A reply to David Sutton:
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which explicitly considered the trade-offs between the quality of various features of the service offered and the price quoted. This idea was further developed by Stephen Ward and Chris Chapman in a JORS article in 1988. However, I think they would agree that the methods required in these situations are far from simple to operate.
Although I personally would never award a contract on price alone, there are a surprisingly large number of situations where price appears to be the governing factor. This is partly because, under traditional procurement
procedures, many bodies in the public sector were
virtually obliged to accept the lowest-priced competent tender because of public accountability considerations. In these situations performance, quality and reliability are often taken into account when drawing up the select list of suppliers invited to tender. Much of the literature on tendering is based on work in industries, such as civil engineering, which regularly tender to situations like this in the public sector. Having commented on David Sutton's letter, it was interesting to be given the opportunity to preview David Edelman's article, and to compare the two contributions.
Both view the tendering process from the opposite
perspective to the bidder, and comment on the auction mechanism. Both are opposed to the standard sealed competitive auction, where the lowest-priced bid always wins, and suggest alternative mechanisms. However, their suggestions differ, and l doubt if David Edeiman's recommended mechanism would carry much conviction with economists, lawyers or politicians. Certainly, as far as tendering in the public sector is concerned, moving into a discussion of preferred auction mechanisms raises
issues of corruption, collusion and the meaning of competition which are important to lawyers and
politicians, as those who remember the Poulson affair will recall. t suspect that sweeping generalizations in this area, rather than specific advice to individual clients, are as dangerous as recommendations to bidders based on naive models. So OR workers must continue to beware!
A reply to David Sutton:
David Sutton makes the important point that when
modelling bidding situations it is wrong to assume that all purchasers base their decisions on price alone. lt is also true that most published OR tendering models deal with the situation where the lowest price always wins. A
MALCOLM KING Loughborough University of Technology
notable exception is an article by Simmonds in 1968
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