement process as the need of every department is
different. Many approaches used in the industry are design and build (D&B), build-operate-
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transfer (BOT), management contracting, public-private-partnership (PPP), and many others. On

the other hand, Morgan (2004) argued that selection of an optimal system is difficult to find as
the clients are not aware of all potential risks and benefits of selected system. Therefore,
procurement system needs search and calculations for optimal solutions, based on the degree of
integration and collaboration in supply chain suppliers and buyers is required in the process
(Walker and Rowlinson 2008). Additionally, Luu et al (2003) was of the view that the limitations
in unstructured and parsimoniel procurement systems lead to system inefficiencies and a careless
selection of procurement system lead to the project failure as well.

2.3.1 Best Value for Money (B.V.M).

According to Moses and Ahlstrom (2008), the effectiveness of procurement process depends on
numerous elements in which the offer made by the potential suppliers is one of the most
important elements. The aspect of receiving the best offer from supplier is considered as most
important trend in public projects that shows a gradual increase in the assessment of procurement
performance. The original emphasis only on the price criterion (Kelly and Coaker 1976)) is
changed with the inclusion of quality, quantity, delivery time, and then recently the evolution to
the concept of “best value for money” (B.V.M) criterion (Asker & Cantillon (2010). In B.V.M
approach, the evaluation of suppliers’ offers is done on the vases of bit monetary and n on
monetary aspects of the procurement proposal.
The transformation from traditional single criteria contracting selection to complex and multi-
dimensional methods used in procurement processes; the achievement of B.V.M is not an easy
goal for project managers. According to Ho et al (2010), though recent researches emphasize
more B.V.M in project procurement but it is not an ideal solution of large public projects as
handling complex and large number of factors is not easy to handle. The definition of BVM as
proposed by Kashiwagi (2011) as a means to optimize the project costs and required quality in
accordance with the requirements of particular project. The considerations of available resources
and potential risk factors is also important I evaluation of B.V.M. Hence, the major goal of
B.V.M is to maximize the organization gains in a specific project. Further, Kashiwagi (2011)
asserted that transparent and accountable decision making proves of procurement are also
required to assure B.V.M achievement.
Use of B.V.M approach is linked with all five steps of the procurement process as described on
previous section. The assessment of best value for money is started before awarding of contract,
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during the process, and after awarding in the controlling and measurement phase. The Supplier
selection criteria are important to design and plan all important specifications and required
qualities of material/ service from vendors. The choice of an open or a restricted mode of
tendering and conditions on which the contract to be awarded are important considerations in
B.V.M. Negotiation with suppliers on the mode of competitive bidding depends on choice and
requirement of project managers. In B.V.M, Kashiwagi (2011) asserted that a penalty versus
incentive approach is used to safeguard the contracts and assures smooth supply of project
materials. In case of conflicts with suppliers, the modes of breaking up contracts or avoidance of
conflict situations are important to consider as well. On the other hand, Ho et al (2010) declared
that the assurance of B.V.M is not only limited to purchasing and procurement department but
also based on liaison with other functional departments, end users, finance officers and other
stakeholders of the company.

2.3.2 Factors Affecting B.V.M.

Researches of Ho et al (2010) and Asker & Cantillon (2010 classified some important factors to
be considered in deciding BVM approach for project procurement:

Table 2.1: Factors affecting B.V.M in projects procurement

Type of Components Impact on BVM
Factors
Cost Related -Total Cost of Ownership (TCO), included all Financial impact on the project
direct and indirect costs like storage, supplies, and change resources allocation
ancillary, and operating costs. strategies
-Volume and trade discounts
-Costs of processing
-Optional lease costs
Non cost -Technical specifications Based on the requirements and
related -ISO certifications, standardization need of company
-TQM like Six sigma an Kaizen approach
-market worth and financial capability of
suppliers
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- delivery time and location

External Market maturity Affect the availability of products
environment -availability of suppliers and suppliers in the market,
-vendors’ registrations determines competitive
environment and selection
constraints
Risk Factors -Financial viability and production capacity of To be considered to safeguard the
suppliers project outcome
-Legal constraints
- stability in price

Source: Designed by Author

The weighted analysis of these factors determines the costs, potential risks, evaluation criteria
and market forces. The relevant factors are selected and included in the multidimensional
evaluation criteria of suppliers in B.V.M approach.

2.4 Contracting strategies.

For successful purchasing it is very important to choose the right contract strategy. Contracting
here means achieving project objectives. It is very important that the strategy that is chosen must
align the purchaser objectives with the contractor’s objective. It is a simple process one needs to
buy and one need to sell the only thing is negotiating with the price (Thompson et al 2010). The
only thing that becomes difficult in contracting process is finding the mechanism to align the
buyer’s and seller’s objective.

2.4.1 Tendering/ Bidding Process in Procurement.

The process of tendering ort bidding is considered as a vital stage in procurement process
(Rodeghier et al 2007). The fig. 2.4 shows the tendering process below:
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Fig. 2.4 The tendering process.

The steps of this tender procurement prices are described as under:

1. Formation of procurement team is the basic steps to make a group of project managers,
planners, quality controllers, cost accountant and others related personnel. Size of the
team and level depends on the size and important of purchase contract (Pauw et al.,
2002).
2. Visser & Erasmus 2007 considered development of tender and evaluation criteria as an
important step as it includes project specifications, item requirements, supplier
requirements like production capacity and I.S.O standardization. Rules of tendering
and other instructions are finalized at this step. These requirements of documents
should point out precise quantities, timings, and other requirements.
3. Pre-Qualification Questionnaire (P.Q.Q) formation to check the suppliers’ suitability.
The mode of tender also finalised at this stage as the invitation based or open tendering
mode like in public projects (Steyn et al 2010).
4. Issuance of tender involved large list of potential suppliers and categorise across the
matrices of price and quality specifications. Formalization of this step is based on the
profile of procurement in project, for instance, formal I.T.Ts in high profile public
projects and e- tenders for normal private projects are widely used in industry (Moeti
et al., 2007).
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5. According to Kovacs (2008), tender briefing or pre-tender discussion is conducted in a

formal meeting with potential suppliers to clarify tender conditions and P.Q.Q
specifications). In contrast, Gildenhuys (2002) argues that irregularities should be
avoided through official opening of tenders in presence of all bidders.
6. Initial evaluation is done through tender panel and each bud is verified against the
components of evaluation matrix. Bids are arranged in order of prices and other
criteria.
7. Short listing of suppliers is done on the basis of bid evaluation and then the suppliers’
presentations and initial contract meetings and visits are conducted.
8. The selection of suppliers is done on the basis of evaluation of tender presentations,
procurement team analysis, and willingness of suppliers to undertake the project
procurement.
9. Negotiation on contract term is one of the concluding steps to settle final terms with
selected suppliers. Techniques like B.A.T.N.A and wisdom pillars are important in this
step.
10. Award of the contract is final step in tendering process. A standstill period in public s
up to 10 days is kept to tackle claims from unsuccessful projects (Rodeghier et al
2007). Final contract is signed after reviewing of claims.

In view of Water (2002) tendering is important in procurement but it has to be done in a proper
manner, otherwise irregularities, corruption, and inefficiencies spoil the main aim. The major
challenges faced in efficient tendering are interruptions, decline n integrity and customer
services, lack of trust and credibility, assessment malfunctioning, and in competitive selection
procedures. Koppelmann (2001)_ suggested that price and innovation are two most important
points to focus in tendering, but Water (2002), favors a mutidmensional factors approach that can
affect on tendering process. Thereafter, tender evaluation has come up to a very important phase
in procurement tendering.

2.4.2 Tender Evaluation Methods.

According to the studies of Santema et al (2011) and Duren and Dorée (2009) in last decades it is
seen that focus on supplier selection is shifted from lowest price to gaining the best qualitative
and economic performance. Challenging task such as contractor evaluation and selection has
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become difficult because one has to face many uncertainties and then it becomes a multi attribute
problem with trade-offs between competing objectives. Many Researchers like (Li et al 2013)
have identified many criteria used in supplier selection.

Fig. 2.5: Criteria of Tender evaluation

Systematic and transparent approaches in supplier selection were identified by researchers like
Carter et al (2001). When public sector is spending more money in purchasing, in return a good
balancing between the cost and delivered quality is required. According to Lewis (2007) the
money that was spent in public procurement amounts to 16.3% of the EU Gross Domestic
product. That shows the high purchasing power in that time period. It is important yet difficult to
select the supplier with the best tender in terms of value for the money spent. According to
(Sciancalepore and Telgen 2012) now public procurement has become a powerful tool to make
governments more efficient.

2.4.2.1M.E.A. T Procedure:
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Most Economically Advantageous Tender (M.E.A.T) process measures the former factors than
the count on price only. These factors are cost effectiveness, technical merit, running costs,
quality, and functional characteristics, after sales service and parts, aesthetic, technical support,
delivery period and date or stage of completion (E.U 2004) as discussed before in B.V.M
approach. Fig. 2.6: shows the important components of M.E.A.T in tendering assessment:

Figure 2.6: M.E.A.T in tendering assessment

There are rules that need to be followed according to EU article 53 to ensure accountability,
efficiency and transparency of public procurement In this way either the public entities are
awarded with the public contract at lowest price or on Most Economically Advantageous Tender
(M.E.A.T).It is seen that in the last twenty years US has adopted the M.E.A.T bid price and
completion time is the basis for awarding highway projects (Lewis, 2007). In the stating days of
formulation of the method the bid price of each competitor is used to be summed up to the cost
value of each day of incompletion of the project. Then the contractor with the lowest bid is
awarded with the project. The substantial benefits further can be seen such as time saving in
comparison to similar projects awarded with the Lowest Price method. (Herbsman 1995).

2.4.2.2 Pre-Qualification Questionnaire (PQQ) model.

P.Q.Q is part of the screening process of suppliers in tendering. According to ( ), the

questionnaire determines the initial suitability of suppliers for the required procurement job/s.
The outcome of P.Q.Q is finalization of potential suppliers with eligibility to take the
procurement orders. P.P.Q is released against the expression of interest announced in public
through newspapers and other public means. Following fig, 2.7 shows the components P.P.Q for
a public procurement contract.
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Fig. 2.7: Pre-Qualification Questionnaire Components.

Part 1: Pre-Qualification Questionnaire Components

Financial Standing
Expressions of EC Procurement Directive Selection Criteria
Interest
Technical Capacity (health & Safety Aspects)

The minimum requirements of project are finalized by B.V.M method and then a formal P.Q.Q is
released in large projects. On the other hand, low profile projects can be evaluated through a
finalized suppliers’ list and screening interviews of suppliers. The important conditions of
qualification of a tender in P.Q.Q are dependent on the cost and time estimation along with the
specification of items required.

2.4.3 Need of Bids in Procurement.

Tendering invites bids on the basis of project cost evaluation through various methods. P.Q.Q
and M.E.A.T are two approaches described above to evaluate the suppliers’ capability to offer a
reasonable bidding price. As price is the major criterion used in most public and private projects
lm therefore, a proper system for evaluation of suitable supplier is important. Bidding allows a
transparent method of comparison among the short listed suppliers capability to provide required
items (Sciancalepore & Telgen, 2012).

The economic transactions involved in bidding process are based on B.V.M approach, deals with
the delivery strategy of supplier during the tendering based procurement process. According to
the argument of Falagario et al. (2012), differentiation of benefits versus cost criteria is required
in tendering process. The evaluation method used by M.E.A.T includes evaluation of suitable
bids with reference to the price-value ratio. In this regard, Dreschler (2009) argued that the
evaluation through M.E.A.T is based on the quantitative method which comprehensively
compares the tenders on multi criteria basis. On the other hand, traditional bidding practices
 22

involved the decision of supplier based on the offering of lowest bid only. Also, M.E.A.T
includes the sustainability and innovation of suppliers also in consideration that makes it a
holistic and contemporary approach. Similarly, use of P.Q.Q instrument validates the eligibility
criteria of suppliers on the basis of multi-dimensional factors. Hence, the researches like
Sciancalepore and Telgen, (2012); Slone (2004); and Ho et al (2010) asserted that MEAT and
P.Q.Q are based on the value–price optimization principle and are not accessed bids only on the
lowest price attribute.

2.4.4 Disadvantages of lowest bid framework.

Some of the drawbacks of low bid are due to delay in meeting the contract duration, tendency to
bear the quality and due to high variations increment of the final project cost. The adverse
relation between buyer and seller is also the major drawback that is connected with the low bid
procedure. According to the researches it is seen that these error occurs due to insufficient time
to prepare the bid. Some bidders are so efficient that they go through the documents thoroughly
and may lead to either changes in order and claim the project right at that time.

Permitting projects to be recompensed in light of the least cost has natural defects. Delays in
meeting the contract span, augmentation of the last project cost because of high varieties,
propensity to trade off quality, and ill-disposed relationship among contracting gatherings are the
real downsides connected with low-bid honour method. Low bid cost as the sole recompense
basis urges unfit contractors to submit bids (alongside bidders that present a low bid with the
expectation of recouping their misfortunes through change requests and claims, otherwise called
ruthless bidding (Crowley and Hancher, 1995). In this way, low bid is not as a matter of course
the best esteem.

The significant disadvantage of the low-bid technique is the likelihood of honouring a

development contract to a contractor that submits either inadvertently or intentionally, an
unreasonably low bid cost. Frequently, such an event attempts to the proprietor's and contractor's
impediment by advancing debate, expanded expenses, and timetable postponements (Ioannou
and Leu, 1993; Rendon 2007). In the event that a contractor presents a bid that is altogether
lower than the customer's assessment and alternate bidders, it is hard to see how that contractor
could finish the employment productively.
 23

Analysts have compressed the not insignificant rundown of components that can impact a
contractor's choice to bid and the value they submit (Chua, 2000; Fayek, 1998). Loose and vague
contract documentation (counting inadequate drawings) may bring about a contractor to make a
genuine oversight in computing costs. Mistakes may likewise emerge because of lacking time to
set up the bid (Zack, 1993). A few bidders precisely audit the bid archives scanning for slip-ups
and uncertainty in ranges that could prompt change requests and claims amid the project (Doyle
and DeStephanis, 1990). In all cases, the unusually low bid is not intelligent of the last contract
cost or the concealed expenses brought about by the customer when managing various change
requests and claims.

2.4.5 Price as a choice Criteria.

There have all the earmarks of being two particular perspectives of variables impacting modern
purchasing choices. To start with is the perspective that underscored the methodology that
choices are made upon "level headed" financial variables (Morgan 2004). These level headed
elements incorporate such destinations as acquiring the thing at the least conceivable cost or
briefest conveyance time, purchasing from firms with potential proportional purchasing
understandings, and also related knowledge with the merchants and known unwavering quality
or notoriety (Li et al 2013). These conventional sound perspectives of obtaining are upheld in the
writing of financial matters, buying and to some degree showcasing. The offering systems of
some modern sales people depend on this supposition. These sales people feel that, to be
effective, their aggressive bid must be the most minimal to be acknowledged.

The second view about selection criteria of bids recommends the purchasing choices hierarchical
order in view of other strong variables, apart from price. Smeltzer and Ogden (2002) asserted
that the limited exposure of selection team in public projects faced limitations in identifying he
important purchasing criteria, also, Roodhooft and Van den Abbeele (2006) added that limited
knowledge of government officials is the main cause of this limitation. For instance, Mitchell
(1995) and Smeltzer and Ogden (2002) pointed out the lack of procurement experience in
consultancy service of UK for public projects. Therefore, price is normally considered as the sole
criterion to select the suitable in public projects through tendering process. Gordon et al (2000)
assessed the abilities f government procurers in UK and agreed with these findings. Pettijohn &
Qiao (2000) recommended the use of more knowledge of national and European regulations in
finalization of oval and international purchase contracts.
 24

Conversely, the investigation of Kelly and Koaker (1976) depends on the way that significance
of cost as a decision foundation differs by association. The acceptance of the most reduced bid
cost when contrasted more than 5 associations were found with vary in an aggregate of 112
buying choices. At the point when a lower cost was rejected it was done as such to vary reasons.
Two organizations put an accentuation on compatibility and extra parts accessibility for
dismissing lower valued bids while alternate organizations utilized conveyance and seller
worthiness as their support for dismissing lower bids. This study researched the post buy choices
of just five firms. . These outcomes do propose it is more essential for the mechanical advertiser
or modern sales representative to endeavour to get it the particular decision criteria of
significance to every firm he is showcasing to than to build up a rundown of decision criteria to
use in making speculations regarding all modern buy choices. There is a need to create decision
criteria which are both organization and item particular as opposed to dependence upon
institutionalized arrangements of decision criteria.

2.5 Strategic Negotiation with bidders.

Negotiations are another important concern in tendering process stages described above.
According to Alexander and Thompson (2004), the negotiation in all project procurement
tendering are different due to nature scale, and need of the project. Ehmann (2014) referred the
seven important pillars of negotiation wisdom, originally discussed by Steven P. Cohen in his
famous work, “Negotiation Skills for Managers”. These seven elements impact the negotiation
process in significant ways:
1. Relationship: Establishment of relationship with old and new contractors is one of the
key elements as it assists the development of long term associations in projects. Stark (2003)
emphasized the importance of co-operative atmosphere as it increases the win – win situation
chances of occurrence.
2. Interests: understanding of own and other parties interest ids the key of success in
negotiation. Ehman (2014) asserted that estimation of contractor’s interest can help to gain
the confidence that the buyer is interested in keeping the other party interest also in the
contract.
3. Best Alternative to a Negotiated Agreement (BATNA): BATNA is understanding of
other alternatives available to negotiation and this understanding give a leading edge in
 25

negotiation as the buyer can better estimate the opportunity costs of all alternative and can
define the terms of contract better. On the other hand, stating of intentions makes the trading
up more difficult as compared to demand high ij the beginning as trading down is easy
(Frosyth 2009). Forsyth (2009) further stated the assumption for anything is not advisable.
On the other hand, Mills (2005) asserted that better B.A.T.N.A is the assurance of strong
their bargaining position.
4. Creativity. The search and inclusion of other alternatives in contract negotiation can give
a leading edge to the buyers in view of the limited scope of the contractors/ suppliers.
5. Fairness: The element of fairness considered as one of the basic requirements of
negotiation to keep the integrity of the organization in long run.
6. Commitment: Commitment of involved parties determines the success of negotiation as
only that contract is workable in which the parties are committed to settled conditions.
7. Communication: Communication is important to transfer the required information from
one party to the other. Understanding party’s point of view determines the seriousness and
provides a means to yield necessary information. According to Beasor (2006), the negotiator
has to ask otherwise nothing can be achieved. Art of communication is also defined by
Etherington (2008) as the positive tone in conversation improves the self esteem of the
opposite party and generates likable results in negotiation.

2.5.1 Negotiation Cycle.

Negotiation cycle is the series of steps involved in negotiation process in tender management.
Alexander and Thompson (2004) elaborated the steps as:

Fig. 2.8: Negotiation Cycle

 26

Source: Google image

1. Prepare for Negotiations: task of Assembling and reviewing conditions and sustaining
Information of tendering process and involved parties.
2. Pre‐brief: meeting of internal team before actual negotiations to review proposals and
issues.
3. Negotiate: Discussion in proposals with contractors/ potential vendors, deciding terms
and conditions of the contract. Pricing, value of material, and delivery schedules are
important concerns to decode.
4. Debrief: Meeting of internal procurement team after negotiation to discuss and finalize
the proposals in line with management instructions
5. Research and action items: Working on the items decided in negotiations like due
diligence and schedule development.

2.5.2 Best Alternative to a Negotiated Agreement (B.A.T.N.A):

BATNA is one of the important pillars of negotiation and considered the knowledge of
alternatives available to negotiation (Thompson et al 201l). If the terms and conditions of
approved tender are ideal, there is no need of further negotiation, but an intended option
generates room for negotiation, another alternative of negotiation is the avoidance of supplier
offer as shown in the figure 2.9 below:
Figure 2.9: BATNA
 27

Source: Google Image

Scholars like Greco et al (2011) and Li et al (2013) concluded that knowing of the buyer
BATNA and the BATNA of opponent plays an important parts die to the clarity of tendering
situation and it helps during negotiation process. Hence, the BATNA of negotiating team
determines the actual course of action in presence of later natives that can affect the outcome of
negotiation process. However, Thomson et al (2010) suggested to state the threshold conditions
as it help to evaluate the alternatives available and made the acceptance or rejection of supplier’s
offer easy. Greco et al (2011) also suggested that the determination of BATNA before start of
negotiation process is important for negotiator as more lucrative NBARNMS holding party has
more chances to win on negotiation. On the other hand, selection of positive BATNA is also very
important as the cost f selection of wrong BATNA is very high for the project.

2.6 Contract management.

Procurement Contract management (C.M) is the administration of contracts signed with
contractors, suppliers, or vendors in procurement of projects. Hotterbeekx (2013) asserted that
C.M incorporates arranging the decided terms of working in supplier contracts and guaranteeing
consistence with the agreed conditions. It incorporates recording and conceding to progressions
that might emerge amid its usage or implementation. It can be outlined as the procedure of
deliberately and productively overseeing contract formation, implementation, and assessment
with the end goal of amplifying money related and effective execution and minimizing exposure
 28

( Bhardwaj, 2011). As indicated by Grimsey and Lewis (2004), referred to by Contract

administration can be characterized as procedures attempted to keep up trustworthiness of
contract, and guarantee that parts and obligations contractually defined are completely
comprehended and did to standard contracted. Another meaning of contract administration is
procedure that guarantees that all contract meetings are completely meet the commitment, with a
specific end goal to fulfil operational destinations of contract and key project objectives of client
(Hotterbeekx, 2013).

The management of contracts involved dealing with common three types of contracts as shown
in the figure 2.10 below:

Fig. 2.10: Types of Contracts

According to Hotterbeekx, (2013), the common types including Fixed – price based that deals
with a lump sum fixed price of the whole contract for total period. The argument of this type is
the lack of consideration of future inflation, tax structures; or any other financial impact in future
on these contracts (Monczka et al 2005). Though, some changes in scope of project can be
adjusted in these contract s but suppliers are bound to complete the terms of contract at the
settled price only. On the other hand, the other two types, Cost Plus and Time and Material hold
for the changes n potential costs of procurement material and project material and time
specifications from time to time. These two forms are more flexible but difficult to manage due
to the variations in standard cost and time mechanisms in suppliers and buyer’s sides.

Further, Oluka and Basheka (2012) declares CM as being qualified workforce, clear procedures,
connections, assets, authority and approaches all of which have direct effect on coming about
contractors' execution results. Costa et al., (2009) argued with reference to the study of CM in
 29

project of Engineering Procurement Construction (EPC), primary classifications are maintained

in contracts related to ; account administration, quality administration, plan administration,
Human assets (HR) administration, and Procurement administration. As per CIPS (2012) key
components of CM include, correspondence; organization; overseeing execution; relationship
administration; and reestablishment or seizing of contracts.
According to Bhardwaj (2011), CM is the procedure that empowers both sides to a contract to
meet their commitments to convey the destinations required from the contract. It is likewise
includes building a decent working relationship amongst organization and contractor. It proceeds
for the duration of the life of a contract and includes overseeing proactively to envision future
needs and in addition responding to the inclined circumstances.

2.7 Supply Chain Management in Procurement:

Supply chain management is a combination of activities like the flow of material to operations
that runs the business smoothly and a key location that must be carefully managed. According to
the studies (Santema et al 2010; Santema 2010) it is seen that supply chain has become an
important job that is involving specialist in purchasing, manufacturing and distribution.

According to lee (2004) the companies frequently confuse the efficient supply chain in order to
achieve optimal level for their situation. According to Lee the optimal supply chain combines the
three A’s that is Adaptability, agility alignment. It is seen that when company is doing well it is
because the company have focused on maximizing the speed of the supply chain and when
business is not doing poorly it is because they are focusing on cutting the cost. It is not that every
time the cost effective and most supply chain gains a sustainable advantage over their rivals. The
disadvantage of supply chain that occurs due to focusing on low cost and high speed results in
enabling to adjust the unexpected changes in demand and supply. According to Gilmore (2003)
when companies devoted their optimization to economies of scale, the result that is seen is
massive changes in the amount of inventory and lost profit. For well-balanced business
environment it is very important to align all three A’s that were pointed out by Lee (2004).

2.7.1 Game Theory Application in Procurement

Game theory is originated as a dynamic branch of mathematics that has long term implications in
business and economics and is widely used to solve conflict situations in business contracts and
 30

negotiations. According to McCain (2010), during negotiations, game theory is used to evaluate
the available strategic choices among the interacting parties and used in development of
interactive decision theory. In the research of Cristani and Burato (2007), it is fo8und that game
theory is a distinctive approach that is not similar to any other concept in the available literature
that is used to represents the process of negotiation so accurately. The theory of zero-sum Games
is an example of this phenomenon, despite of the criticism of scholars that the approach is not
widely understood in supply chain management and other business fields involving interactive
negotiations (Cristani and Burato (2007). In a previous research, Kambe (1995) asserted that
application of game theory I negotiation process of buyer and seller is important. The sharing on
a common dollar with the target of gaining larger amount is the target of each agent in
bargaining. The demands of both agents are discussed and the agreement is reached when the
sum of two proposal reach to zero sum or otherwise the demands are accepted. If the sum
reached to the value less than one, then the game continues, till the optimal solution is not
reached. Also, there is a chance of perpetual disagreement, in that case the negotiations never
end ,and parties never reached to a mutual; agreement (Giesler 2014).

Furthermore, Giesler (2014) emphasized the game theory application in four major areas of
supply chain management decisions like sourcing strategies, make or buy decision, selection of
suppliers, and contracting. The use of technique called ‘Prisoner’s Dilemma’ is considered as a
basic and simplified application of game theory in these cases. According to McCain, (2010),
this strategy of negotiation involves only two strategies and two variables at a time and generate
a win-win or lose-lose condition in two extreme situations. Though, in real life situation, there
are more than two alternatives and more strategies are available, but this technique involves two
agents wit two option at the time. In order to avoid complications, Lasaulce & Tembine, (2011)
suggested that proper definition of game outcomes and available appropriate strategies should be
stated before the start of the game, similar to case of understanding B.A.T.N.A to a certain
extent. However, (Roth 2002) argued that the strategy design does not only consider the factors
affecting in the market but also deals with the ways to handle complications in decided strategies
implementations. Therefore, use of game theory needs prior assessment of available options and
opportunities in a bargaining situation.
 31

The application of game theory in procurement decisions is part of supply chain management
processes. As the study of Zamarripa et al., (2012) suggested that the supply chain profits depend
on the managers’ abilities to negotiate with known and unknown third party contractors and
suppliers. The availability of the options of collaboration or conflict decides the conditions pg
bargaining by using games theory. Further, Cristani and Burato (2007) classified that cooperative
game s played in case of coalition conditions whereas, non-cooperative games are observed in
case of nonaligned strategies of both parties. Lozano et al., (2013) discussed that in view of
increasing logistics cost and market position of the buyers, in many cases, the alignment or
coalition with two or more buyers is also resulted.

Despite of the wide applications of game theory in procurement contracting and supplier
selection decisions, the major criticism on game theory application is the unrealistic and ideal
situations used with the observation of non-compatibility due to dangers of risk, emotional factor
in human interactions, and interdependence (Burns & Roszkowska, 2005). Further, Lozano et al.,
(2013) indicated that assumption of complete knowledge of the situation at the negotiation table
is another hindrance. Hence, game theory is an effective tool and widely used in negotiation
during tendering process, but it has certain limitations as well. Therefore, more research is
required on the implications of game theory in procurement management.
 32

Chapter III

Research Methodology.

3.1 Introduction.
The description of research methods employed in this research is presented in this chapter. The
organized ways to adopt a structured form to collect and analyse data is part of the research
methodology. The use of various print and online sources to collect information about the
selected research topic and adoption of appropriate methods of analysis are important objectives
of this chapter. The standardized research methods prescribed in Saunders et al (2012) proposed
‘Research Onion Model’ is used to describe the actual research techniques used in current
research. The components of this commonly used model as follows:

Source: Saunders et al (2012)

3.2 Research Philosophy.

According to Malhotra and Burks (2007), two major philosophies are used in social and business
researches, namely positivism and interpretivism. In order to analyse the complex and vague
research issues with more subjective points of view, interpretivism is suitable. On the other hand,
Saunders et al (2012) stated that for logical and scientific researches that use objective point of
 33

view to collect and analyse data, positivism is the most appropriate research philosophy. In order
to conduct a survey of respondent based on collection of data for their opinions about some
predefined issue, positivism is more pronounced as it follows mathematical approaches and
statistical procedures to reach accurate results. In both philosophies, data is collected, classified,
and analysed in a systematic way with keeping the integrity and unbiased efforts of researcher.

In current research, an external philosophy like positivism is required to judge the research
objectives in an objective manner. The impartiality of researcher and objective nature supported
some goals but the other research questions need detailed and versatile answers from the
participants. Furthermore, the detailed literature review and analysis of qualitative secondary
data was also one of the major objectives of this research. The bidding practices and procurement
processes in various project management areas were explored through extensive review of
available literature. In this regard, positivism was not sufficed in reaching broad and holistic
results. Therefore, the philosophy was extended with the use of an interpretivist element also;
therefore, the primary and secondary data collection was done primarily with the issue of
interpretivism. As Fisher (2004) asserted that interpretive research is important to explore the
opinions of project managers about the issue at hand in detail.

3. 3 Research Approach.
According to Malhotra (2005), the researches in business administration are widely used two
main approaches, inductive and deductive. Inductive is based on exploratory methodology and
inked with interpretivism. This approach is focused on qualitative sources of data to explore the
unknown aspects in any research where existing theories are not able to define the phenomenon
completely. While, in deductive approach, theories and premises are well established, and the
relationship among included variables can be evaluated through quantitative methods. As the
current research mainly used subjective data in both primary and secondary models, therefore,
inductive approach is more suitable. The detailed and subjective responses from the survey will
help to analyze the important factors affecting the selection f lowest bids in industrial projects.

3.4 Research Technique.

Dawson (2002) asserted that there are two major techniques of data collection, quantitative and
qualitative methods of research. The quantitative technique is collection of data in form of
 34

numbers through multiple choice items or scaled questions. While, qualitative technique is the
data collection in subjective forms like detailed personal interviews or open ended questions in
survey. Both methods are simultaneously used in wide researches and some time the researchers
used both methods to validate the findings of one method with the answers of the other method.

In current research, qualitative form of data will be collected through detailed responses of
participants of structured questionnaire. The selection of qualitative method is due to the
preference of interpretivism philosophy. Also, the qualitative data deals with feelings, opinions,
and attitudes of participants in detail. In view of Saunders et al (2012), interviews and structured
open ended survey are used to collect quantitative data in most researches. The positive aspect
of using qualitative data in current research was to collect detailed data through opinions of the
project managers to probe the options used in bidding and tendering process. The survey
questionnaire was open ended with some multiple choice items for basic information of
participants. The main research technique was used to collect data was qualitative as it has
provided the means to get detailed insight in the decision making factors related to project
procurement. Also, quantitative technique might not produce a detailed account for the research
questions.

3.5 Research Strategy.

According to Schwab (2004), the major research strategies are survey, case study, experiments,
observation, and interviews. In Saunders et al (2012) research model, survey and interviews are
quoted as two major research strategies to collect data in business. In view of the time and other
resources limitations, survey strategy was chosen to reach more participants in less time. This
strategy is termed as more accurate, time saving and cost effective as compared to the other
prevailing strategies. The survey was decided to be comprised on mixed tow of both qualitative
and quantitative data with major emphasis on collecting qualitative data through participants’
opinions. The questionnaire was personally administered in the vicinity of author’s residence
from various project managers in selected industries. The major sectors were manufacturing/
production, oil and gas, and construction projects. The access to project managers was easy in
some cases but mostly face denial and more follow-up time to get assistance in questionnaire
completion.
 35

3.6 Sampling Process.

Sampling stands for selection of representative group of respondents from selected population.
The population for current research was comprised on project managers/ planners/ and
administrators responsible for the decisions related to project procurements. Saunders et al
(2012) declared that sampling technique needs to be relevant and assisted in selecting a
representative sample that bear all qualities of study population. Therefore, purposive sampling
technique was used to contact project managers and planners in the concerned organizations.
Proper permission of the company was taken before the conduct of actual survey.
Initially, the sample size used in the research was 20, but three participants have refused to
answer questions due to some project emergency, and one participant returned incomplete
questionnaire. In the end, 16 responses were finalized for data analyses as their questionnaire
were duly filled with clear answers to each question. The sample size was small but it was in
accordance for the requirements of qualitative data as small sample size is required to collect
subjective opinions and points of views. Therefore, despite the limitations of time and restricted
sample size, the answers from the survey were sufficient to conduct data analysis.

3.7 Data Collection.

Data was collected in this research with the help of both secondary and primary sources:

3.7.1 Primary Data Sources:

Primary data is collected for a particular research for the first time (Saunders et al 2012). The
primary data sources in this research were project managers and planners in different targeted
organizations. The concerned participants were contacted through official sources and the data
was collected through survey strategy. The survey questionnaire was given to respondents in
personal presence of researcher so that any query can be handled on respective location. The
survey questionnaire was comprised on two detailed questions related to the impacts of selection
of lowest bid in tendering process and the recommendation provided by these project managers
on the basis of their own experience. These two questions are stated as below:

Q1. Please consider this statement: “The overall project Cost will be minimized if the customer
chooses the lowest bidder from the tender process “. Do you:
Q2. According to the above statement, do you have any advice for project managers /
procurement managers / contract mangers?
 36

The rest of the questionnaire was comprised on multiple choice items related t the experience,
industry, and position/status of respondents. Quantitative data is collected from these questions
that entail the basic information related to the sample of the study. The basic consideration in this
questionnaire development was major emphasis on the research hypothesis and collection of
required information in less time. Therefore, two direct open ended questions were asked to
fulfill the objectives of this research from primary data. According to Saunders et al (2012),
questionnaire should be easy, directed, and contain all required information to answer the raised
questions in the research. Therefore, selection of small and directed questionnaire has provided
detailed but directed information to test the stated hypothesis in this research.

3.7.2 Secondary Sources.

Secondary data is the data collected for some other research and used in the current research to
answer the raised question and to meet the research objectives. Analyzing and critically
reviewing the literature of procurement strategies is one of the major objectives of this research.
Therefore, research journal, books, periodical, and online research articles were used to collect
and analyse secondary information. The use of credible, relevant, and accurate secondary data
sources was the major criteria in collection of secondary data (Saunders et al 2012). Therefore,
the recent sources are mostly used along with some important researchers of past twenty years’
period.

3.8 Data Analysis.

Analysing the collected data is an important step in research methodology. As the major part of
the collected primary and secondary data is comprised on qualitative data, therefore, thematic
analysis is the major technique used for this analysis. Thematic analysis is based on identifying
the main themes in literature and the collected respondents’ opinions to discuss in view of the
stated assumptions of the research. Quantitative data is shown in the form of charts and tables to
classify and interpret in detail. The primary and secondary data was collected in the form of
qualitative data from survey and secondary data from literature. The analysis of these two data
sets lead to the testing of stated hypothesis and to answer the raised research question. For this
purpose, coding of inductive data into meaningful units using words or phrase was done for two
questions in questionnaire. Bar charts demonstrated the results Responses in terms of attributes
of agreement and disagreement and classification of important themes in quantitative form. The
 37

two detailed questions included in the survey were analysed through quantitative method as well
after conversion of important themes to tables of classified data. MS- Excel was used to classify
and analyse tables to show in graphical form as well.

3.9 Time Horizon.

There are two major time horizons quoted in Saunders et al (2012) model, longitudinal and cross
sectional. Longitudinal are meant to be used in long term repetitive researches and not suitable
for this short and time bound research. Therefore, cross-sectional time strategy is followed which
is based on limited time research to be conducted on one time only. This research is not going to
be repeated n future with same sample and other constraints of study.

3.10 Ethical Measures.

In marketing research, ethical concerns are important as the respondents involved at the stake of
their privacy and confidence. The principles set by Bell and Bryman (2010) for marketing
research are important to consider. These principles include the prior knowledge and guidance
to0 respondents about the nature and scope f research. The achievement of proper consent of
individuals and their organization to participate in this research is important. The avoidance of
personal questions or necessary details is also kept in this research. Further, the collection of data
through ethical means and use of only accurate and credible resources is also one of the keys of
success. The privacy and confidentiality of participant’s personal information was kept at
priority and majority respondents were not willing to share their answers with the company
officials. Therefore, it was important to keep the anonymity of respondents and their respective
companies. Finally, the use of credible and authentic data analysis tools with complete care of
transparency of results was also considered important as an ethical concern.

Limitation.
The major limitation faced during the collection of data was availability of extensive and broad
literature, therefore, it was time consuming and efforts were involved to select and analyse
focused literature. Another issue was to locate and contact project managers to give their input in
primary data collection. The difficulty of reaching project managers and taking their time for
survey was a difficult task. Limited sample size was another limitation and the research results
 38

were restricted to collect at in the vicinity projects only, Therefore, the research of this research
cannot be generalized on national or global levels. The results will provide a foundation for
further research in specific industries about the consequences of bidding prices in procurement.
 39

Chapter IV

Data Analysis.

4.1 Introduction.
The analysis of collected qualitative and quantitative data is performed in this chapter with the
help of MS-Excel and thematic analysis technique. Main themes in qualitative data also
converted to quantitative data. There were 16 final respondents in this survey and the data was
personally collected from these respondents,

4.2 Demographic Data Analysis.

In this purposive sample, only questions related to the experience and industry were included in
the questionnaire to have an idea of sample characteristics.

4.2.1 Experience.
The experience represented in the table below shows various rage of periods of professional
tenure n project organizations. In this result, there are 39% respondents have experience up to
five years, 28% have experience between 6-10 years, and 22% participants have experience in
the range of 11-20 years. Therefore, these participants have enough experience in their respective
fields to answer the raised questions confidently.

experience
Frequency Percentage
a- 0- 5 years 7 39%
b- 6 yrs.- 10 yrs. 5 28%
c- 11-20 Yrs. 4 22%
d- more than 20 yrs. 2 11%
Total 18 100%
 40

experience
11%
0- 5 years
39%
22% 6 yrs- 10 yrs

1i-20 Yrs

28% more than 20 yrs.

4.2.2 Experience sector.

The sector of experience in sample respondents was also discovered in this section to estimate
the targeted project areas of the research. In view of the results shown in the table and graph
below, 66% sample respondents are working in manufacturing/ production (22%), oil and gas
(33%), and construction sectors (11%) in total. The rest 44% sample is comprised heath care, IT
and other project areas.

Experience sector
Frequency Percentage
a- Manufacture/ Production 4 22%
b- Oil &Gas 6 33%
c- Construction 2 11%
d- Healthcare 1 6%
e- IT technology 1 6%
f- Others 4 22%
Total 18 100%

Experience sector

22% 22% Manufacture/

Production
Oil &Gas
6%
Construction
6%
Healthcare
33%
IT technology
11%
 41

4.2.3 Project Position.

The question was asked to find the position of the target respondents in particular projects.
According to responses shown in the table and graph below, 61% sample was comprised on
project managers/ directors, 11% each are served as Project Assistant Managers and Project
Engineers. The remaining sample was distributed in project planners, project PMO, and other
posts related t procurement decision making.

Project Position
Frequency Percentage
a- 11 61%
Project Manager / Director
b- 2 11%
Project Assistant Manager.
c- 1 6%
Project Planner.
d- 1 6%
Project PMO.
e- 2 11%
Project Engineer.
f- 1 6%
Others
Total 18 100%

Project Position
Project Manager /
Director
6% Project Assistant
11% Manager.
6% Project Planner.
5%
Project PMO.
11% 61%
Project Engineer.

Others

4.3 Opinions about project procurement bidding process.

This section deals with the analysis of the answers of respondents related with the bidding
practices prevailing in their organizations and their recommendations to the effective
procurement management.
 42

4.3.1 Cost Minimization in choice of lowest bid

The respondents were asked to show their agreement or disagreement with the question that
whether “The overall project Cost will be minimised if the customer chooses the lowest bidder
from the tender process “. Do you Agree / disagree? Why?

The answers of this question showed a significant disagreement from the respondents. According
to a high percentage of 78% respondents, cost minimization through lowest bid is not possible.
Rest 22% each have agreed and stayed neutral with this assumption. The results are shown in the
table ad graph below:

Cost Minimization in choice of lowest bid

Frequency Percentage
a- 2 11%
Strongly Agree/ Agree
b- 2 11%
Neutral
c- 14 78%
Strongly Disagree / Disagree
Total 18 100%

Cost Minimization in choice of lowest bid

11% Strongly Agree/ Agree

11%
Neutral

78% Strongly Disagree /

Disagree

This disagreement with the stated assumption clearly indicated that the earlier stated null
hypothesis H0 is accepted. According to this hypothesis,

H0: “If Project contractor is paid less at the start of the project, the project will cost more in
procurement projects”.
Therefore, if lowest bid is accepted for a particular project, then actually the project cost more at
the end due to the factors like delivery delays, compromised quality of material, and other
malfunctioning from the contractor as the decided cost is very low at the beginning and the
supplier might not able to provide required amount and quality at the end. Therefore, actually the
 43

project cost more at the end due to the delays and below standard work and project ends up in
loss.
The detailed answers of this question provide the proof of this assumption that other factors are
also responsible for the success of the project equally and deny the traditional view of price as
the only determinant of the procurement supplier selection. A respondent added that, “Sometimes
some project will cost more regardless you pay less or more in the start of work”. Hence
alternative hypothesis was rejected as enough evidence was provided by the results of this
research that less cost on the beginning of project has more tendencies to increase the cost of
project or may result in failure.

The detailed answers of the respondents were converted to the quantitative data in view of the
prevalent major themes in these 16 responses. According to the table 4.3.2below, the factors
responsible for bid selection are classified in terms of the favoured responses.

Table 4.3.2: Attributive Number of response (Disagreement to Hypothesis)

Frequency Percentage
a- 3
customer requirements (Specifications/Quality) 8 3
b- Procurement schedule/ time scale. 6 22
c- Supplier ability / reputation. 4 15
d- Project benefits. 2 7
e- Sustainable profit. 2 7
f-
Contractor’s experience. 2 7
g-
Procurement value added. 3 11
Total 27 100%
 44

Attributives Number of response

8
7
6
5
4
3
2
1
0
a b c d e f g

The above table and graph showed that 30% answers have favoured the analysis of customer
requirements (Specifications/Quality). The other favoured options were size and nature of the
projects due to Procurement schedule/ time scale (22%). The third favoured option was
suppliers’ market reputation and production capacity before final decision of the contract
allocation (15%). Project benefits like quantity, and delivery time importance (7%), and use of
multi-dimensional criteria of Contractor’s experience (7%) and Procurement value addition (7%)
in tender management and supplier selection.

Low cost to increases profits first

2.5

1.5
Low cost to increases
1 profits first

0.5

0
1
 45

The respondents expressed their opinions in various ways, like one project manager explained
that “may or may not cost minimised depend on the size of project , specification the customer
require , customer satisfaction of function and outcomes of project in the end or not are the
equipment fits to the purpose , then we can decide whether the overall cost reduced or not from
tender process,” this view is in line with the findings of Asker & Cantillon (2010) and Slone
(2004) that cost only cannot determine the qualification of contractors and other factors are also
responsible in which size and specification of the project is considered very important. Similarly,
another answer depicted, “lowest bidder regardless other factors the cost of overall project may
become high or project could fail to deliver the objectives that may fit to the function in the end”.
The hypothesis is clearly accepted in this answer as the lowest bid can result in project failure
and increase in cost due to the presence of other major factors, which are normally ignored in the
projects decided on lowest bid price. Therefore, the view of Kelly and Coaker (1976) that price is
the sole determinant of procurement contract issuance is rejected. The major reason of this
project cost increase was identified by a respondents in these words as, “The contractor must
make a sustainable profit to exist, therefore the risk that corners will be cut means the customer
must spend more on 'policing' or checking against the specification”, this view against price as a
sole determinant is in accordance with the conclusion s of Crowley and Hancher, 1995 Chua,
2000; Fayek, 1998; and Dreschler (2009) that multiple factors are responsible for selection of a
contractor.

Hence, consideration of other factors is an important as focus on the lowest bid price. In words
of a respondent, “Often the expensive quote is marked up due to the estimator covering for areas
he does not understand”, therefore, modern tender evaluation methods discussed in literature
including MEAT and PQQ are found effective in analysing the other important factors
comprehensively. In view of Sciancalepore & Telgen, (2012), MEAT has provided a
comprehensive analysis tool for tenders to assess suppliers on multidimensional factors.
Therefore, use of these modern tools are also strengthened with this comment of the respondents
that “there is a need for sufficient accurate information about the contractors bidding for the
work, if this is not available, it may cause difficulties with the cost effectiveness on this
occasion”.
 46

In another view, choice of the lowest bid is depends on the nature and objectives of the projects,
as a respondent added that,” the lowest bidder price will be their choice as long as the value of
project / procurement is acceptable to minimise the cost and maximise the profit”. Hence,
effective negotiation with the bidder (Ehmann 2014) and use of BANTA tools (Greco et al 2010;
Thompson et al 201l) provide effective methods to decide low [price along with consideration of
other important alternatives as well.

4.3.2 Advice for project managers

This section of the questionnaire was dealt with the advice and recommendations of respondents
in view of their opinions already discussed in previous sections. The major recommendations
provided but these respondents are mainly linked with improvement in procurement and
tendering management systems and use of latest supplier assessment tools. The results are
classified in major attributes as in the table below:

Advice for project managers

Percentage Frequency
a- Post tender negotiating 17% 3
b- Right and clear specifications 33% 6
c- 28% 5
Balancing quality price ratio.
d- Understanding the markets better 11% 2
e- Consider add value for BVM 22% 4
f- Claims. 6% 1
117% 21

Advice for Project managers.

40%

30%

20% 33%
28%
22%
10% 17%
11%
6%
0%
a b c d e f
 47

According to the results shown above, 33% respondents advice that right and clear specifications
are needed. The other major responses were Balancing quality price ratio (28%), use of multi-
dimensional factors in BVM and improved tender management process. Is the response of 22%
respondents Therefore, these findings from literature review are validated that effective
procurement and tender management system is required to assess the suppliers on the basis of
quality and other important factors, apart from the price only.

The detailed answers of the respondents depict that “PM should make sure of: tendering process
going well and invited the right suppliers/ contact after he survey the market”, also, the same
respondent exclaimed that.” Balancing between quality and project cost is very important factor
to achieve the project objectives otherwise the project will be considering as waste”. In this
view, the studies of Asker and Cantillon (2010) and Bedford (2009) were verified. The issue of
quality is also very important to assess before awarding the contracts to suppliers on the basis of
lowest bid criterion only. Also, a statement of respondent shows that, “Survey of supplier and
make relationship or partnering with good dominated vender to specific work / service”, and
another statement, “The Basic rule for successful project/ procurement manger is always to
achieve low cost and high quality work by every means”.

In view f the application of tools like MEAT, Game theory, and PQQ in tendering management
system, the designing of bidding matrix is important to assess the suppliers against the decided
criteria. A respondent suggested, “The bidding matrix should be made up of a weighted scoring
system taking into account the Health & safety / Construction / Risk / Engineering / Project
management / commercial capabilities of the potential suppliers (bidders) and all tenders should
be reviewed against this criteria”. Therefore, the studies of Burguet et al (2012) and Rodeghier
et al (2007) are I accordance with these suggestions that quality and price both need to be
evaluated apart from other major factors in supplier evaluation. .

The hypothesis is also verified from the suggestion of a project director that “the lowest tender
bid may not minimise the total project cost because you may end up paying more to finish the
project when the contractor fails to deliver the right quality of job”. This view is also supported
by the Literatures as Ioannou and Leu, 1993 and Rendon 2007 are also concluded that when
contractors tender low price due to lack of jobs, then mostly fail to deliver on the specification of
 48

the project. Therefore, in view of another suggestion from respondents that “It's simple, be clear
on what you want the contractor to bid on, put key lines in all areas.
Furthermore, the respondents advised to use BVM as a modified procurement management
approach to select a supplier on the basis of multidimensional criteria. In views of respondents,
“PM procurement should focus on delivering "best value for money" (BVM), and another
respondent added that, “Consider knowing a lot about your contractor’s strengths and
weaknesses. Maybe look at other companies who can verify the contractors work ethic, their
results and would they use the contractor again. Therefore, the studies of Parthiban et al (2013)
and NRX (2008) are found in accordance of these statements. Moreover, apart from assessment
tools like BVM, MEAT, and PQQ, the use of negotiation in tender management system was also
considered as very important. According to a project engineer, “Using negotiation skills along
with the procurement process put the project manager in a strong position. In this regard, the
pillars of negotiation wisdom (Ehmann 2014) and BATNA approach were found relevant to the
project negotiation stages. According to the views of Thompson et al (2010) and Li et al (2013),
preparation of procurement team to asses and discover the alternative solutions is important to
decide win-win situation for both buyer and contractor.

Hence, in summary, the opinions of project managers and analysis of academic literature has
provided enough evidence to accept the null hypothesis. This shows that the less cost preference
in the beginning of the project may lead to the high costs at the end in the case of project delays
and even failure. The opinions of project managers and engineers are found in accordance of the
major researches conclusions as discussed in the pages above, the assumption of using lowest bid
price as the sole criterion of supplier selection is rejected and the research found that many other
factors are also equally important in supplier selection and tendering process.
 49

Chapter V

Conclusion

5.1 Introduction.
This chapter deals with the conclusion of the research on the basis of findings from primary and
secondary data analysis. The conclusion is followed by brief recommendations to the project
managers and future implications of this research.

5.2 Conclusion.
In conclusion, procurement management process is one of the vital elements in procurement
management. The data collected for the present research has concluded that in every industrial
project, the final bid selection in procurement process is important and should be done through
structured approaches. The development of tendering process is the core of procurement
management and involves systematic stages of announcement of tender till finalization of
suppliers for a particular project. According to the assumption provide the basis of this research,
selection of suppliers on the bases of lowest bid only lead to the increase in project costs in the
execution of supplier contracts. This hypothesis was tested with the help of empirical review of
literature, explanation of theoretical frameworks provides the bases of tendering management
system. Major discussion of tender assessment and negotiation tools is also used in the industry.

According to the findings of primary research discussed in the previous chapter, the hypothesis
was accepted due to the presence of enough evidence. The respondents have clearly disagreed
with the assumption that lowest bids selection is resulted in project costs minimization and the
ultimate impacts on the success of project are cost and performance effective. On the other hand,
literature findings and survey results are depicted the same argument that selection of bids on the
basis of lowest bids is a traditional view and inclusion of other important factors like quality,
quantity, suppliers’ market value, production capacity, and adherence to the project
specifications are more important, therefore, use of analytical assessment methods like Best
value for money (BVM) is found more relevant and comprehensive in bids selection. The factors
outlined in the literature review are validated from the findings of primary research.
Furthermore, the respondents emphasized on usage of modern tender assessment methods like
 50

MEAT and PQQ to establish a merit list of potential suppliers. Furthermore, using scientific
approaches in contracting and contract negotiation stages, the efficiency of tendering
management system is certainly increased.

5.3 Recommendations.
On the basis of research findings from primary and secondary sources, following
recommendations are given to project managers in industrial projects:

1. The aim, of the successful procurement management is to achieve low cost and high
quality supply by using standardized procedures. Therefore, project managers should
consider value in this process not just lowest bidder. Also, choice of the lowest tender bid
may not minimise the total project cost because the buyer may end up paying more to
finish the project when the contractor fails to deliver the right quality of job. In view of
this fact, use of only lowest bid as a single measure of supplier qualification is not
suitable for high profile and large projects especially as there is high probability that
vendor might fails to deliver on the specification or objectives of the project.
2. The selection of suppliers should be done in effective way by using supplier evaluation
matrices, MEAT procedures, and PQQ tools of qualification, assessment, and selection in
tendering process. The selection of qualified and expert procurement team is also
important; the team members should review the formal or informal tenders with complete
attention. Weighted scored indices can be used in matrix for evaluation to assure the
objectivity of evaluation procedure. Transparency and unbiased attitudes are required
during these stages of evaluation. Project managers in procurement division should focus
on delivering "best value for money" (BVM). That is, to award the contract, both
monetary and non-monetary components, whether a contractor is selected by competitive
bidding or through forms of negotiated procedures.
3. The avoidance of price focus is important to increase the horizon of suppliers’
assessment. The consideration of size and nature of projects, type of material needed,
quality and quantity specifications, and the required expertise and capacity of suppliers is
important in finalizing the selection. The provision of necessary briefing and explanation
to potential suppliers and vendors is also important so that unnecessary applications are
not collected to review. Also, the steps of taking presentation and review meetings at
 51

suppliers’ premises are also important to judge the site situation s of potential vendors.
4. Clear project procurement scope is also important to clarify the terms, conditions, and
requirements to contractors in the beginning of the selection process. The incapacity at
the later stages will result only in negative impacts on the project performance. Similarly,
the consent and technical capability of suppliers is also vital to match with the project
specifications, otherwise, any incompetence on quantity and quality from suppliers’ side
generate high variations in project costs. A clear and formal communication record is
important to keep for referring at the later stages of the project and to receive the written
commitments from suppliers/ contractors.
5. Using negotiation skills along with the procurement process put the project manager in a
strong position. Consider knowing a lot about contractor’s strengths and weaknesses in
the beginning of the process. The information can be received from other companies to
verify the contractors’ work ethic, their results and their intention use the contractor
again. Creation of good relationship with supplier / Vendor in the market, and initiation
of partnering policy for long term investment/ business can create mutual benefits for
both parties.

5.4 Future Implications of the Research.

The findings of this research are limited to the bidding process efficiency in terms of selection of
lowest bids and relative impacts on costs of projects in future. Therefore, the findings of the
research directly important or the decision making of procurement project managers in industrial
concerns of manufacturing, construction, oil and gas, and other important industries. On the
other hand, limited sample size and depended mostly in qualitative data collection has limited the
scope of the research and the generalization of the results to wider contexts f the industries are
not possible. Therefore, it is recommended for the future researchers to use larger sample size
and multiple methods of data collection to achieve triangulation in the study and generalization
of the results. Another implication of this research is in the enhancement of bidding and
procurement management systems. The policies of project managers in view of the research
recommendations are expected to be more flexible and comprehensive to incorporate all major
factors in qualification and selection of the suppliers. Also, the theoretical frameworks discussed
in the research and primary findings will assist academia to explore further in this topic area.
 52

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Appendix A- Questionnaire.
Section 1. General information:
Please put tick where applicable.
Q1. Experience working in projects:

 0- 5 ( )
 6-10 ( )
 11-20 ( )
 + 20 ( )

Q2. Experience Sector:

 Manufacture/ Production ( )
 Oil &Gas ( )
 Construction ( )
 Healthcare ( )
 IT technology ( )
 Others ( ) please specify ( ).

Q3. Project Title or Position:

 Project Manager / Director ( )
 Project Assistant Manager. ( )
 Project Planner. ( )
 Project PMO. ( )
 Project Engineer. ( )
 Others. ( ) please specify ( ).

Section 2. Research Questions:

Please Circle and answer where applicable:

Q1. Please consider this statement: “The overall project Cost will be minimised if the
customer chooses the lowest bidder from the tender process “.

Do you:
strongly Disagree Disagree strongly Agree Agree none

Q2. According to the above statement, do you have any advice for project managers’ /
procurement managers’ / contract mangers?
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Appendix B- Glossary

B.A.T.N.A Best Alternative to a Negotiated Agreement.

B.V.M Best Value for Money.

C.M Contract Management.

E.P.C Engineering Procurement Construction.

E.U European Union.

M.E.A. T Most Economically Advantageous Tender.

MRO Maintenance, repair and operating

PM Procurement Management

PQQ Pre-Qualification Questionnaire

UN United Nations
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Appendix C-

Appendix C- Original responses to the research questions.

Question 1:

A. Participants who are disagreeing:

1. Specification the customer requirements, customer satisfaction of function and outcomes of
project in the end to fits to the purpose
2. If you select lowest bidder Quality or required specification could be missed out. lowest bidder
regardless other factors the cost of overall project may become high or project could fail to
deliver the objectives that may fit to the function in the end.
3. If you select lowest bidder Schedule of project could be longer than expected.
4. Lowest Supplier might not have the required ability / degree to achieve the project in proper
way.
5. The timescales afforded to the procurement/project process often reflect and influence the
standard of tender submissions.

6. Lowest cost usually results in multiple variations, the disruption and prolongation will more than
likely cause project over runs and result in degradation of the intended project output - further
resulting in a reduction in the overall outcome.

7. Lowest bidders may reduce the benefit to the organisation in different ways. may or may not
cost minimised depend on the size of project, specification the customer require , customer
satisfaction of function and outcomes of project in the end or not are the equipment fits to the
purpose , then we can decide whether the overall cost reduced or not from tender process

8. Lowest cost may lead to risk on contractor to make a sustainable profit in project. “The
contractor must make a sustainable profit to exist, therefore the risk that corners will be cut means
the customer must spend more on 'policing' or checking against the specification”

9. Often the expensive quote is marked up the estimator covering for areas he does not understand
from scope. Sometimes some project will cost more regardless you pay less or more in the start of
work

10. The contractor’s experience/quality of work/reliability of the contractor very important as well.
11. Score for 'value added' as well as overall cost and this will vary on a project-by-project basis.

12. Cheap is often a false economy; often this is due to a lower quality standard in workmanship,
materials and management of works. the lowest bidder price will be a choice as long as the value
of project / procurement is acceptable to minimise the cost and maximise the profit.

13. The lists of the following criteria (although this list is not exhaustive) the most you have to
consider not only price.
 Quality.
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 Safety.
 price or cost using a cost-effectiveness approach
 technical merit
 functional characteristics
 accessibility
 social characteristics
 environmental characteristics
 innovative characteristics.
 after-sales service and technical assistance
 Supplier ability and reputation in the markets.
 Delivery conditions such as date, process and period.

14. Tender has low knowing scope / requirements that they will inflate costs once works are
underway (sometimes through extending programme and claiming more prelims, cost of
materials increasing because out of date rates were used etc.).

15. Delivery on time or meeting requirements specifications, becoming more important in public
sector / private as well (competitions).

16. Supplier / contactor reputation. there is a need for sufficient accurate information about the
contractors bidding for the work, if this is not available, it may cause difficulties with the cost
effectiveness on this occasion

17. Low bidder could lead to open change / claims attempts.

18. Contingencies for risk and escalation.

Question 1:

B. Participants who are agreeing:

1. Price is first as long as your bid reach the minimum level of required specifications/ quality etc.
2. Bidder should minimise the overall cost to increase the profits.

Question 2: Advices to P.M.

1. Post-tender negotiations, to find out whether any improvements in suppliers' offers are
available. Such to ensure that other tenders are not disadvantaged, competition is not distorted, or
that trust in the tendering process is not adversely affected.
2. the lowest tender bid may not minimise the total project cost because you may end up paying
more to finish the project when the contractor fails to deliver the right quality of job
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3. Specification should be clear, unambiguous, comprehensive statement that describes a

purchase requirement in full. It is the most important document in the procurement process as it
specifies the requirements and will be referred to if disputes arise.

4. Survey of supplier and make relationship or partnering with good dominated vender to specific
work / service

5. P.M to balancing between quality and project cost ratio is consider to be a very important
factor to achieve the project objectives otherwise the project will be considering as waste.
6. Market should be surveyed in prior to tender to understand the market better. It's simple, be clear
on what you want the contractor to bid on, put key lines in all areas.
7. The basic role for PM to achieve low cost and max profits.
8. PM should consider adding value to the project rather than low cost. Consider knowing a lot
about your contractor’s strengths and weaknesses. Maybe look at other companies who can verify
the contractors work ethic, their results and would they use the contractor again
9. Use score matrix to take wise decision between biddersi.e. safety, engineering, management,
commercial capability, staff qualifications, retention, training, risk involved etc.
10. Commitment to sustainability and good practices evidenced by being member of organisations
such the considerate constructor.
11. Clear and detailed scope of work to tenders from A to z. PM should make sure of: tendering
process going well and invited the right suppliers/ contact after he survey the market.
12. Survey the supplier / tenders strengths, weaknesses finically and technically.
13. Ensure you have Q.S rate working with you. Claims
14. Post negotiation of awarded tender to make sure and agreeing every detail. Using negotiation
skills along with the procurement process put the project manager in a strong position.
15. Make sure the project will deliver B.V.M, PM procurement should focus on delivering "best
value for money”.
16. The bidding matrix should be made up of a weighted scoring system taking into account the
Health & safety / Construction / Risk / Engineering / Project management / commercial
capabilities of the potential suppliers (bidders) and all tenders should be reviewed against these
criteria.