On the study of the impact of relaxing the pre-qualification requirements on the competitiveness in the supply of water pumps

This paper reports a pioneering and quantitative approach being developed for assisting a large-scale high-rise residential building developer in Hong Kong in monitoring the competitiveness in the supply of fresh and flush water pumps to the building development projects. Integrated empirical pricing models based upon the hedonic price technique have been developed for the supply of both fresh and flush water pumps to the developer and the competitive sector. Our results revealed that the pricing levels charged to the developer were comparable to the competitive sector even though the quality standards of water pumps delivered were much lower. Upon close examination of the market structure, it was found that this was possibly due to the Limit Pricing Strategy being adopted by two leading suppliers in the developerʹs market as a result of relaxing the pre-qualification to standards below the industry norm. This finding should add to our understanding on the impact on the market competitiveness due to relaxation of pre-qualification requirements. Besides, measures of enhancing competitiveness in the supply market have also been discussed.