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Polish Information Processing Society
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Annals of Computer Science and Information Systems, Volume 2

Proceedings of the 2014 Federated Conference on Computer Science and Information Systems

On Winners and Losers in Procurement Auctions

Grzegorz Kersten, Tomasz Wachowicz

DOI: http://dx.doi.org/10.15439/2014F271

Citation: Proceedings of the 2014 Federated Conference on Computer Science and Information Systems, M. Ganzha, L. Maciaszek, M. Paprzycki (eds). ACSIS, Vol. 2, pages 1163–1170 (2014)

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Abstract. The use of auctions in procurement results in price reduction as well as the reduction in the cost and the time required to complete transactions. In many situations, price-only auctions resulted in the violation of the contracts or even contractors' bankruptcies. This is one reason for the introduction of multi-attribute auctions as well as auctions-followed-by negotiations. Auction theory is based on two assumptions which assure that auctions are efficient mechanisms, guarantee efficient solutions, and produce the best possible results for bid-takers. In practice these assumptions are often violated. The contribution of this paper is to propose a procedure for auctions-followed-by negotiations which retains important auction features such as process transparency and efficiency while allowing for increased social welfare. The unique feature of the procedure is the introduction of the win-win phase in which the market participants may attempt to make joint improvements to efficient solutions obtained from auctions.