AuthorsM. Jørgensen
TitleThe Effects of the Format of Software Project Bidding Processes
AfilliationSoftware Engineering, Software Engineering
StatusPublished
Publication TypeJournal Article
Year of Publication2006
JournalInternational Journal of Project Management
Volume24
Number6
Pagination522-528
Abstract

This study investigates how differences in format of the bidding process affect companies' bids for software projects. Thirty outsourcing companies from different Asian and European countries participated in the bidding for a software project. A participating company either started with the provision of a bid based on a reduced version of the specification and then continued with a bid based on the full specification (the Increase situation), or started with the full specification and then continued with the reduced one (the Decrease situation). We observed important differences in bids for the same project as a result of different bidding sequences. Our results constitute evidence that in situations similar to the one we studied, the client will typically select a provider with about a 40% lower price in the Decrease situation than in the Increase situation. The difference in bids seems to be explained by whether the first bid was provided on the full or the reduced specification, not by the process of updating, i.e., increasing or decreasing, the bids. We warn against manipulation of the bidding processes to receive lower bids. This increases the risk of over-optimistic bids. Over-optimistic bids frequently have as a consequence "the winner's curse", which leads easily to "the client's curse".

Citation KeyJorgensen.2006.3