AuthorsM. Jørgensen and G. J. Carelius
TitleAn Empirical Study of Software Project Bidding
AfilliationSoftware Engineering
Publication TypeJournal Article
Year of Publication2004
JournalIEEE Transactions on Software Engineering

The study described in this paper reports from a real-life bidding process in which 35 companies were bidding for the same contract. The bidding process consisted of two separate phases: A pre-study phase and a bidding phase. In the pre-study phase 17 of the 35 bidding companies provided rough non-binding price indications based on a brief, incomplete description of user requirements. In the bidding phase, all 35 companies provided bids based on a more complete requirement specification that described a software system with substantially more functionality than the system indicated in the pre-study phase. The main result of the study is that the 17 companies involved in the pre-study phase presented bids that were on average about 70% higher than the bids of the other companies. We propose a preliminary theory that has the potential to explain this difference. This preliminary theory is based, amongst other things, on the “precautionary bidding effect” found in auctioning studies. Two important implications of our preliminary theory are that: 1) Software clients tend to achieve better price/uncertainty relationships, i.e., better prices, when the requirement uncertainty perceived by the bidders is low. 2) Software clients should not request early price indications based on limited and uncertain information when the final bids can be based on more complete and reliable information.

Citation KeySE.4.Joergensen.2004.g