The way in which the government selects the winning tenders for travel expenses such as plane tickets has resulted in a veritable race to a rather surreal bottom, in which companies compete in how many zeroes they can type on their keyboard.
Usually, public procurement procedures select the proposal with the lowest price from a first selection that conforms to the formal criteria of the tender. However, in certain cases, such as the plane tickets, companies do not compete based on the lowest price, but on the lowest profit margin.
This is counter-intuitive, in the sense that it should not be in the interest of the government to drive companies to reduce their profit margins. Rather, they should stimulate an increase of efficiency through which lower prices can be offered while retaining a regular profit margin.
Moreover, profit margins, contrary to price, are subject to interpretation. For example, what part of the overhead, personnel, or research are calculated into the profit margin and which are not? A price is absolute, a profit margin relative.
A stunning example is a public procurement procedure of the Albanian Electrical Energy Distribution Operator (OShEE) for a series of tickets for foreign trips, at the value of 8 million lekë (~€59,000).
The two “winning” proposals both claim ridiculously small profit margins. Golden Travel claims a profit margin of 1 × 10-251%, whereas “Spirit Travel & Tours” profits a much larger 1 × 10-193%. To give a comparison, the smallest measurement unit known to mankind is the Planck length, which is a gigantic 1.6 × 10-35 m!
In other words, the way in which these public procurement procedures are structured provides an incentive to market players not to provide services efficiently and at low cost, but rather to claim profit margins that are so ridiculously small that not even exhausting all the atoms in the universe (estimated at 1082) would not even start to make a significant difference.
It is physically impossible to calculate a profit margin that small, but apparently, the OShEE accepts it without blinking an eye.
