Outsourcing Practices: Subconsultant Tipping Points Identified

Abstract

Poor procurement and management practices can negatively affect subconsultant bidding interest and contract performance. Subconsultants tolerate these practices until a tipping point is reached, at which point their willingness to bid decreases and their contract performance declines. In this study, personnel from four engineering consultant firms and seven subconsultants in Taiwan were interviewed to investigate the effects of their outsourcing and procurement practices on the bidding interest of subconsultants. Outsourcing records spanning 3 years were retrieved from an engineering consultant firm and used to identify the aforementioned tipping points. The findings suggest that inviting many subconsultants to bid lowers their response rate and contract performance, without reducing the contract award price. In addition, when the maximum award price falls below the minimum price acceptable to subconsultants, resulting in the inability to achieve a one-time bidding scenario, even if the engineering consultant firms subsequently increase the maximum award price and successfully contract, the subconsultants’ sentiment remains unrecoverable. Finally, a novel remainder analysis mechanism is proposed to reveal the reasons why some contracts are not awarded in the first round and evaluate whether the reasonableness of the maximum award price setting by engineering consultant firms.