A preliminary study toward mechanism of contractor selection for public sector

This paper establishes a model to identify the mechanism of selecting contractors by public sectors; and, by using indifference curve, to explain exchangeability between the most advantageous bid and the lowest bid. Literature reviews the concepts of procurement and economic discussions to support the procurement and consumer behaviors. With the viewpoint of consumer behavior, a model based on indifference curve theory is found utilizing mathematical hypotheses and construction. It is proved that a power function as well as an indifference curve, named Chen-Kuo curve, exists with satisfaction of statistical evaluation. Exchangeability between the most advantageous bid and the lowest bid is also provided to support the mechanism of a public sector's contractor selection. The contribution provided by this paper to both practice and research is that a conceptual methodology is introduced to reasonably explain procurement behavior, and a solution is for contractor selection by a public sector.