Did you know that the strategy of splitting the contract into different lots might be changed if procuring entity considers the structure of the relevant market?
In order to illustrate this, let us assume that there are two different lots, lot 1 and lot 2. Let us further assume that there are only two firms in the relevant market, firm A and firm B. Firm A’s production costs are 10 GEL for lot 1 and 100 GEL for lot 2. Firm B’s production costs are 90 GEL for lot 1 and 10 GEL for lot 2. We assume that both firms are informed about the cost structure of their competitors. It is obvious that procuring the contracts as a bundle lowers the buyer’s procurement cost: In separate tendering processes, the price to be paid for lot 1 is 90 GEL, and the price of lot 2 is 100 GEL. Thus, the total procurement cost is 190 GEL if the contracts are procured in separate tendering processes. If the bundle is being procured, the procuring entity would pay 80 GEL less and firm B (the firm with the lower total cost) would supply both lots