Auction theory - Revision history

Editor at 21:11, 12 November 2020

2020-11-12T21:11:24Z

← Older revision		Revision as of 21:11, 12 November 2020
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	* Contract award.		* Contract award.
	* E-auction.		* E-auction.
		+	* E-sourcing.
	* Game theory.		* Game theory.
	* Invitation to tender.		* Invitation to tender.

Designing Buildings at 07:32, 2 November 2020

2020-11-02T07:32:24Z

← Older revision		Revision as of 07:32, 2 November 2020
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	* Tender evaluation.		* Tender evaluation.

−	[[Category:Theory]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]	+	[[Category:DCN_Definition]] [[Category:DCN_Guidance]] [[Category:Theory]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Editor at 16:49, 28 July 2020

2020-07-28T16:49:01Z

← Older revision		Revision as of 16:49, 28 July 2020
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	* Best value.		* Best value.
		+	* Bidding tactics
	* Bid strategies.		* Bid strategies.
	* Bid writer.		* Bid writer.

Editor at 14:23, 22 April 2020

2020-04-22T14:23:29Z

← Older revision		Revision as of 14:23, 22 April 2020
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	* Open tendering.		* Open tendering.
	* Procurement route.		* Procurement route.
		+	* Reverse auction.
	* Selection criteria.		* Selection criteria.
	* Selective tendering.		* Selective tendering.

Designing Buildings: Reverted edits by 193.150.27.254 (talk) to last revision by Designing Buildings

2020-03-14T07:45:29Z

Reverted edits by 193.150.27.254 (talk) to last revision by Designing Buildings

← Older revision		Revision as of 07:45, 14 March 2020
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	= Introduction =		= Introduction =

−	Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win a tender ~~contract~~ for project work.	+	Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win tender contracts for project work.

−	The four traditional types of auction are:a	+	The four traditional types of auction are:

	=== First-price sealed-bid ===		=== First-price sealed-bid ===

193.150.27.254 at 23:04, 13 March 2020

2020-03-13T23:04:15Z

← Older revision		Revision as of 23:04, 13 March 2020
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	= Introduction =		= Introduction =

−	Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win tender ~~contracts~~ for project work.	+	Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win a tender contract for project work.

−	The four traditional types of auction are:	+	The four traditional types of auction are:a

	=== First-price sealed-bid ===		=== First-price sealed-bid ===

Designing Buildings at 14:14, 9 March 2020

2020-03-09T14:14:14Z

← Older revision		Revision as of 14:14, 9 March 2020
Line 56:		Line 56:
	* Bidding for renovation works.		* Bidding for renovation works.
	* Contract award.		* Contract award.
		+	* E-auction.
	* Game theory.		* Game theory.
	* Invitation to tender.		* Invitation to tender.

Editor at 11:56, 17 July 2019

2019-07-17T11:56:16Z

← Older revision		Revision as of 11:56, 17 July 2019
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	Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win tender contracts for project work.		Auction theory relates to the design of auctions and how this influences the bidding strategies of the parties taking part in the auction. Auctions take place in which different parties bid for the right to purchase goods or, in the construction industry, to win tender contracts for project work.

−	The four traditional types of auction are ~~as follows~~:	+	The four traditional types of auction are:

	=== First-price sealed-bid ===		=== First-price sealed-bid ===

−	Bidders hand bids to the auctioneer. Upon opening, the most suitable bid (highest or lowest) wins.	+	* Bidders hand bids to the auctioneer. Upon opening, the most suitable bid (highest or lowest) wins.

	=== Second-price sealed-bid ===		=== Second-price sealed-bid ===

−	Bidders hand bids to the auctioneer. Upon opening, the most suitable bid wins, paying equal to the bid which is judged second-most suitable.	+	* Bidders hand bids to the auctioneer. Upon opening, the most suitable bid wins, paying equal to the bid which is judged second-most suitable.

	=== Open ascending-bid (English auctions) ===		=== Open ascending-bid (English auctions) ===

−	Bidders make increasingly high bids until no one is prepared to make a higher bid and one remains.	+	* Bidders make increasingly high bids until no one is prepared to make a higher bid and one remains.

	=== Open descending-bid (Dutch auctions) ===		=== Open descending-bid (Dutch auctions) ===

−	An inflated price is set and is progressively lowered until the first bidder is prepared to buy.	+	* An inflated price is set and is progressively lowered until the first bidder is prepared to buy.

−	Generally, the tendering process within the construction industry is the first of ~~these~~ – a first-price sealed-bid auction with multiple stages.	+	Generally, the tendering process within the construction industry is the first of the above – a first-price sealed-bid auction with multiple stages.

	= ‘Winner’s curse’ =		= ‘Winner’s curse’ =
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	However, while it is common for tendering processes to favour lowest bids, the construction industry does not operate on a strictly first-price sealed-bid basis, as other factors also come into play. An existing working relationship between employer and tenderer might give the latter an advantage over tenderers who are unfamiliar to the employer.		However, while it is common for tendering processes to favour lowest bids, the construction industry does not operate on a strictly first-price sealed-bid basis, as other factors also come into play. An existing working relationship between employer and tenderer might give the latter an advantage over tenderers who are unfamiliar to the employer.

−	The employer might also be prepared to select a higher bid because there is an expectation of higher quality and reliability. It is just as important for the employer that the tenderer does not suffer the ‘winner’s curse’, since the project will be likely to be impacted negatively as a result of the tenderer trying to rush, cut costs or ~~becoming~~ insolvent.	+	The employer might also be prepared to select a higher bid because there is an expectation of higher quality and reliability. It is just as important for the employer that the tenderer does not suffer the ‘winner’s curse’, since the project will be likely to be impacted negatively as a result of the tenderer trying to rush, cut costs or even become insolvent.

	= ‘Bid shopping’ =		= ‘Bid shopping’ =
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	The construction industry has obtained something of a bad reputation in the past for corrupting the first-price sealed-bid auction design. This is known as ‘bid shopping’.		The construction industry has obtained something of a bad reputation in the past for corrupting the first-price sealed-bid auction design. This is known as ‘bid shopping’.

−	A sealed-bid auction is intended to proceed with tenderers only knowing their bid and not those of their rivals. However, what can happen is that the employer reveals the bids of tenderers to their rivals in an attempt to drive bids down ~~lower~~. This turns the design of the auction into more of an English auction, and puts tenderers at a disadvantage compared to the employer. One way of avoiding this in construction is for tenderers to withhold their bid submission until right before the deadline, in the hope that this will prevent their bid becoming common knowledge to rivals.	+	A sealed-bid auction is intended to proceed with tenderers only knowing their bid and not those of their rivals. However, what can happen is that the employer reveals the bids of tenderers to their rivals in an attempt to drive bids down. This turns the design of the auction into more of an English auction, and puts tenderers at a disadvantage compared to the employer. One way of avoiding this in construction is for tenderers to withhold their bid submission until right before the deadline, in the hope that this will prevent their bid becoming common knowledge to rivals.

	= Other forms of corruption =		= Other forms of corruption =
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	=== Bid rotation ===		=== Bid rotation ===

−	This occurs when a number of tenderers are involved in the auction process but only one of them places a bid, inevitably making them the winner. The tenderers collude together to rotate the title of ‘winner’ among themselves, meaning they are each assured of winning unrivalled a certain amount of work.	+	This occurs when a number of tenderers are involved in the auction process but only one of them places a bid, inevitably making them the winner. The tenderers collude together to rotate the title of ‘winner’ among themselves, meaning they are each assured of winning (unrivalled) a certain amount of work.

	=== Phantom bidding ===		=== Phantom bidding ===
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	This is more common and involves all bar one of the tenderers submitting artificially high bids, while the one tenderer submits a lower bid which is still sufficiently high to ensure they make a profit. This is designed to give the impression of competition.		This is more common and involves all bar one of the tenderers submitting artificially high bids, while the one tenderer submits a lower bid which is still sufficiently high to ensure they make a profit. This is designed to give the impression of competition.

−	~~= Find out more =~~	+	= Related articles on Designing Buildings Wiki =
−		+
−	=== Related articles on Designing Buildings Wiki ===	+

	* Best value.		* Best value.

Construction Link Ltd at 07:27, 7 August 2017

2017-08-07T07:27:12Z

← Older revision		Revision as of 07:27, 7 August 2017
Line 66:		Line 66:
	* Selection criteria.		* Selection criteria.
	* Selective tendering.		* Selective tendering.
		+	* The benefits of e-procurement in construction.
	* Tender.		* Tender.
	* Tender evaluation.		* Tender evaluation.

	[[Category:Theory]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]		[[Category:Theory]] [[Category:Appointments]] [[Category:Contracts_/_payment]] [[Category:Procurement]]

Designing Buildings at 06:54, 21 June 2017

2017-06-21T06:54:28Z

← Older revision		Revision as of 06:54, 21 June 2017
Line 64:		Line 64:
	* Open tendering.		* Open tendering.
	* Procurement route.		* Procurement route.
		+	* Selection criteria.
	* Selective tendering.		* Selective tendering.
	* Tender.		* Tender.