Integrating unbiased background information in the private partner selection of PPP procurement process: a game-theoretical approach

Abstract

In recent years, increasing infrastructure investment has become a relevant challenge in Latin America. Different economic entities agree that this objective can be achieved with a greater participation of the private sector, for instance using the public-private partnership (PPP) model. The procurement phase in PPP projects is crucial, the selection of the private partner occurs at this point. Public entities need to select an objective bid evaluation method and evaluation criteria in order to make an objective selection while guaranteeing a transparent process. A game theory approach is proposed and developed to integrate an unbiased background information indicator of contractors, aiming for the selection of the right private partner. Moreover, a case of study is proposed to exemplify the effects of the proposed approach. The results shows that the new criterion is significant in the bidding process and in the long term a mechanism is achieved where the fulfillment of contracts is the best decision of bidders.