A TENDER SUBJECT FOR BUSINESS

The Ze’evi Family Chair in the Theory of Auctions, Efficiency, and Control in Business Administration at the University’s Graduate School of Business Administration sponsored a study of why companies and entrepreneurs often refused to take part in tenders and what could be done about this phenomenon. The high expense in preparing a bid was the main deterring factor cited by engineering companies, architectural firms, and contractors. The paucity of participating firms at times has resulted in adversely affecting the economic efficiency of an important apparatus in business activity.

The researchers--Professors Michael Landsberger and Shmuel Gal of the Business School and Arkady Nemirovsky of the Technion--developed a theoretical model showing that the issuers of tenders could profit, by up to 10 percent and more, by partially compensating the expenses incurred by those submitting bids. A compensation policy would create a more competitive environment, as a result of which the issuer would receive better (cheaper) bids. The savings would pay for the compensation given to all who took part in the tender. The study and the model, which gained the support of Israeli entrepreneurs who participate in various kinds of tenders, constitute the first theoretical base of its kind.

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