From High Discounts to Cost Overruns
the 'Pendulum Effect' in Public Works Tenders
DOI:
https://doi.org/10.46421/entac.v20i1.6210Keywords:
Construction Tenders, Public Works, Pendulum Effect, Cost estimateAbstract
The bidding process aims to ensure that the selection of the proposal is capable of generating the most advantageous contracting outcome for the public administration. In pursuit of this, the most commonly used proposal selection criterion in the engineering works and services bidding is typically the highest discount. However, selecting the highest discount may result, throughout the contract, in the need for cost addenda. This phenomenon, referred to as the 'Pendulum Effect', manifests as the surpassing of the initial cost estimate for the contract through successive addenda. In light of this issue, this article evaluates the initial cost estimates, competitor proposals, and final costs of 62 contracts, drawn from the database of a higher education institution, concluded between 2016 and 2023. The study thus verifies cost overruns in these works that initially offered significant discounts, and confirms the presence of the pendulum effect. This article provides a deeper understanding of the reasons for cost overruns, offering a basis for the improvement of bidding processes and cost management in the construction of public works. This article demonstrated that the practice of selecting proposals with the highest discount often leads to cost addendums.
References
BRASIL. Lei nº 14.133, de 1º de abril de 2021. Lei de licitações e contratos administrativos. Brasília: Presidência da República, 2023.
LOVE, Peter E. D. et al. Curbing Poor-Quality in Large-Scale Transport Infrastructure Projects. IEEE Transactions on Engineering Management, [s. l.], v. 69, n. 6, p. 3171–3183, 2022.
GIAT, Y.; MITELMAN, A. Cost Overruns, Winner’s Curse, Wisdom of the Crowd, and a Pendulum Effect in Public Construction Tenders. IEEE Engineering Management Review, [s. l.], v. 51, n. 2, p. 141–151, 2023.
CATALÃO, Francisco Pinheiro; CRUZ, Carlos Oliveira; SARMENTO, Joaquim Miranda. Exogenous determinants of cost deviations and overruns in local infrastructure projects. Construction Management and Economics, [s. l.], v. 37, n. 12, p. 697–711, 2019.
SARMENTO, Joaquim Miranda; RENNEBOOG, Luc. Cost Overruns in Public Sector Investment Projects. Public Works Management & Policy, [s. l.], v. 22, n. 2, p. 140–164, 2017.
DOS SANTOS, Natália José; LIMA, Luanna Oliveira. OBRAS PÚBLICAS: ASPECTOS LEGAIS, PLANEJAMENTO E EXECUÇÃO. REVISTA FOCO, v. 16, n. 12, p. e3940-e3940, 2023.
CARNEIRO, Laura Elizandra Machado et al. Ensaio sobre transparência, participação e mecanismos de controle social das obras públicas e serviços de engenharia: com base em pesquisa de informações e dados abertos da capital Florianópolis (SC). Revista Simetria do Tribunal de Contas do Município de São Paulo, v. 1, n. 12, p. 93-106, 2023.
ADAFIN, Johnson; ROTIMI, James O.B.; WILKINSON, Suzanne. Why do the design stage elemental cost plan and final tender sum differ in New Zealand?. Journal of Financial Management of Property and Construction, [s. l.], v. 20, n. 2, p. 116–131, 2015.
COSTA, Mateus Monferrari; ALMEIDA, Fernando do Couto Rosa. Análise de aditivos contratuais em obras públicas no estado de Minas Gerais. The Journal of Engineering and Exact Sciences, [s. l.], v. 7, n. 1, p. 12101–09e, 2021.
CRUZ, Herbert Melo; SANTOS, Débora de Gois; MENDES, Ludmilson Abritta. Causas da variabilidade do tempo de execução dos processos em diferentes sistemas construtivos. Ambiente Construído, [s. l.], v. 18, p. 49–65, 2018.
ALVARENGA, Felipe Campos et al. Alterações de custo e prazo em obras públicas. Ambiente Construído, [s. l.], v. 21, p. 161–180, 2020.
TAREKEGN GURMU, Argaw; MAHMOOD, Muhammad Nateque. Critical Factors Affecting Quality in Building Construction Projects: Systematic Review and MetaAnalysis. Journal of Construction Engineering and Management, [s. l.], v. 150, n. 3, p. 04024004, 2024.
SIGNOR, Regis et al. Underpricing in Social Infrastructure Projects: Combating the Institutionalization of the Winner’s Curse. Journal of Construction Engineering and Management, [s. l.], v. 146, n. 12, p. 05020018, 2020.
DIAS, Shahla Felisbino. Critérios para Seleção de Licitantes de Obras Públicas evitando Contratações a Preços Inexequíveis. 2021. - Universidade Federal de Santa Catarina, Florianópolis, 2021.
CAVALIERI, Marina; CRISTAUDO, Rossana; GUCCIO, Calogero. Tales on the dark side of the transport infrastructure provision: a systematic literature review of the determinants of cost overruns. Transport Reviews, [s. l.], v. 39, n. 6, p. 774–794, 2019.
THALER, Richard H. Anomalies: The Winner’s Curse. Journal of Economic Perspectives, [s. l.], v. 2, n. 1, p. 191–202, 1988.
OSWALD, D.; AHIAGA-DAGBUI, D.D.; SHERRATT, F.; SMITH, S.D. An industry structured for unsafety? An exploration of the cost-safety conundrum in construction project delivery.
SILVA, Edna Lúcia da; MENEZES, Estera Muszkat. Metodologia da Pesquisa e Elaboração de Dissertação. 4. ed. Florianópolis: UFSC, 2005.
