Some troubles with the famous Scoring Rules

Relevance of the paper to the panel topic In the public procurement and public-private partnership (PPP) contracts are awarded according to results of bids comparing on one or more criteria. In the second case, the contracting... [ view full abstract ]

Relevance of the paper to the panel topic
In the public procurement and public-private partnership (PPP) contracts are awarded according to results of bids comparing on one or more criteria. In the second case, the contracting authority (public buyer) has to assign scores to suppliers’ bids on each criterion. In the international practice there are a lot of assignment rules, which have been applied for a long time without serious trouble.
However, the experience of the Russian Federation has revealed that in the institutional environment, which is typical for the emerging economies, the applying of such famous rules as the Highest bid – Lowest bid scoring rule and the Linear scoring rule can jeopardize the efficiency and even effectiveness of procurement.
Significance of the research
The objects of the research are the tenders for public procurement and public-private partnership contracts. The proposed research treats the performance of the tenders in the assumptions of their low competitiveness due to the corruption, on the one hand, and inappropriate regulation due to the lack of experience in the public procurement or PPP, on the other hand. The research has revealed the additional critical success factor of the PPP project’s procurement stage – the quality of applied scoring rule.
The research question(s) and method
The research questions of the paper are connected with the regulatory impact assessment (RIA) of the above mentioned scoring rules in the institutional environment of Russian Federation or, to some extent, countries with emerging economies. The research method is applying the agency model, adjusted for the public sector needs, for the RIA. To identify the bidder’s strategy under the conditions of discussed regulation the survey of the St. Petersburg healthcare organizations contests has been performed.
The theoretical/conceptual foundations for the research
The paper promotes the model of the extended RIA, which has been developed by the author for the modelling of the corrupt behavior under the different regulatory regimes. The model uses regulation rules to describe agent’s preference order and compare it with the “ideal” society’s preference order, which has to be modeled.
The results to be reported
The paper proves that in the condition of the low competition in the tenders and some additional assumptions, the applying the Highest bid – Lowest bid scoring rule and the Linear scoring rule without fresholds, generally speaking, cannot give to the public buyer (partner) to award the contract to the best for the society bid. Besides this, the necessary conditions for applying the above stated scoring rules have been obtained. The case of St. Petersburg healthcare organizations has revealed two different bidders strategies in the tenders with the Linear scoring rule without fresholds: dumping and avoiding of price discount, and give evidences that the latter is predominant.