Volume 16, Number 1, Spring 2016

Procurement Procedure, Competition and Final Unit Price:

The Case of Commodities.......................................................................        1

J. Soudek and J. Skuhrovec

The Evolution of the World Bank’s Procurement Framework:

Reform and Coherence for the 21st Century..........................................     22

S. Williams-Elegbe

The Case of the Panama Canal Expansion: Pacta Sunt Servanda

Versus Rebus Sic Stantibus in Public Works Procurement ....................     52

F. L. Hernández González

An Integrated Approach for Supplier Selection in Military Critical

Application Items .....................................................................................   83

C. Nikou and S. J. Moschuris

Supplier selection for defence procurement is a crucial function of a Ministry of Defence. The Ministry spends huge amounts of money each year to procure a vast array of equipment, goods and services. The ongoing financial crisis demands less subjective and more cost-saving methods for selecting a supplier. The approach advocated in this article integrates Analytic Hierarchy Process (AHP) with Goal Programming (GP) in order to combine conflicting criteria to select the best suppliers and allocate optimum order quantities among them. This paper presents a model close to real-world situations. Findings demonstrate that cost savings is a feasible result along with a viable combination of conflicting criteria in the suppliers’ selection area.

In 2011, the World Bank announced its intention to conduct a holistic review and reform of its procurement framework. This reform was intended to ensure that its procurement system, which is the means through which the Bank disburses developmental loans and grants is in line with modern trends in procurement, is flexible enough to respond to unforeseen challenges and is coherent. This paper examines both how Bank procurement has evolved since the first formal regulations were issued in 1964 and the implications of the recent reforms for the Bank and its borrowers. Readers will see that ongoing reforms evidence a significant change for the Bank’s approach to procurement and its relationship with its borrowers and will dramatically affect the way the Bank-funded procurements are conducted.

The Panama Canal expansion is one of the most important public works projects in recent times. Both the awarding of the contract and its execution have been surrounded by intense controversy. The situation came to a head in February 2014 when the contractor halted construction work due to the canal authority’s failure to maintain the economic balance of the contract. This article explains the circumstances surrounding this dispute and analyses the causes and consequences of modifications to the contract. These are classic problems that affect all public procurement systems. The lessons drawn from this extraordinary case are valid for other legal systems.

We show how institutional and procedural characteristics affect the final price in public procurement. In order to obtain comparable unit prices, our analysis examined public procurement of homogeneous goods only. We examined two Czech commodity markets: electricity and natural gas, which enabled us to use a private market price as a benchmark metric. The regression analysis is based on the standard ordinary least squares method. On a dataset of 277 tenders, we found that the final unit price of the procurement is sensitive to movements in both commodity market price and price estimated ex ante by the procurer. Moreover, we identified that the final price is reduced when the procurer uses an open procedure, an electronic auction, or attracts more competitors.

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