A comparative study of multiple criteria decision making methods for contractor selection
Gevers, W. R.
Stellenbosch University. Faculty of Economic and Management Sciences. Graduate School of Business.
ENGLISH ABSTRACT: One of the most difficult and more important decisions taken by a client is the selection of the most appropriate contractor. It requires the assessment of various factors, often conflicting, in order to determine the most appropriate contractor and are therefore classified as a problem that can be resolved by using multiple criteria decision making methods. The act of decision making is never an easy one and requires a sound understanding of the requirement, the alternatives and the model used to assess the alternatives in terms of the requirement in order to instil confidence that the most appropriate alternative is selected. The appropriateness of the methods used in contractor evaluation has a vital impact on the cost of the transaction.
The three broad categories, or schools of thought, relating to multiple criteria decision making (MCDM) methods are assessed in terms of their applicability to the contractor selection problem within a quasi-government organisation, namely Armscor. Of the three categories, only the methods of the value measurement category were found to be appropriate within the current legislative framework of the Preferential Procurement Act, which seeks to express the performance of an offer as a unique numerical function.
The old contractor selection model of direct point allocation on a qualitative scale is shown to be inappropriate, especially in terms of the additive utility assumption of single dimensional units. The proposed new model makes use of the weighted product model that is not restricted by the additive utility assumption as it results in dimensionless analysis of the criteria. The utility functions associated with the quantitative criteria uses curves which are raised to the power of the confidence variable. The arithmetic mean of these variables represents the group’s confidence level associated with each contractor’s offer in the correctness and/or its ability to maintain the stated level of performance. Furthermore, the analytic hierarchy process is used for the assessment of the qualitative criteria.
The new model, although not perfect, is an improvement over the old model with regards to the understanding of the requirement as well as the assessment of contractors’ proposals.
AFRIKAANSE OPSOMMING: Die keuse van ‘n kontrakteur is een van die moeilikste besluite wat ‘n kliënt moet neem, dit is egter ook een van die belangrikste besluite wat geneem word. Ten einde die mees geskikte kontrakteur te kies, moet daar ‘n waarde geheg word aan verskeie faktore, menigmaal teenstrydig, wat kontrakteur seleksie klassifiseer as ‘n probleem wat deur middel van meervoudige-kriteria-besluitnemingsmetodes opgelos kan word. Die handeling van besluitneming is nooit ‘n maklike een en vereis deeglike kennis van die behoefte, die alternatiewe, asook die model wat gebruik word om die alternatiewe in terme van die behoefte te waardeer in orde om vertroue in die gekose alternatief te hê.
Vir die doeleindes van hierdie studie is die drie kategorieë van meervoudige-kriteria-besluitnemingsmetodes vergelyk in terme van hul toepaslikheid op die voorafgenoemde probleem binne ‘n Semi-Staatsinstelling, naamlik Krygkor, met die oogmerk om die beste metode te identifiseer. Slegs die metodes vervat in die waarde-meting kategorie is geskik binne die Wet op die Raamwerk vir Voorkeurverkrygingsbeleid wat die evaluasie van ‘n aanbod uitdruk as ‘n unieke numeriese funksie.
Uit die studie blyk dit dat die vorige kontrakteur seleksie model van direkte punt allokasie op ‘n kwalitatiewe skaal onvanpas is, veral in terme van die sommerings-nutfunksie aanname van enkel dimensionele eenhede. Die model wat eerder aanbeveel word, maak gebruik van die geweegde-produk-model wat nie beperk word deur die bogenoemde aanname nie, aangesien dit dimensielose analise tot gevolg het. Nutfunksies wat geassosieër word met kwantitatiewe kriteria, word voorgestel deur kurwes wat tot die mag van die vertrouensvlak-veranderlike gehef word. Die rekenkundige gemiddelde van hierdie veranderlike verteenwoordig die groep se vertrouensvlak met betrekking tot elke kontrakteur se akkuraatheid en vermoeë om die gespesifiseerde vlak van werkverrigting te handhaaf. Die kwalitatiewe kriteria word beoordeel deur gebruik te maak van die analitiese hiërargie proses.
Die gevolgtrekking wat uiteindelik gemaak word is dat die nuwe model, alhoewel nie foutloos, tog ‘n verbetering is op die vorige model, veral met betrekking tot die insig wat verkry word deur die ontleding van die kontrakteurs se voorstelle in terme van die bepaalde behoefte wat bevredig moet word, ten einde die beste keuse uit te oefen.
Masters Degrees (University of Stellenbosch Business School)