Misplaced Pages

Part of a series on
Auctions
Types
All-pay Chinese Bidding fee Dollar Amsterdam Anglo-Dutch Barter double Best/not best Brazilian Calcutta Candle Click-box bidding Combinatorial Common value Deferred-acceptance Discriminatory price Double Dutch English Forward French Generalized first-price Generalized second-price Japanese Knapsack Multi-attribute Multiunit No-reserve Rank Reverse Scottish Sealed first-price Simultaneous ascending Single-price Traffic light Uniform price Unique bid Value of revenues Vickrey Vickrey–Clarke–Groves Walrasian Yankee
Bidding
Shading Calor licitantis Cancellation hunt Jump Rigging Sniping Suicide Tacit collusion
Contexts
Algorithms Autos Art Charity Children Players Domain names Flowers Loans Scam Slaves Spectrum Stamps Virginity Wine Wives
Theory
Digital goods Price of anarchy Revenue equivalence Winner's curse
Online
Ebidding Private electronic market Software
v t e

Suicide bidding is a response to a tendering exercise in which a potential supplier, anxious to win business, submits a proposal to carry out the work for less than it will cost. These procurement processes are typically modelled as reverse sealed-bid auctions with the lowest bid winning.

The motive for such bidding is to keep the company's skilled labour employed, even if the project only breaks even or makes a loss.

This can result in poor quality work, poor service and debates over loopholes in contract wording in attempts to charge clients extra, or even insolvency on the part of the contractor.

The practice has particularly been noted in construction bidding. Around 2010, suicide bidding was widespread due to the economic crisis and strong competition. 2010 survey by the Chartered Institute of Building found that 82% of respondents believed that “suicide bidding” existed within the industry. It was considered to have contributed to the financial collapse of British firms Connaught plc and Rok plc in 2010.

The Civil Engineering Contractors Association acknowledged that the practice had become "rife" in the desperate competition for work during the late-2000s recession, but blamed the public sector procurement process for focussing on the lowest price rather than best value.

Some commissioning bodies, such as Crossrail, openly discourage the practice. In 2011, some housing associations began including specific terms in tenders to protect them from legal challenge in the event of refusing to award the contract according to the lowest tender.

See also

• Loss leader

References

1. Biruk, S.; Jaśkowski, P.; Czarnigowska, A. (2017). "Modelling contractor's bidding decision". Engineering Management in Production and Services. 9 (1). doi:10.1515/jem-2017-0007. ISSN 2543-6597. S2CID 159251582. Retrieved 21 May 2021.
2. ^ Procurement in the Construction Industry. Chartered Institute of Building. December 2010. pp. 3, 12.
3. ^ Brown, Carl. "Landlords crack down on 'suicide-bidding'". Inside Housing. Retrieved 2011-05-31.
4. ^ Prior, Grant (28 April 2011). "Government urged to stamp out suicide bidding". Construction Enquirer. Retrieved 31 May 2011.
5. MANGANELLI, BENEDETTO; MORANO, PIERLUIGI; TAJANI, FRANCESCO (2016). "An empirical analysis of winning bids in public procurement in the Italian construction sector" (PDF). Trans. Bus. Econ. 13: 129–137. Retrieved 16 May 2021.
6. Lane, Michael (19 November 2009). "Crossrail discourages suicide bidding". Construction News. Retrieved 2011-05-31.

• Procurement
• Insolvency
• Construction industry
• Bidding strategy