Determining ‘the most economically advantageous tender’ based on capability and fee-percentage criteria

Abstract

Early involvement of the construction team is increasingly utilized in demanding projects to incorporate versatile expertise in their planning. For public owners this is a challenge since they are obliged to use competitive, transparent team selection based on the ‘most economically advantageous’ criterion which ensures that both price and quality viewpoints are taken into account. In the case of early involvement, the price component naturally does not include the total price, but may consist only of the fee-percentages of competing service providers. This study examines such a selection situation in project alliancing in the European context and seeks to find a way to integrate the fee component in a multi-criteria selection system and determine reasonable fees for different levels of capabilities. The study builds on the performance difference between different capabilities, derived from a survey of practitioners, and determines an indifference curve arithmetically for the planning of a selection method. The influence of the owner‘s risk attitude and risk premiums are also considered exploratively based on the pricing methods of the theory of finance.

Citation

Lahdenperä, P. (2013), "Determining ‘the most economically advantageous tender’ based on capability and fee-percentage criteria", Journal of Public Procurement, Vol. 13 No. 4, pp. 409-446. https://doi.org/10.1108/JOPP-13-04-2013-B001