Harada, S (2015) Bidding for private finance initiative projects: An analysis. Journal of Financial Management of Property and Construction, 20(2), pp. 188-202. ISSN 1366-4387
Abstract
Purpose – This paper aims to present a positive analysis of the bidding process for private finance initiative (PFI) projects. The analysis attempts to unravel how value for money (VFM) changes in the bidding process and what factors influence this change. Bidding theory postulates that the winning bid price drops from the effect of competition when the number of bid-participating firms increases. Design/methodology/approach – An instrumental variable analysis was conducted using a two-stage least-squares method to remove the influence of endogeneity in the number of bid participants, which, according to prior research and surveys of business operators, possibly explains some of the VFM change. The results were considered robust because no observable change was found in the positive effect of the number of participant firms. Findings – This paper provides positive evidence of the relationship between the number of firms and the bidding result. The analysis shows that the number of bid-participating firms clearly has a significant positive effect on VFM change. Specifically, competition lowers the winning bid amount in line with the theoretical proposition. Originality/value – This study confirms previous research based on bidding data of Japanese PFI projects, a segment not sufficiently researched so far. Further, increasing the number of participant firms, up to a maximum of six, is shown to raise the VFM, a result consistent with the fact that five major construction companies play a leading role in Japanese PFI projects.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | bid-participating firms; bidding theory; competition effect; endogeneity |
| Index terms: | endogeneity, bidding, value-for-money, competition, evidence, methodology, private finance initiative, survey, construction company |
| Subjects: | bidding, contractual arrangements, data collection methods, evaluation and assessment methods, organization, financial analysis, market analysis, evaluation, research methods |
| Topics: | Procurement, Research Practice, Cost Management, Business Strategy, Value Management |
| Descriptive scope: | 5 PCTEA |
N.B. Descriptive scope is a count of how many of the five facets of empirical research are indicated by the words used in title, abstract and keywords. It is not intended as a judgement on the research; merely a count of the kind of word we would expect to indicate Phenomenon, Concepts, Theoretical framing, Empirical techniques, Analytical techniques. If all five are present, then a code of “5 PCTEA” will indicate this. If you feel the coding for this record is questionable, we welcome discussion around the terms we matched or the way we categorized them. The facet you would expect may not be coded, or a facet may be coded inappropriately. This can also bear on a larger question, of which facets should be treated as defining in construction management research. Please get in touch, and we will look at it. More details here