Balancing fee and quality in two envelope fee bidding

Abstract

Consultant commissions in two envelope fee bidding are awarded on the basis of fee and quality (i.e. technical score). Consultants' fees and technical score are combined using a pre‐designated formulation and predetermined weightings to form a total score. Procurers seem to be having difficulties with existing formulations in controlling the extent to which two envelope fee competitions are dominated by fees. This is because, in most cases, fees vary more than technical scores and the predetermined weightings applied are not sufficient to correct the variability imbalance. The analysis in this paper shows that in fee dominant competitions lower fee‐lower technical scoring consultants are more likely to be successful in winning commissions. The analysis shows that this can be corrected by balancing fees and technical score. Although procurers are likely to pay higher fees when balancing fees and technical scores they normally benefit from getting higher technical scoring consultants.

Citation

Drew, D.S., Tang, S.L.Y. and Lui, C.K. (2004), "Balancing fee and quality in two envelope fee bidding", Engineering, Construction and Architectural Management, Vol. 11 No. 3, pp. 159-175. https://doi.org/10.1108/09699980410535778