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Public procurement design: Lessons from the private sector

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  • Tadelis, Steven

Abstract

Public procurement regulations put constraints on the contracts and award mechanisms that public procurement agencies can use. These constraints are not present in the private sector, and recent studies suggest that the added flexibility in private sector procurement offers efficiency advantages. This paper offers a short progress report of these recent studies, and argues for the need to enhance the tools that are currently at the disposal of public sector procurement offices.

Suggested Citation

  • Tadelis, Steven, 2012. "Public procurement design: Lessons from the private sector," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 297-302.
    • Handle: RePEc:eee:indorg:v:30:y:2012:i:3:p:297-302
    DOI: 10.1016/j.ijindorg.2012.02.002
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    References listed on IDEAS

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    1. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 387-407, Autumn.
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    9. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 149-169, September.
    10. Victor P. Goldberg, 1977. "Competitive Bidding and the Production of Precontract Information," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 250-261, Spring.
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    Cited by:

    1. Yizhaq Minchuk & Shlomo Mizrahi, 2017. "The (in) effectiveness of procurement auctions in the public sector," Applied Economics Letters, Taylor & Francis Journals, vol. 24(4), pages 247-249, February.
    2. Aitken, Alan & Paton, Robert A., 2016. "Professional buyers and the value proposition," European Management Journal, Elsevier, vol. 34(3), pages 223-231.
    3. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    4. Yizhaq Minchuk & Aner Sela, 2021. "Subsidy and Taxation in All-Pay Auctions under Incomplete," Working Papers 2104, Ben-Gurion University of the Negev, Department of Economics.
    5. Dakshina G. De Silva & Timothy Dunne & Georgia Kosmopoulou & Carlos Lamarche, 2015. "Project modifications and bidding in highway procurement auctions," FRB Atlanta Working Paper 2015-14, Federal Reserve Bank of Atlanta.
    6. Manuel J. García Rodríguez & Vicente Rodríguez Montequín & Francisco Ortega Fernández & Joaquín M. Villanueva Balsera, 2019. "Public Procurement Announcements in Spain: Regulations, Data Analysis, and Award Price Estimator Using Machine Learning," Complexity, Hindawi, vol. 2019, pages 1-20, November.
    7. Patrick L. Warren, 2014. "Contracting officer workload, incomplete contracting, and contractual terms," RAND Journal of Economics, RAND Corporation, vol. 45(2), pages 395-421, June.
    8. Andrey V. Tkachenko & Andrei A. Yakovlev & Olga A. Demidova & Irina O. Volmenskikh, 2014. "The Effects Of Regulatory Reforms On Public Procurement: The Case Of A National University In Russia," HSE Working papers WP BRP 19/PA/2014, National Research University Higher School of Economics.
    9. Šumpíková Markéta & Ďurčeková Ina, 2019. "Transaction Costs, Outsourcing, and the Public Procurement Review Process in the Czech Republic and Slovakia," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 12(2), pages 233-250, December.
    10. Nyström, Johan & Wikström, Daniel, 2019. "Empirical analysis of unbalanced bidding on Swedish roads," Working Papers 2019:4, Swedish National Road & Transport Research Institute (VTI).
    11. Jongeneel, Roel & Polman, Nico, 2014. "Farmer groups as a device to ensure the provision of green services in the Netherlands: a political economy perspective," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186674, European Association of Agricultural Economists.
    12. Jongeneel, Roel & Pollman, Nico, 2014. "Farmer groups as a device to ensure the provision of green services in the Netherlands: a political economy perspective," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186379, European Association of Agricultural Economists.
    13. Klara Granheimer & Per-Erik Eriksson & Tina Karrbom Gustavsson, 2022. "Adaptability in Public Procurement of Engineering Services Promoting Carbon Reduction: An Organizational Control Perspective," Sustainability, MDPI, vol. 14(10), pages 1-18, May.
    14. Jiancai Pi, 2021. "An investigation of seeming favoritism in public procurement," Manchester School, University of Manchester, vol. 89(1), pages 128-137, January.
    15. Nilsson, Jan-Eric, 2012. "Procurement and contract design in the construction industry: … not one size fits all," Working papers in Transport Economics 2012:26, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
    16. Štěpán Veselý & Mirko Dohnal, 2012. "Decision making in goverment tenders: A formalized qualitative model," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(4), pages 397-406.
    17. Miguel Vazquez & Michelle Hallack, 2017. "Efficiency versus transaction costs in multidimensional auctions: the case of Brazilian oil and gas lease auctions," IEFE Working Papers 94, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    18. He, Chusu & Milne, Alistair & Ataullah, Ali, 2023. "What explains delays in public procurement decisions?," Economic Modelling, Elsevier, vol. 121(C).
    19. Grega Matus & Orviska Marta & Nemec Juraj & Lawson Colin, 2019. "Factors Determining the Efficiency of Slovak Public Procurement," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 12(1), pages 43-68, June.
    20. Andrey Yakovlev & Andrey Tkachenko & Olga Demidova & Olga Balaeva, 2013. "An impact of different regulatory regimes on the effectiveness of public procurement," HSE Working papers WP BRP 08/PA/2013, National Research University Higher School of Economics.
    21. Ram Singh, 2018. "Public–private partnerships vs. traditional contracts for highways," Indian Economic Review, Springer, vol. 53(1), pages 29-63, December.

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    More about this item

    Keywords

    Public procurement; Fixed-price contracts; Cost-plus contracts; Auctions; Negotiations; Adaptation costs;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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