Optimising the National Threshold Value in Public Procurement : an analysis of the effects of the influential factors on costs and gains for buyers and suppliers who participate in the public and invited tender procedures

One of the ways for public authorities to achieve an efficient spending of public money is by choosing the optimal tendering procedure. Unfortunately, such decision is not straightforward as it is affected by trade-offs of gains and costs, numerous influential factors and multiple stakeholders. To remedy this problem, we develop a framework, which provides a data-driven methodology to determine the optimal contract value for setting the national threshold that will separate the public from the invited procedure. Moreover, we contribute to literature by providing an exhaustive list of direct and indirect influential factors on costs and gains and quantification of their effects. Additionally, we found that the public procedure is 2–3 times more expensive than the invited procedure for buyers and 3.5 times more expensive for suppliers. Interestingly, the most cost-consuming stage within the procurement delivery chain for buyers is “pre-award”, while for suppliers it is “proposal”. Based on the deployment of the developed decision framework, we conclude that the differential costs and gains show an increase over contract values; however, gains increase more rapidly than costs. As a result, the public procedure will be the preferred procedure starting from relatively low contact values.