Optimal bidding and investment strategy in the PPP competitive dialogue

Public private partnerships (PPPs) are cutting edge contractual agreements nowadays. The long-term prospect entails considerable risks and practitioners underline the inefficiencies in the contracting phase. This research focuses on the competitive bidding procedure in the tendering stage. A private contractor will decide upon its pre-tendering research strategy and the involved investment in order to determine the costs implied in the project. Secondly, it will consider a bidding strategy while taking into account the number of other competitors and their respective characteristics. A game theoretical analysis of the influence of the strategies of competitors, a company’s experience and the government’s compensation schemes is performed in an initial, analytical way and by using simulations. This shows that pre-tender research incentives can be created but the dynamics of the game require careful consideration. Consequently, a rational approach for investigating the pre-bidding research strategy and the final offer is proposed. The difficulties to enter this niche market are underlined and possible policies to deal with this issue can be studied in more detail in future research.status: publishe