Bidder Selection in Public Procurement using a Fuzzy Decision Support System

Bidder Selection in Public Procurement using a Fuzzy Decision Support System

Vjekoslav Bobar (University of Belgrade, Serbia), Ksenija Mandic (University of Belgrade, Serbia) and Milija Suknovic (University of Belgrade, Serbia)
Copyright: © 2017 |Pages: 23
DOI: 10.4018/978-1-5225-1908-9.ch066
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Bidder selection in public procurement is a decision making problem whose primary purpose is to achieve the cost effectiveness and efficiency in the expenditure of public money. This principle is also known as the principle of “value for money”. This selection is based on many alternatives and many quantitative and qualitative criteria where qualitative criteria are often expressed as linguistic uncertain variables. The theory of fuzzy sets is a tool suitable to model uncertainty when applied to a variety of problems in real life. However, many fuzzy methods require complex calculation and they are not appropriate for using in public procurement because they slow down this process. In this paper, in order to make a quick decision in public procurement, a Decision Support System based on the fuzzy extent analysis method is developed. In order to demonstrate the usefulness of this system, a real-life case scenario of public procurement is presented.
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1. Introduction

Public procurement means the procurement of goods, services and work by the government authority, in the manner and under conditions prescribed by the Law of public procurement in Serbia (Public Procurement Law, 2012). The primary purpose of this process is to achieve cost effectiveness and thereby attain an implicit level of efficiency as regards the expenditure of public money. This principle is also known as the principle of “value for money” - meaning to achieve the best possible ratio between the amount paid and the value received. The importance of this process becomes evident when we consider the fact that in Serbia public procurement accounts for some 7.27% of gross domestic product (GDP), that in the EU it approximates to 19% of GDP (European Commission, 2012) and that public procurement represents around 15% of the world's GDP.

The public procurement process consists of two main stages: the pre-award stage and the post-award stage. The pre-award stage has the sub-stages like call preparation for public procurement, notification, bid submission, bid evaluation and the selecting the most suitable bid. The post-award stage has sub-stages like ordering, invoicing and payment (Bobar, 2013).

The one of very important phase in public procurement is bid evaluation and selection of the most acceptable bid. This evaluation and bidder selection in the public procurement procedure can be viewed from the perspective of the Multi-Criteria Decision-Making (MCDM) problem (Bobar, 2013), where a contracting authority as decision maker must compare the bids against pre-defined criteria, select one of the potential bids or conversely reject all of them. For solving MCDM problem is specific that is not a search for the optimal solution, but this kind of decision-making helps decision-makers to process complex data which are involved in their problem and, in that way, progressing towards the most appropriate solution (Roy, 1990). In the public procurement process there is the same situation: there are many complex data (criteria and bidders) where the decision-maker (contract authority) wants to find the most suitable bidder.

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