Public Procurement and the Tension Between the Economically Most Advantageous Tender and Lowest Price

This study analyses the use of most economically advantageous tender criterion and the lowest price criterion in public procurement in Austria using economic arguments and empirical evidence. The review of the relevant economics literature reveals that the advantage of the use of most economically advantageous tender criterion compared to the lowest price criterion depends on the presence of specific project characteristics (volume, complexity and contractual incompleteness) and market structure. Empirical evidence shows that regarding the use of the most economically advantageous tender criterion, Austria is – together with countries such as Germany, Sweden and Finland – close to the European average, but that the weighting of non-price criteria in Austria is below average. These findings are validated by interviews with contracting authorities and contractors. Policy implications are discussed.