IDEAS home Printed from https://ideas.repec.org/a/eee/transa/v136y2020icp194-204.html
   My bibliography  Save this article

Competitive tendering, ownership and cost efficiency in road maintenance services in Sweden: A panel data analysis

Author

Listed:
  • Yarmukhamedov, Sherzod
  • Smith, Andrew S.J.
  • Thiebaud, Jean-Christophe

Abstract

This paper uses econometric methods to study the cost efficiency of road maintenance provision in Sweden for the first time. The novelty lies in the application of econometric techniques to a new and rich panel dataset (73 contracts; 11 years, 2004–2014) with a wide range of variables and approaches to controlling for heterogeneity (including weather variation). The analysis is applied in the context of a sector where all road maintenance contracts are subject to competitive tendering, but with a state-run provider competing against private firms. The key focus is whether, even after competitive tendering, efficiency differences remain between the state provider and private entrants. We find that the state-run provider has significantly higher costs (between 8 and 20%) than private firms despite holding 60% of the market. The results suggest that substantial savings are possible through opening up road maintenance to the private sector through competition for the market; but that in Sweden, the tendering process is still not working optimally. Further research is needed to understand why the current cost gap persists between public and private providers, despite competitive tendering having been present across the whole market for several years.

Suggested Citation

  • Yarmukhamedov, Sherzod & Smith, Andrew S.J. & Thiebaud, Jean-Christophe, 2020. "Competitive tendering, ownership and cost efficiency in road maintenance services in Sweden: A panel data analysis," Transportation Research Part A: Policy and Practice, Elsevier, vol. 136(C), pages 194-204.
    • Handle: RePEc:eee:transa:v:136:y:2020:i:c:p:194-204
    DOI: 10.1016/j.tra.2020.03.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0965856419308018
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.tra.2020.03.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-750, July.
    2. Blom-Hansen, Jens, 2003. "Is Private Delivery of Public Services Really Cheaper? Evidence from Public Road Maintenance in Denmark," Public Choice, Springer, vol. 115(3-4), pages 419-438, June.
    3. Anastasopoulos, Panagiotis Ch. & Florax, Raymond J.G.M. & Labi, Samuel & Karlaftis, Mathew G., 2010. "Contracting in highway maintenance and rehabilitation: Are spatial effects important?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 44(3), pages 136-146, March.
    4. Luis Ignacio Rizzi, 2014. "Simple Model of Road Infrastructure Financing The Impact of Different Funding Schemes," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 35-51, January.
    5. Sally Burningham & Natalya Stankevich, 2005. "Why Road Maintenance is Important and How to Get it Done," World Bank Publications - Reports 11779, The World Bank Group.
    6. Elena Krasnokutskaya, 2004. "Identification and Estimation in Highway Procurement Auctions under Unobserved Auction Heterogeneity," PIER Working Paper Archive 05-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    7. Heike Link, 2014. "A Cost Function Approach for Measuring the Marginal Cost of Road Maintenance," Journal of Transport Economics and Policy, University of Bath, vol. 48(1), pages 15-33, January.
    8. Jonathan Levin & Steven Tadelis, 2010. "Contracting For Government Services: Theory And Evidence From U.S. Cities," Journal of Industrial Economics, Wiley Blackwell, vol. 58(3), pages 507-541, September.
    9. Link, Heike, 2006. "An econometric analysis of motorway renewal costs in Germany," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 19-34, January.
    10. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1127-1161.
    11. Ingemar Ahlstrand, 2001. "The Politics and Economics of Transport Investment and Pricing in Stockholm," Journal of Transport Economics and Policy, University of Bath, vol. 35(3), pages 473-489, September.
    12. David Levinson, 2005. "Paying for the Fixed Costs of Roads," Journal of Transport Economics and Policy, University of Bath, vol. 39(3), pages 279-294, September.
    13. Stephen Perkins, 2013. "Better Regulation of Public-Private Partnerships for Transport Infrastructure: Summary and Conclusions," International Transport Forum Discussion Papers 2013/6, OECD Publishing.
    14. Caves, Douglas W & Christensen, Laurits R, 1980. "The Relative Efficiency of Public and Private Firms in a Competitive Environment: The Case of Canadian Railroads," Journal of Political Economy, University of Chicago Press, vol. 88(5), pages 958-976, October.
    15. Wheat, Phill, 2017. "Scale, quality and efficiency in road maintenance: Evidence for English local authorities," Transport Policy, Elsevier, vol. 59(C), pages 46-53.
    16. Bossche, Marten van den & Certan, Corina & Veldman, Simme & Nash, Chris & Matthews, Bryan, 2005. "Measuring Marginal Social Cost: Methods, Transferability," Research in Transportation Economics, Elsevier, vol. 14(1), pages 287-314, January.
    17. Gerhard Munduch & Alexander Pfister & Leopold Sögner & Alfred Stiassny, 2002. "Estimating Marginal Costs for the Austrian Railway System," Department of Economics Working Papers wuwp078, Vienna University of Economics and Business, Department of Economics.
    18. Andrej Christian Lindholst & Ole Helby Petersen & Kurt Houlberg, 2018. "Contracting out local road and park services: economic effects and their strategic, contractual and competitive conditions," Local Government Studies, Taylor & Francis Journals, vol. 44(1), pages 64-85, January.
    19. Domberger, S & Meadowcroft, S & Thompson, D J, 1986. "Competitive tendering and efficiency: the case of refuse collection," Fiscal Studies, Institute for Fiscal Studies, vol. 7(4), pages 69-87, November.
    20. Massiani, Jerome & Ragazzi, Giorgio, 2008. "Costs and efficiency of highway concessionaires: a survey of Italian operators," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 38, pages 85-106.
    21. Welde, Morten & Odeck, James, 2011. "The efficiency of Norwegian road toll companies," Utilities Policy, Elsevier, vol. 19(3), pages 162-171.
    22. Munduch, Gerhard & Pfister, Alexander & Sögner, Leopold & Stiassny, Alfred, 2002. "Estimating marginal costs for the Austrian railway system," Department of Economics Working Paper Series 78, WU Vienna University of Economics and Business.
    23. Nyström, Johan & Nilsson, Jan-Eric & Lind, Hans, 2016. "Degrees of freedom and innovations in construction contracts," Transport Policy, Elsevier, vol. 47(C), pages 119-126.
    24. Odeck, James, 2014. "Do reforms reduce the magnitudes of cost overruns in road projects? Statistical evidence from Norway," Transportation Research Part A: Policy and Practice, Elsevier, vol. 65(C), pages 68-79.
    25. Domberger, S & Meadowcroft, S & Thompson, D, 1987. "The impact of competitive tendering on the costs of hospital domestic services," Fiscal Studies, Institute for Fiscal Studies, vol. 8(4), pages 39-54, November.
    26. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    27. Henrik Hammar & Tommy Lundgren & Magnus Sjöström, 2008. "The Significance of Road Transport Costs in the Swedish Forest Industry," Journal of Transport Economics and Policy, University of Bath, vol. 42(1), pages 83-104, January.
    28. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    29. Chris Nash & Tom Sansom, 2001. "Pricing European Transport Systems: Recent Developments and Evidence from Case Studies," Journal of Transport Economics and Policy, University of Bath, vol. 35(3), pages 363-380, September.
    30. Ricardo Gonçalves & António Gomes, 2012. "Maintenance Incentives in Highway Concession Contracts," Journal of Transport Economics and Policy, University of Bath, vol. 46(1), pages 99-122, January.
    31. Patrick Bajari & Stephanie Houghton & Steven Tadelis, 2014. "Bidding for Incomplete Contracts: An Empirical Analysis of Adaptation Costs," American Economic Review, American Economic Association, vol. 104(4), pages 1288-1319, April.
    32. Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Papers 97, National Institute of Economic Research.
    33. Fallah-Fini, Saeideh & Triantis, Konstantinos & de la Garza, Jesus M. & Seaver, William L., 2012. "Measuring the efficiency of highway maintenance contracting strategies: A bootstrapped non-parametric meta-frontier approach," European Journal of Operational Research, Elsevier, vol. 219(1), pages 134-145.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kim, Sunuk & Oh, Han Jin & Han, Sang Ju & Ko, Han Seo & Shin, Youhwan & Shin, Dong Ho, 2022. "Development of black-ice removal system with latent heat thermal energy storage and solar thermal collectors," Energy, Elsevier, vol. 244(PA).
    2. Baños-Pino, José F. & Boto-García, David & Zapico, Emma, 2021. "Persistence and dynamics in the efficiency of toll motorways: The Spanish case," Efficiency Series Papers 2021/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    3. Baños-Pino, José F. & Boto-García, David & Zapico, Emma, 2022. "Persistence and dynamics in the efficiency of toll motorways: The Spanish case," Economics of Transportation, Elsevier, vol. 31(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andrew S. J. Smith & Jan-Eric Nilsson & Ivan Ridderstedt & Oskar Johansson, 2023. "Efficiency measurement in the tendering of road surface renewal contracts," Journal of Productivity Analysis, Springer, vol. 60(2), pages 189-202, October.
    2. Paul H. Jensen & Robin E. Stonecash, 2004. "The Efficiency of Public Sector Outsourcing Contracts: A Literature Review," Melbourne Institute Working Paper Series wp2004n29, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    3. Andersson, Fredrik & Jordahl, Henrik, 2011. "Outsourcing Public Services: Ownership, Competition, Quality and Contracting," Working Paper Series 874, Research Institute of Industrial Economics.
    4. Alena Podaneva & Pierre Picard, 2023. "Facility Management Services in UK Hospitals: in-house or outsourcing," DEM Discussion Paper Series 23-15, Department of Economics at the University of Luxembourg.
    5. Paul H. Jensen & Robin E. Stonecash, 2005. "Incentives and the Efficiency of Public Sector‐outsourcing Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 767-787, December.
    6. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    7. Phill Wheat & Alexander D. Stead & William H. Greene, 2019. "Robust stochastic frontier analysis: a Student’s t-half normal model with application to highway maintenance costs in England," Journal of Productivity Analysis, Springer, vol. 51(1), pages 21-38, February.
    8. Lamar Pierce & Michael W. Toffel, 2013. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Organization Science, INFORMS, vol. 24(5), pages 1558-1584, October.
    9. Germà Bel & Xavier Fageda, 2008. "Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis," Working Papers XREAP2008-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2008.
    10. Andersson, Mats, 2011. "Marginal cost of railway infrastructure wear and tear for freight and passenger trains in Sweden," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 48, pages 3-23.
    11. Jean Beuve & Marian W Moszoro & Pablo T Spiller, 2023. "Doing It by the Book: Political Contestability and Public Contract Renegotiations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 39(1), pages 281-308.
    12. Athias, Laure & Wicht, Pascal, 2014. "Cultural Biases in Public Service Delivery: Evidence from a Regression Discontinuity Approach," MPRA Paper 60639, University Library of Munich, Germany.
    13. Elisabetta IOSSA & Stephane SAUSSIER, 2018. "Public Private Partnerships In Europe For Building And Managing Public Infrastructures: An Economic Perspective," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 25-48, March.
    14. repec:bla:annpce:v:89:y:2018:i:1:p:25-48 is not listed on IDEAS
    15. Matias Busso & Sebastian Galiani, 2019. "The Causal Effect of Competition on Prices and Quality: Evidence from a Field Experiment," American Economic Journal: Applied Economics, American Economic Association, vol. 11(1), pages 33-56, January.
    16. Müller, Gernot, 2006. "Zur Ökonomie von Trassenpreissystemen," WIK Discussion Papers 279, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    17. Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 349-372.
    18. Lamar Pierce & Michael W. Toffel, 2010. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Harvard Business School Working Papers 11-004, Harvard Business School, revised Feb 2012.
    19. Giorgio Zanarone, 2012. "Coase (1937) revisited: Endogenous fiat in firms and markets," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(2), pages 201-221, July.
    20. Lazzarini,Sergio G., 2022. "The Right Privatization," Cambridge Books, Cambridge University Press, number 9781316519714.
    21. Thomas S. Conkling, 2020. "Compliance and competition with heterogeneous service providers: the federal Lifeline program," Journal of Regulatory Economics, Springer, vol. 57(1), pages 74-104, February.

    More about this item

    Keywords

    Road maintenance; Cost efficiency; Competitive tendering; Unbalanced bidding; Ownership; Unobserved heterogeneity; Tendering;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:transa:v:136:y:2020:i:c:p:194-204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/547/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.