Belt Auction

What are causes and effects of competitive bidding?

Public Comments

1. As Adam Smith noted: "In general, if any branch of trade, or any division of labour, be advantageous to the public, the freer and more general the competition, it will always be the more so." - The Wealth Of Nations, Book II, Chapter II, para. 106. So the cause of competitive bidding is the desire on the part of the consumer to get more for less. But as Adam Smith also noted: "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." - The Wealth Of Nations, Book IV Chapter VIII, para. c27. So the results of competitive bidding are attempts by the bidders to avoid competition somehow. Often, you get collusion. http://www.justice.gov/atr/public/guidelines/211578.htm https://www.oag.state.tx.us/AG_Publications/pdfs/collusionFactsheet.pdf You often see unreasonably low bids. The idea is that once the bidder has won the contract and started work, the customer is locked in and will have no choice but to pay more than the bid amount just to get the project completed. http://idei.fr/doc/conf/rai/papers_2003/alexandersson.pdf http://flyvbjerg.plan.aau.dk/JAPAASPUBLISHED.pdf This is often masked by a "scope change" clause: http://www.vbhconsulting.com/Articles/What%20to%20do%20When%20Project%20Estimates%20Are%20Ignored.pdf