An Assessment of Competitive Tendering using Transaction Cost Analysis

Abstract

Competitive tendering is the means by which most goods and services are produced by public bodies: therefore it is important to try to improve it. Transaction cost analysis, in particular the concepts of bounded rationality, asset specificity and opportunism, provided the framework for examining two competitively tendered contracts let by the Government Purchasing Agency (in Northern Ireland). The firms tendering for the contracts were surveyed and interviews were carried out with purchasing staff managing the tendering process. The authors found that the main areas for further improvement in competitive tendering are the availability of information on previous contracts and debriefing, providing a clearer specification of user needs and of quantities.