The effects of the format of software project bidding processes

This study investigates how differences in format of the bidding process affect companies’ bids for software projects. Thirty outsourcing companies from different Asian and European countries participated in the bidding for a software project. A participating company either started with the provision of a bid based on a reduced version of the specification and then continued with a bid based on the full specification (the Increase situation), or started with the full specification and then continued with the reduced one (the Decrease situation). Our results constitute evidence that in situations similar to the one we studied, the client will typically select a provider with about a 40% lower price in the Decrease situation than in the Increase situation. We discuss implications of this finding for clients and providers.