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JOURNAL OF PUBLIC PROCUREMENT, VOLUME 11, ISSUE 3, 403-427 FALL 2011
USING FUZZY DECISION MAKING FOR SUPPLIER SELECTION IN

PUBLIC PROCUREMENT
Nicola Costantino, Mariagrazia Dotoli,
Marco Falagario, and Maria Pia Fanti*
ABSTRACT. The paper addresses supplier selection in the public

procurement sector. The motivation is providing a decision-making tool that
mimics the intuitive behavior of the public tender committee in evaluating
the bid according to predefined (quantitative and qualitative) criteria by a
strict and transparent procedure, in accordance with governmental
procurement regulations and requirements. To this aim, we address the
supplier selection decision problem in the public procurement sector by a
well-known fuzzy multiple criteria decision- making approach. Using the
presented technique enables evaluation of both imprecise information and
quantitative data in vendor selection, while keeping the transparency
features requested in public procurement. We show the effectiveness and
efficiency of the approach with a case study involving an Italian public
administration.
INTRODUCTION
The vendor rating process is a critical step of the purchasing
function for any organization. Vendor rating systems identify top
---------------------------------
* Nicola Costantino, Ph.D., a Professor in Management, and Rector;
Mariagrazia Dotoli, Ph.D., an Assistant Professor in Control Systems
Engineering; Marco Falagario, Ph.D., a Contract Professor in Management;
and Maria Pia Fanti, Ph.D., an Associate Professor in Control Systems
Engineering, are at Politecnico of Bari. Prof. Costantino’s research interests
are in Supply Chain Management and Public Procurement. Prof. Dotoli’s
research interests are in Design, Optimization and Performance Evaluation
of Supply Chains, Dr. Falagario’s research interests are in Logistics,
Optimization Models and Public/Private Procurement, and Prof. Fanti’s
research interests are in Modelling, Identification and Fault Diagnosis of
Industrial Discrete Event Systems.
Copyright © 2011 by PrAcademics Press

404 COSTANTINO, DOTOLI, FALAGARIO & PIA FANTI
suppliers, i.e., the candidate partners that are best equipped to meet
the customer’s expected level of performance, and then check them
periodically (Baily, Farmer, Jessop, & Jones, 2005). Consequently, the
supplier or vendor selection process receives considerable attention
in business management literature (Bruno, Esposito, Genovese, &
Passaro, 2009; Chen, Yeh, & Yang, 2004; de Boer, Labro, &
Morlacchi, 2001; Huang & Keshar, 2007). Indeed, incorrect decisions
about supplier selection may lead to disruptions in the supply of
product/services, and therefore to serious troubles in the
organization operation (Piramuthu, 2005).
In most countries the public sector has recently started using
innovative methodologies for supplier selection (de Boer, Labro, &
Morlacchi, 2001; Panayiotou, Gayialis, & Tatsiopoulos, 2004; Erridge
& Callender, 2005). Some common points may be found between
procedures for supplier selection in the public and private sectors. In
a review of 74 articles Weber, Current, and Benton (1991) concluded
that by nature supplier selection is a multi-objective problem. Indeed,
both for private and public organizations vendor selection is a multi-
objective decision problem that besides the obvious goal of (low)
price includes conflicting objectives: quality, quantity, delivery,
performance, capacity, communication, service, geographical location
etc. (Araz & Ozkarahan, 2007; Degraeve, Labro, & Roodhooft, 2000;
Morlacchi, 1999).
Despite the similarities between private and governmental
purchasing, the latter type of procurement exhibits some peculiarities
(Panayiotou, Gayialis, & Tatsiopoulos, 2004). In most countries, the
public sector is covered by a number of public procurement
regulations, bringing legislative requirements into force: for instance,
in the European Union the 2004/18/EC Directive, also called the
Public Procurement Directive, is effective (The European Parliament,
2004). As a consequence, public procurement differs from private
procurement in the fact that prescribed procedures are to be followed
and transparency is imperative (Panayiotou, Gayialis, & Tatsiopoulos,
2004) for the so called public tender committee (usually a
commission of experts, named by the public authority) that exists to
perform the same duty as does the buyer of a private contract. In
other words, it is crucial that public procurement follows strict and
clear business models that optimize the specific service objectives
and considers the impact on processes across the considered
USING FUZZY DECISION MAKING FOR SUPPLIER SELECTION IN PUBLIC PROCUREMENT 405
governmental organization, avoiding subjective evaluations of

vendors: all suppliers participating in public procurement procedures
are equal in principle and preference must be given by the public
organization based on the rigorous ranking obtained by the
application of the said transparent business models.
Usually, in both the public and private sectors the vendor rating
decision problem is characterized by conflicting objectives and
imprecise and qualitative information. From a conceptual point of
view, Ellram (1990) and Patton (1996) underlined the importance of
qualitative issues in the vendor selection process, particularly of
financial concerns, organizational culture, strategic issues and
technological capability concerns. Although the public sector has a
long tradition of using the lowest bid as the only award criterion for
contracts, recently reliance on additional nonprice criteria is
increasing (Waara, & Bröchner, 2006) and public procurement
regulations are being changed accordingly. For instance, the Public
Procurement Directive (The European Parliament, 2004) explicitly
states that supplier selection may be performed according to, apart
from price, qualitative factors such as technical merit, aesthetic and
functional characteristics, environmental characteristics, etc. In this
directive, the application of either of the following two award criteria
is considered: the Lowest Price (LP) and the Most Economically
Advantageous Tender (MEAT) criterion. Typically, the LP principle is
significant when the sole purpose is to save money. On the contrary,
when the contract is awarded on the basis of MEAT criterion, various
(quantitative and qualitative) criteria are simultaneously considered
before awarding the contract.
Regardless of the chosen principles for supplier selection, in most
governmental areas selecting one of the numerous alternative
vendors bidding for a transaction may turn out to be a deeply complex
task. Indeed, usually the dimension of the vendor set is excessively
large with respect to the actual number of required vendors, so that
the resulting selection process may be time-consuming (and
expensive) with respect to its output. Often the supplier selection
process has to deal with imprecise and qualitative information, e.g.,
enhancement plans, quality and performance. The need in the public
sector for vendor rating procedures to deal with qualitative factors
appears to be potentially in contrast with the necessity for
transparency: in public procurement decisions have to be based on a

strict and unambiguous ranking of the available bidding suppliers.
This paper addresses supplier selection in public procurement
using a fuzzy decision-making technique. After the first contribution
by Lotfi Zadeh (1965), in the last two decades fuzzy logic has enjoyed
increasing popularity in virtually all sectors of industry and science in
the western world, including in military and aerospace applications.
Fuzzy logic may be defined as a multi-valued logic derived from fuzzy
set theory to address approximate reasoning (Zimmermann, 2001). In
contrast with “crisp” logic, in fuzzy logic the degree of truth of a
statement can range between 0 and 1 and is not constrained to the
classic propositional logic binary values. As a result, fuzzy logic
provides a natural framework to incorporate qualitative knowledge in
the form of “If…Then” rules with quantitative information such as real
data. A major potential benefit of this tool is that, thanks to its user-
friendliness, the user experiences an increased effective input in
decision processes. For a more detailed definition of fuzzy logic the
reader is referred to Zimmermann (2001). The combination of fuzzy
logic tools and multi-objective optimization or multi-criteria decision-
making (i.e., the process of simultaneously optimizing two or more
conflicting objectives subject to certain constraints (Ehrgott, 2000)
gave birth to fuzzy multi-objective optimization that may be dated
back to 1970 (Bellmann & Zadeh, 1970). Numerous fuzzy
optimization methods have been proposed in the literature, all
leading to workable solutions, in which flexibility in the goals and
constraints are traded off against one another and satisfied to
various degrees (Kaymak & Sousa, 2003). Hence, fuzzy optimization
successfully overcomes the limitations of classical Pareto optimality
in modeling and simulating human decision making.
The use of fuzzy logic tools was proposed in the related literature
to enhance traditional purchasing management techniques in the
private procurement sector. Some early contributions employing fuzzy
logic for vendor evaluation and selection were proposed by Albino,
Garavelli, and Gorgoglione (1998); Li, Fun, and Hung (1997); and
Morlacchi (1999). More recently, Nassimbeni and Battain (2003);
Jain, Tiwari, and Chan (2004); and Ohdar and Ray (2004) proposed to
enhance fuzzy inference systems evaluating suppliers by adopting
soft computing methods, such as neural networks or genetic
algorithms. Later contributions were proposed in Amid, Ghodsypour,
and O’Brien (2006); Bevilacqua, Ciarapica, and Giacchetta (2006);

Chen, Lin, and Huang (2006); Kumar, Vrat, and Shankar (2006);
Noorul Haq and Kannan (2006); and Costantino, Dotoli, Falagario,
and Fanti (2006) that apply various fuzzy multi-objective optimization
approaches to vendor rating for public procurement.
To the best of our knowledge, fuzzy decision making has never
before been applied to evaluating and ranking the available bids in
governmental procurement. Hence, in this paper we propose to solve
the supplier selection problem for public procurement by fuzzy multi-
objective optimization. Advantages of the proposed award procedure
are(1) the ability to address multiple and conflicting criteria (as
required in the MEAT procedure); (2) the ability to deal both with
qualitative and quantitative criteria; (3) the ability to mimic in a
transparent and rigorous way the tender committee synthetic
preference in choosing the best bidding supplier (according to a
typically nonlinear decision process and mimicking what usually
happens in the private sector); (4) the ability to employ unambiguous
rules, in accordance with public procurement regulations. More in
detail, we propose the application to supplier selection in the public
procurement area of a well-known decision-making approach based
on fuzzy logic, i.e., the Fuzzy Analytic Hierarchy Process (FAHP)
methodology (Saaty, 1990; Triantaphyllou & Lin, 1996). FAHP is
selected for the following reasons: (1) it is a renowned optimization
technique; (2) it is compatible with the widespread current European
Union directives. The advantages in the use of this method for
governmental purchasing are enlightened by way of a case study,
namely the contract regarding the renovation of a building facility of
Politecnico di Bari, Italy. The presented model for supplier selection in
the public procurement sector is implemented in the MATLAB
framework (The Mathworks, Inc., 2004a; 2004b) and is a typical case
of a multiple source single-item vendor selection problem taking into
account four performance indices: price, reduction in the execution
time, free maintenance time and enhancement plans (proposed
design changes).
The remainder of the paper is structured as follows. The following
section defines the vendor rating and selection problem for the public
procurement sector and presents and discusses the fuzzy decision-
making model. The subsequent section presents the case study and
illustrates the application of the chosen technique. The concluding
section summarizes the paper’s objectives and results and proposes

some future research perspectives.
METHODS
The Input Data
In the public procurement sector, governmental regulations
typically impose that all the potential suppliers satisfying the
requirements specified in the public tender call may bid; public
agencies have thus to evaluate and rank all the different bids,
according to a prefixed set of parameters (offered price, delivery time,
quality, etc.) in a transparent way and on the basis of strict
procedures. Accordingly, in the public procurement sector a vendor
selection decision problem can be defined through the set of bidding
suppliers S=s1,s2,…,sm and the given set of conflicting criteria
C=c1,c2,…,cn (defined beforehand by the tender committee) against
which vendors in S have to be ranked. Consequently, each supplier
siS is associated the following n-tuple: (di1, di2,…,din), where dij
represents the value of the performance index characterizing the i-th
vendor with i=1,…,m with respect to the j-th criterion with j=1,…,n. For
example, the first performance index di1 associated to the i-th
supplier with i=1,…,m typically represents the price of the received
bid. These performance indices are collected in a m×n decision
matrix D, where m is the number of available vendors and n is the
number of criteria. Therefore, the generic element dij of D, with
i=1,…,m and j=1,…,n, represents the j-th performance value of the i-th
alternative supplier. The decision problem data are completed by the
criteria importance, i.e., each criterion cj with j=1,…,n is associated
n
with a given weight wj, with  w j  1 , assigned by the public tender
j 1
committee and specified in the call. It is noteworthy that soft
computing methods may be straightforwardly employed to address
the issue of obtaining in an automatic and objective way the criteria
weights. For instance, a fuzzy inference system with a knowledge
base containing “If…Then” rules (Zimmermann, 2001) may be set up
by the tender committee, with the eventual help of experts, to
automatically determine the weight assigned to the criteria.
The Technique
The well-known fuzzy multi-objective technique, FAHP, (Saaty,
1990; Triantaphyllou & Lin, 1996) is proposed and evaluated in this
work for use in the decision problem of supplier selection for public
procurement. In FAHP, given the input data previously described, a
fuzzification process associates to each element dij with i=1,…,m and
j=1,…,n of D a fuzzy value d’ij, with d’ij[0,1] defining the m×n
fuzzified decision matrix D’ that models the committee’s satisfaction
degree with respect to the bidding suppliers against each criterion. In
particular, each j-th column of D’ for j=1,…,n is obtained by applying
to the corresponding column of D a fuzzy membership function μj with
j=1,…,n that is defined over the performance indices domain with
values in the [0,1] interval and mimics the tender committee
evaluation of the j-th performance index.
The fuzzification process enables the tender committee to
simultaneously take into account, in a transparent and rigorous way,
both quantitative and qualitative evaluation criteria, while fitting the
synthetic preference of the committee based on the chosen
membership functions’ shapes. Indeed, the choice of such functions
is subjective and has to be performed by the tender committee before
the award. If necessary, the membership function selection may take
place with the help of experts joining the committee for this purpose.
The definition of membership functions is a key point in the
fuzzification process, because the only restriction that a membership
function has to satisfy is that its values must be in the [0,1] range. A
fuzzy set can therefore, unlike a crisp one, be represented by an
infinite number of membership functions: a whole variety of
possibilities exists, including triangular, trapezoidal or Gaussian
membership functions, as well as sinusoidal, exponential shapes and
so forth (The Mathworks, Inc., 2004b). Figures 1 to 4 respectively
represent a linear, piece-wise linear, sigmoidal, and linear
membership function. The fact that a fuzzy set can be described by
an infinite number of membership functions is at the same time a
weakness and a strong point: uniqueness is sacrificed for the
advantage of flexibility, thus making the “adjustment” of a fuzzy
model possible. When fuzzy decision making is used in public
procurement, this subjectivity feature is an added value of fuzzy
decision making, since it allows close mimicking of the intuitive
tender committee behavior in the criteria evaluation. Note that in the
FIGURE 1
An Example of Linear and Monotonically
Decreasing Membership Function
0.8
Degree of membership
0.6
0.4
0.2
1.1 1.15 1.2 1.25 1.3

Price [€] 5
x 10
FIGURE 2
An Example of Piece-Wise Linear Membership Function with a Local
Maximum
0.8
0.6
0.4
0.2
0 5 10 15 20 25
Reduction time in the execution [weeks]
FIGURE 3
An Example of Sigmoidal and Monotonically Increasing Membership
Function
0.8
0.6
0.4
0.2
0 20 40 60 80 100 120
Free maintenance time [months]
FIGURE 4
An Example of Linear and Monotonically Increasing
Membership Function
0.8
0.6
0.4
0.2
0 1 2 3 4 5 6 7 8 9 10
Enhancement plans score
related literature numerous methods exist for determining the

membership functions that are essentially based on direct methods
of inquiry made on human beings (Bouchon-Meunier, Dotoli, &
Maione, 1996).
The most common choices for the membership functions shape
are the piece-wise linear outline and other strongly nonlinear
functions (typically sigmoidal). In the context of procurement, linear
membership functions model the fact that all the variations in the
considered performance criterion (even negligible ones) are equally
significant and as such are taken into account by the tender
committee in the vendor rating process, in a proportional way. This is
typically the case of the price criterion, (see Figure 1). While some
criteria are linearly assessed, others often have to be evaluated in a
non linear way, e.g., only a considerable difference in the offered bids
is viewed as significant by the buyer. In the private procurement area
such a non-linearity is usually embedded in the buyer’s holistic
experience; on the contrary, in the public sector it has to be fully and
clearly expressed in formal and transparent rules and fuzzy
membership functions can be used to model the intuitive tender
committee behavior. Figures 2 and 3 respectively show two different
nonlinear membership functions, with triangular and sigmoidal
shapes.
We remark that, regardless of the choice of the membership
function shape, some criteria values (e.g., prices) have to be
minimized, whereas others have to be maximized (e.g., the values of
free maintenance post delivery). Accordingly, the chosen membership
functions are respectively monotonically decreasing (see the example
in Figure 1) and monotonically increasing (see Figures 3 and 4). In
particular cases some criteria may be evaluated by way of a custom
membership function, exhibiting local maxima in a particular region of
the offered bids range, to closely model the buyer evaluation that may
take into account the trustworthiness of the offered bids. This is for
instance the case of the reduction in the execution time criterion, for
which too high offered values may be penalized by the tender
committee, i.e., judged not credible (see the example in Figure 2).
The FAHP Approach

In FAHP all the elements involved in the decision problem are
arranged in a hierarchical structure and objectives are of varying
degrees of importance. The ranking is achieved by assigning to each

available alternative (the generic supplier in the vendor rating case) a
power indicative of its importance and then raising each fuzzy value
to the appropriate power. Such powers are obtained by determining
the eigenvector of the maximum eigenvalue of the so-called
comparison matrix. The technique consists of the following steps
(Triantaphyllou & Lin, 1996).
Step 1. Structuring the decision problem as a hierarchy. The first
level of the decision problem is defined as “Suppliers Efficiency” that
is evaluated by the overall performance index of each vendor,
according to which the rating is performed. The second level is
composed by the n considered criteria contributing to the goal. The
third and final level is defined as the m alternative supplier
configurations to be ranked in terms of the stated criteria.
Step 2. Determining the fuzzified decision matrix. Determine the mxn
fuzzified decision matrix D’ applying column by column the chosen
membership functions to matrix D.
Step 3. Constructing the pairwise comparison matrix CM. Compare the
n criteria with each other and construct the so-called n×n pairwise
comparison matrix CM by Saaty’s original AHP scale in Table 1. Each
element cmij of CM with i,j=1,…,n represents the relative importance
of the i-th criterion compared to the j-th one and is determined by
evaluating the difference 100|wi-wj| of the respective performance
indices’ weights and associating to it an integer value from 1 to 9
according to Table 1.
TABLE 1
Saaty’s Original AHP Scale
35 45
Pairwise 0 5 15  25  55  65  75 
Differences 5 15 25 35   65 75 100
45 55
AHP Scale 1 2 3 4 5 6 7 8 9
Step 4. Determining the eigenvector associated to the maximum

eigenvalue of the comparison matrix. Calculate the eigenvalues set
{  1,  2,…,  R} of CM, where R is the matrix rank. Let  max be the
maximum eigenvalue of CM, then determine its eigenvector vmax.

Compute the priority vector:
P  vmax  n  [1 ... n ]T , (1)

where each element πj with j=1,…,n of P represents the importance
degree of the j-th performance index associated to the j-th column of
D’: the greater πj, the more important the j-th performance index.
Step 5. Raising alternatives to the criteria power. Determine the
alternative values associated to each j-th performance index as
follows:
CRITj  [d '1 j ... d 'mj ] for each j=1,…,n (2)
Determine the following vectors:

j    

j=[γ1j… γmj]= CRITj     
  d '1 j j ... d 'mj j  for each j=1,…,n (3)
 
Step 6. Determining the decision model. For each bidding supplier
siS determine:
PIi _ FAHP  min   i1,...,  in  with i=1,…,m, (4)
so that PIi_FAHP provides information about the overall satisfaction of

alternative si with respect to the criteria and their importance degree.
Step 7. Ranking the alternatives. Rank the alternatives or bidding
suppliers according to their overall performance index PIi_FAHP with
i=1,…,m. Obviously, the best supplier is the one showing the highest
index PIi_FAHP obtained by Equation (4). Therefore, the ranked vector of
alternatives is =[1 … m]T, where i for i=1,…,m is the generic i-th
supplier and exhibits a performance index PIi_FAHPPIi+1_ FAHP: 1 is the
best and m the worst vendor.
Discussion
Usually, in most public tenders adopting a MEAT procedure the
top-ranked vendor is selected using the so-called Linear Weighting
(LW) technique (Dulmin & Mininno, 2004; Sonmez, 2006). Such an
approach is structurally compensatory and tends to counterbalance a
good performance against a criterion with a second-rate performance
index, which in many cases is not realistic: indeed, in private
procurement, where strict transparency is not required, vendors are

rated by the synthetic experience of the buyer in a typically nonlinear
fashion. Hence, the main objective of this paper is to test an
alternative approach (more detailed than the LW one) to support the
public tender committee’s choice while also taking into account
qualitative factors, e.g., as prescribed by the European Union
directives. Our multiple criteria decision-making approach may be
successfully employed to model and solve a vendor selection problem
for public procurement. Note that several key differences may be
discerned between the considered approach and the standard LW
method, nowadays the most widespread vendor rating approach for
MEAT awards.
First, the LW technique is compensatory in essence, since it
simply determines a crisp or non-fuzzy weighted sum of the
normalized performance indices associated with each supplier. On
the contrary, the FAHP decision-making approach is non-
compensatory in nature, partly due to the considered nonlinear rules
in the vendors’ evaluation (i.e. Steps 1 to 7) but mostly because of
the nonlinear fuzzification process that tends to reward suppliers
exhibiting the best performance indices with respect to all criteria and
to penalize the worst ones. In our opinion, such an evaluation fits very
well with the overall preferences and behavior of a tender committee
in governmental purchasing.
Second, it is noteworthy that the considered fuzzy logic-based
technique is characterized by an algorithmic approach that is more
complex than the LW technique. Nevertheless, the use of the FAHP
decision-making technique for vendor evaluation and selection is
enabled by the exploitation of simple computational platforms,
nowadays available to any outsourcing organization.
Third, the FAHP technique relies on pairwise comparisons of the
solutions, providing an approach to rank alternatives based on their
reciprocal assessment.
Fourth, the proposed technique can consider qualitative criteria
that cannot be treated by the crisp LW technique. These may be
related to the requested goods or services (as it is the case with the
enhancement plans criterion, considered in the subsequent case
study), e.g., in the case of product standardization level, quality,
strategic importance and availability, or to the supplier, such as for
instance risk level, vendor dimension and reliability, proposed

technical improvements, experience and geographical location
(Costantino, et al., 2006; Degraeve, Labro, & Roodhooft, 2000).
Finally, note that the FAHP method, being based on Saaty’s
comparison scale, produces a stepwise ranking of the bidding
suppliers. Two (or more) equally ranked best suppliers may be further
classified based on a predefined rule, for instance on the basis of one
criterion only, e.g., price.
CASE STUDY AND RESULTS

The presented decision-making approach for supplier selection in
the public procurement area was applied to a case study. We
considered the contract regarding the renovation of a building facility
of Politecnico of Bari, Italy. The tender amount- based auction was €
148500 plus VAT and the maximum acceptable work duration was
35 weeks.
The number of bidding suppliers was m=45, each offering a bid
(see Table 2) evaluated by way of n=4 criteria, specified in the tender
TABLE 2
Case Study Bids, Corresponding Decision Matrix Elements and Overall
Performance
Reduction in Free Overall
Enhance- perfor-
Vendor Price execution maintenance
ment plans mance
time post delivery
di2 di3
si di1 [€] di4 PIi_FAHP
[weeks] [months]
s1 110238.11 8.00 48.00 8.00 0.4243
s2 110963.63 4.00 9.00 9.00 0
s3 109514.93 20.00 29.00 1.00 0
s4 110484.45 8.00 15.00 9.00 0
s5 110681.87 13.00 22.00 6.00 0
s6 111092.92 4.00 29.00 1.00 0
s7 112930.37 15.00 50.00 3.00 0.4714
s8 112783.38 7.00 6.00 5.00 0
s9 131714.23 16.00 108.00 10.00 0
s10 109920.87 17.00 113.00 10.00 0.8069
s11 110821.52 19.00 59.00 2.00 0.4472
s12 109775.89 11.00 59.00 10.00 0.6835
s13 108511.70 2.00 41.00 10.00 0.2593
s14 111457.61 6.00 108.00 5.00 0.5657
TABLE 2 (Continued)
Reduction in Free Overall
Enhance- perfor-
Vendor Price execution maintenance
ment plans mance
time post delivery
di2 di3
si di1 [€] di4 PIi_FAHP
[weeks] [months]
s15 111127.97 23.00 44.00 8.00 0.3300
s16 108990.13 4.00 13.00 1.00 0
s17 115299.67 21.00 94.00 4.00 0.3973
s18 111242.01 13.00 47.00 9.00 0.4007
s19 112036.06 25.00 29.00 8.00 0
s20 111461.96 2.00 48.00 10.00 0.3266
s21 111009.58 11.00 12.00 7.00 0
s22 110504.87 3.00 16.00 0.00 0
s23 110247.06 24.00 113.00 8.00 0.400
s24 110438.76 0.00 120.00 9.00 0
s25 112457.83 19.00 69.00 7.00 0.5922
s26 108469.71 20.00 7.00 8.00 0
s27 110667.84 22.00 28.00 7.00 0
s28 111660.57 2.00 42.00 4.00 0.2828
s29 110500.76 10.00 99.00 7.00 0.7303
s30 110918.29 6.00 0.00 2.00 0
s31 115520.49 20.00 5.00 7.00 0
s32 119535.68 11.00 20.00 0.00 0
s33 110183.27 23.00 78.00 3.00 0.5477
s34 109839.68 5.00 88.00 0.00 0
s35 110583.74 7.00 78.00 1.00 0.3162
s36 110186.17 4.00 54.00 8.00 0.4619
s37 125075.21 3.00 66.00 7.00 0.0413
s38 111151.44 22.00 36.00 3.00 0.1414
s39 109224.97 14.00 89.00 10.00 0.8641
s40 110556.28 14.00 23.00 0.00 0
s41 110575.67 4.00 82.00 4.00 0.4619
s42 107967.74 21.00 22.00 4.00 0
s43 111367.66 16.00 44.00 8.00 0.3300
s44 116276.03 9.00 75.00 8.00 0.3408
s45 118868.15 13.00 94.00 2.00 0.2152
call. According to one of the options offered by the European

legislation regulating public procurement under the MEAT award
procedure, the following n=4 criteria were selected in the tender call:
(1) offered price c1 (with the corresponding performance value di1
measured in € for the i-th supplier and i=1,…,m); (2) offered reduction
in the planned work execution time c2 (with di2 measured in weeks
and i=1,…,m); (3) offered free maintenance period post delivery c3
(with di3 measured in months and i=1,…,m); (4) quality of
enhancement plans c4 (with di4 and i=1,…,m evaluated by the tender
committee in a 0-10 scale estimating the quality of changes proposed

by the buyer to the designed work and/or to the requested supply
that can improve it).
Three of the selected criteria (i.e., c1, c2 and c4) measure price
and efficiency of the bids, while criterion c3 may be classified as
belonging to the class of after sales services parameters. Some
additional classes of parameters may be taken into account, e.g.
technological solutions and environmental conditions (see Salomon
[2004] for further examples on this topic); most of them can be
evaluated analogously to the enhancement plans criterion. In
addition, note that the criteria according to which the contract was
awarded are partly quantitative (as is the case with c1, c2 and c3) and
partly qualitative (as with criterion c4, since the tender award
committee had to evaluate the actual enhancements to the
supply/service that the proposed changes would produce). Evidently,
taking into account additional (qualitative) criteria (e.g., product
standardization level, vendor dimension and reliability, other
technical improvements etc., to personalize the vendor rating
process) is always possible with the proposed method.
For each bidding supplier siS we associated the following four-
tuple collecting the elements of the i-th row of the decision matrix:
(di1,di2,di3,di4). The weights assigned to the fourth criteria cj with
j=1,…,4, were selected as follows: w1=0.55, w2=w3=w4=0.15. In other
words, the tenderer considered the usual public procurement
situation in which the offered price is the main performance index
according to which the contract is awarded, while the other criteria
were assigned minor importance. Hence, the FAHP technique was
used in the MATLAB framework (The Mathworks, Inc., 2004a;
Venkataraman, 2009) to evaluate and rank the different vendors and
their bids. The vendor bids for the case study and the related overall
performance computed by FAHP are reported in Table 2. In the
second-to-last column of Table 2 are reports of the enhancement
plans’ performance indices, ranging on a 0 to 10 scale, with points as
assigned by the committee to the free –of- charge enhancement
plans to the requested service offered by the bidding vendors. The
votes were assigned to the improvements suggested by the bidders:
5 points out of 10 were connected to the materials to be used (tiles,
floor, fixtures, etc.), 2 points out of 10 to the proposed installation
methodology (plaster, cement, concrete, etc.), and the last 3 points to
the logistics of the proposals. Obviously, all the evaluation rules were
stated in the tender call.
For the fuzzification process the well-known piecewise linear and
sigmoidal membership functions were selected. In particular, for the
price criterion we chose a linear membership function that models
the fact that even negligible price variations are taken into account by
the tender committee (see Figure 1). Accordingly, the generic element
of the first column of the fuzzified decision matrix D’ was obtained by
defining the price membership function μ1 as follows:
d1max  di1
d 'i1  1 (di1 )  , for i=1,…m, (5)
d1max  d1min
with d1min  min  di1  and d1max  max  di1  , respectively

i 1,..., m i 1,..., m
representing the minimum and maximum bids offered by the m
suppliers (see Table 2).
Note that Equation (5) defines a monotonically decreasing linear
membership function that rewards (penalizes) low (high) values,
associating a performance index of 1 (0) to suppliers that exhibit a
performance value equal to d jmin ( d jmax ). Bids in between these
values are to be evaluated in a linear way.
The chosen membership function of the second-ranking criterion
(i.e., the reduction in the execution time) is piece-wise linear and
triangularly shaped, so that (see Figure 2):
 di 2  d 2min
 for di 2  [d 2min , d 2* ]
 d 2*  d 2min
d 'i 2   2 (di 2 )   , (6)
 d 2max  di 2
d for di 2  [d 2* , d 2max ]
 d 2*
 2max
for i=1,…m, with d 2min  min  di 2  and d 2max  max  di 2  ,
i 1,..., m i 1,..., m
d 2min  3d 2max
respectively (see Table 2). Moreover, we set d 2*  ,
4
representing the most suitable value of reduction in the execution

time according to the expert members of the commission. In other
words, Equation (6) defines a triangular membership function that
rewards intermediate values of reduction in the execution times and
penalizes suppliers that exhibit a performance value equal to d jmin
(since too low indices are virtually useless) or d jmax (because too
high values are judged to be unrealistic and therefore unreliable).
Accordingly, while the index values belonging to the [d 2min , d 2* ]
interval are evaluated in a monotonically increasing linear fashion,
the remaining values are assessed in a decreasingly linear way.
For the third criterion a sigmoidal and increasing membership
function was selected as follows (see Figure 3):
 0 if di3  [d3min , d3* ]


  d  d 2  d3  d3max 
 2  i3 3*
 if di3   d3* , min 
  d3**  d3*   2 
d 'i3  3 (di3 )   (7)
 2 
d d   d 3 d 3max 
1  2  3** i3  if di3   min , d3** 
  d3**  d3*   2 

 1 if di 3  [d3** , d3max ]
for i=1,…m, with d3min  min  di3  and d3max  max  di3  (see
i 1,..., m i 1,..., m
3d3min  d3max
Table 2). Furthermore, d3*  represents the minimum
4
acceptable value in the free maintenance time according to the buyer.
In addition, suppliers offering a free maintenance time equal to or
d3  3d3max
higher than d3**  min are all ranked at the same (top)
4
level by the buyer. In other words, Equation (7) defines a monotonically
increasing sigmoidal membership function that penalizes (rewards)
low (high) values of the free maintenance times, with index values in
the [d3* , d3** ] interval evaluated in a nonlinear fashion. This
membership function models the fact that free maintenance is almost
useless in the first months after the award (because the supplier has
to assure assistance in the warranty’s time) and that in the long range
increases in the free maintenance time are disregarded by the

committee (since the usual need for refurbishment of the facility
makes it useless to increase the free maintenance period over some
years).
Similarly to Equation (5), we fuzzified the enhancement plans in a
monotonically increasing linear fashion, since this performance index
has to be maximized, as follows (see Figure 4):
di 4  d 4max
d 'i 4   4 (di 4 )  , for i=1,…m, (8)
d 4max  d 4min
with d 4min  min  di 4  and d 4max  max  di 4  (see Table 2).

i 1,..., m i 1,..., m
Note that the membership function input variable (i.e., the abscissa in
Figure 4) represents the vote that the tender committee assigns to
the free of charge number of variations proposed by the supplier in
his bid to improve the requested product/service quality.
The last column of Table 2 shows the results obtained by applying
the FAHP decision-making technique to the case study, (i.e., the
overall performance index of each supplier PIi_FAHP for i=1,…,m
obtained under the considered methodology). The highest overall
performance index is highlighted in bold. Table 3 reports the
corresponding ordered list of the top-ten vendors, showing that the
fuzzy decision- making method chose vendor s39 as the best solution.
Indeed, this supplier was characterized by one of the lowest values of
price; moreover, among the low price solutions, it exhibited
intermediate values of the less important criterion-reduction in
execution time, and very high performance in terms of the minor
criteria-free maintenance time and enhancement plans (see Table 2).
Note that, when an identical performance index value is obtained for
two or more suppliers, these are classified according to the LP
principle (e.g., in Table 3 this is the case of suppliers s36 and s41 in
case a, respectively ranked ninth and tenth since s36 offers a lower
price than s41).
It is interesting to note that the worst suppliers were assigned a
zero overall performance index (see the last column of Table 2),
corresponding to the cases in which at least one of the fuzzified
performance index d’ij is null (e.g. vendor s2 is assigned an index
PI2_FAHP=0). In addition, note that supplier s42, offering the lowest price
TABLE 3
Top-Ranked Bidding Vendors for the Case Study
Position Supplier
1 s39
2 s10
3 s29
4 s12
5 s25
6 s14
7 s33
8 s7
9 s36
10 s41
(see Table 2), was assigned a zero overall performance index, due to
the too low free maintenance time offered by the vendor and the non-
compensatory nature of the technique.
The obtained results were analyzed together with the purchasing
manager responsible for the considered tender. Such an examination
showed that the FAHP supplier ranking fits with the synthetic, holistic
manager’s preferences resulting from his personal experience.
CONCLUSIONS
This paper contributes to the field of purchasing in the public
sector focusing on vendor assessment and selection in single-item
multiple sourcing exchanges. We have addressed the need for
supplier selection procedures in the public sector that are able to
deal with qualitative factors, as prescribed by the recent European
legislation, while maintaining the necessity for transparency typical of
public practices. We propose to enhance traditional vendor
evaluation and selection techniques in the public procurement sector
by employing fuzzy multiple criteria optimization and, in particular, the
well-known FAHP technique. The approach is tested by way of a case
study involving an Italian public administration, illustrating its
effectiveness for application to governmental purchasing.
Future work may consider additional qualitative factors related
either to the requested product/service or to the particular supplier,
as well as the more complex case of multi- items exchange.

Moreover, fuzzy inference systems may be employed to determine the
weights characterizing the performance scores in an automated way
depending on supplier characteristics. An additional perspective on
future research is to implement the proposed vendor evaluation and
selection framework as a decision support system. To this aim, the
authors are developing a web automatic tool that supports the buyer
in the vendor evaluation and selection process and may be employed
by the bidding suppliers to evaluate their own offers before the actual
bid takes place.
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JOURNAL OF PUBLIC PROCUREMENT, VOLUME 11, ISSUE 3, 403-427 FALL 2011

USING FUZZY DECISION MAKING FOR SUPPLIER SELECTION IN

ABSTRACT. The paper addresses supplier selection in the public

Copyright © 2011 by PrAcademics Press

governmental organization, avoiding subjective evaluations of

transparency: in public procurement decisions have to be based on a

and O’Brien (2006); Bevilacqua, Ciarapica, and Giacchetta (2006);

section summarizes the paper’s objectives and results and proposes

1.1 1.15 1.2 1.25 1.3

related literature numerous methods exist for determining the

The FAHP Approach

degrees of importance. The ranking is achieved by assigning to each

Step 4. Determining the eigenvector associated to the maximum

maximum eigenvalue of CM, then determine its eigenvector vmax.

P  vmax  n  [1 ... n ]T , (1)

Determine the following vectors:

so that PIi_FAHP provides information about the overall satisfaction of

procurement, where strict transparency is not required, vendors are

instance risk level, vendor dimension and reliability, proposed

CASE STUDY AND RESULTS

call. According to one of the options offered by the European

committee in a 0-10 scale estimating the quality of changes proposed

with d1min  min  di1  and d1max  max  di1  , respectively

representing the most suitable value of reduction in the execution

 0 if di3  [d3min , d3* ]

increases in the free maintenance time are disregarded by the

with d 4min  min  di 4  and d 4max  max  di 4  (see Table 2).

as well as the more complex case of multi- items exchange.

Proceedings of the IPSERA 2009 Conference (pp. 882-891), April

Huang, S.H., & Keshar, H. (2007). “Comprehensive and Configurable

Patton, W.W. (1996). “Use of Human Judgment Models in Industrial

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