IDEAS home Printed from https://ideas.repec.org/a/kap/jtecht/v42y2017i5d10.1007_s10961-016-9477-4.html
   My bibliography  Save this article

Evaluating quality or lowest price: consequences for small and medium-sized enterprises in public procurement

Author

Listed:
  • Johan Stake

    (Södertörn University)

Abstract

This study investigates the effect of evaluating the most economically advantageous tender (MEAT) in public procurement rather than lowest price. According to the European Union (EU), evaluations based on MEAT, rather than lowest price, give an advantage to small and medium-sized enterprises (SMEs) in winning public procurement contracts because such firms are viewed as sources of innovation. Thus, MEAT as an evaluation criterion is recommended throughout the EU. Using procurement data from Sweden, I find no significant effect on SME participation in procurement calls for tender as a result of the use of MEAT in firm evaluations. However, large firms significantly increase their participation when MEAT is evaluated. Even more importantly, micro, small and medium-sized firms’ probability of winning procurement contracts significantly decreases when MEAT rather than lowest price is used as an evaluative criterion. Thus, evaluation in terms of MEAT increases large firms’ bids and success rates; hence, this policy is counterproductive. The reasons SMEs are disadvantaged as a result of evaluations based on MEAT are, however, not examined in this paper and require further research.

Suggested Citation

  • Johan Stake, 2017. "Evaluating quality or lowest price: consequences for small and medium-sized enterprises in public procurement," The Journal of Technology Transfer, Springer, vol. 42(5), pages 1143-1169, October.
    • Handle: RePEc:kap:jtecht:v:42:y:2017:i:5:d:10.1007_s10961-016-9477-4
    DOI: 10.1007/s10961-016-9477-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10961-016-9477-4
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10961-016-9477-4?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. Edler, Jakob & Georghiou, Luke, 2007. "Public procurement and innovation--Resurrecting the demand side," Research Policy, Elsevier, vol. 36(7), pages 949-963, September.
    2. Stefano Iacus & Gary King & Giuseppe Porro, 2008. "Matching for Causal Inference Without Balance Checking," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1073, Universitá degli Studi di Milano.
    3. Elena Krasnokutskaya & Katja Seim, 2011. "Bid Preference Programs and Participation in Highway Procurement Auctions," American Economic Review, American Economic Association, vol. 101(6), pages 2653-2686, October.
    4. David Pickernell & Adrian Kay & Gary Packham & Christopher Miller, 2011. "Competing Agendas in Public Procurement: An Empirical Analysis of Opportunities and Limits in the UK for SMEs," Environment and Planning C, , vol. 29(4), pages 641-658, August.
    5. Aschhoff, Birgit & Sofka, Wolfgang, 2009. "Innovation on demand--Can public procurement drive market success of innovations?," Research Policy, Elsevier, vol. 38(8), pages 1235-1247, October.
    6. Castellacci, Fulvio, 2008. "Technology clubs, technology gaps and growth trajectories," Structural Change and Economic Dynamics, Elsevier, vol. 19(4), pages 301-314, December.
    7. Douglass C. North, 2005. "Introduction to Understanding the Process of Economic Change," Introductory Chapters, in: Understanding the Process of Economic Change, Princeton University Press.
    8. Knoeber, Charles R & Thurman, Walter N, 1994. "Testing the Theory of Tournaments: An Empirical Analysis of Broiler Production," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 155-179, April.
    9. Andrea Vaona & Mario Pianta, 2008. "Firm Size and Innovation in European Manufacturing," Small Business Economics, Springer, vol. 30(3), pages 283-299, March.
    10. Filippetti, Andrea & Archibugi, Daniele, 2011. "Innovation in times of crisis: National Systems of Innovation, structure, and demand," Research Policy, Elsevier, vol. 40(2), pages 179-192, March.
    11. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
    12. Pierre-Henri Morand, 2003. "SMEs and public procurement policy," Review of Economic Design, Springer;Society for Economic Design, vol. 8(3), pages 301-318, October.
    13. Fagerberg, Jan & Srholec, Martin, 2008. "National innovation systems, capabilities and economic development," Research Policy, Elsevier, vol. 37(9), pages 1417-1435, October.
    14. Fagerberg, Jan, 1994. "Technology and International Differences in Growth Rates," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1147-1175, September.
    15. Pierre-Henri Morand, 2003. "SMEs and public procurement policy," Review of Economic Design, Springer;Society for Economic Design, vol. 8(3), pages 301-318, October.
    16. Manelli, Alejandro M & Vincent, Daniel R, 1995. "Optimal Procurement Mechanisms," Econometrica, Econometric Society, vol. 63(3), pages 591-620, May.
    17. Georghiou, Luke & Edler, Jakob & Uyarra, Elvira & Yeow, Jillian, 2014. "Policy instruments for public procurement of innovation: Choice, design and assessment," Technological Forecasting and Social Change, Elsevier, vol. 86(C), pages 1-12.
    18. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-937, October.
    19. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    20. Kim Loader, 2011. "Are public sector procurement models and practices hindering small and medium suppliers?," Public Money & Management, Taylor & Francis Journals, vol. 31(4), pages 287-294, July.
    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. Peter Džupka & Matúš Kubák & Peter Nemec, 2020. "Sustainable Public Procurement in Central European Countries. Can It Also Bring Savings?," Sustainability, MDPI, vol. 12(21), pages 1-13, November.
    2. Obwegeser, Nikolaus & Müller, Sune Dueholm, 2018. "Innovation and public procurement: Terminology, concepts, and applications," Technovation, Elsevier, vol. 74, pages 1-17.
    3. Bernard Hoekman & Bedri Kamil Onur Taş, 2022. "Procurement policy and SME participation in public purchasing," Small Business Economics, Springer, vol. 58(1), pages 383-402, January.
    4. Matus Kubak & Peter Nemec & Robert Stefko & Marcel Volosin, 2023. "On competition and transparency in public procurement during the COVID-19 pandemic in the European Union," E&M Economics and Management, Technical University of Liberec, Faculty of Economics, vol. 26(2), pages 4-23, June.
    5. Knut Blind & Jakob Pohlisch & Anne Rainville, 2020. "Innovation and standardization as drivers of companies’ success in public procurement: an empirical analysis," The Journal of Technology Transfer, Springer, vol. 45(3), pages 664-693, June.

    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. Patrick GIANFALDONI & Pierre-Henri MORAND, 2015. "Incentives, Procurement and Regulation of Work Integration Social Enterprises in France: Old Ideas for New Firms?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(2), pages 199-219, June.
    2. Uyarra, Elvira & Zabala-Iturriagagoitia, Jon Mikel & Flanagan, Kieron & Magro, Edurne, 2020. "Public procurement, innovation and industrial policy: Rationales, roles, capabilities and implementation," Research Policy, Elsevier, vol. 49(1).
    3. Knut Blind & Jakob Pohlisch & Anne Rainville, 2020. "Innovation and standardization as drivers of companies’ success in public procurement: an empirical analysis," The Journal of Technology Transfer, Springer, vol. 45(3), pages 664-693, June.
    4. Daria Crisan, 2020. "Buying With Intent: Public Procurement for Innovation by Provincial and Municipal Governments," SPP Briefing Papers, The School of Public Policy, University of Calgary, vol. 13(18), July.
    5. Maréchal, François & Morand, Pierre-Henri, 2022. "Are social and environmental clauses a tool for favoritism? Analysis of French public procurement contracts," European Journal of Political Economy, Elsevier, vol. 73(C).
    6. Filippetti, Andrea & Archibugi, Daniele, 2011. "Innovation in times of crisis: National Systems of Innovation, structure, and demand," Research Policy, Elsevier, vol. 40(2), pages 179-192, March.
    7. Tas, Bedri Kamil Onur, 2020. "SME Participation in Public Purchasing: Procurement Policy Matters," CEPR Discussion Papers 14836, C.E.P.R. Discussion Papers.
    8. Elvira Uyarra & Kieron Flanagan & Edurne Magro & Jon Mikel Zabala-Iturriagagoitia, 2017. "Anchoring the innovation impacts of public procurement to place: The role of conversations," Environment and Planning C, , vol. 35(5), pages 828-848, August.
    9. Bernard Hoekman & Bedri Kamil Onur Taş, 2022. "Procurement policy and SME participation in public purchasing," Small Business Economics, Springer, vol. 58(1), pages 383-402, January.
    10. Pierre-Henri Morand & François Maréchal, 2021. "Are social and environmental clauses a tool for favoritism? Analysis of French public procurement contracts ," Post-Print hal-03418572, HAL.
    11. Ghisetti, Claudia, 2017. "Demand-pull and environmental innovations: Estimating the effects of innovative public procurement," Technological Forecasting and Social Change, Elsevier, vol. 125(C), pages 178-187.
    12. Castellacci, Fulvio & Natera, Jose Miguel, 2013. "The dynamics of national innovation systems: A panel cointegration analysis of the coevolution between innovative capability and absorptive capacity," Research Policy, Elsevier, vol. 42(3), pages 579-594.
    13. Quintero Jaramillo, Jose E., 2004. "Liquidity constraints and credit subsidies in auctions," DEE - Working Papers. Business Economics. WB wb040604, Universidad Carlos III de Madrid. Departamento de Economía de la Empresa.
    14. Jan Boone & Christoph Schottmüller, 2016. "Procurement with specialized firms," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 661-687, August.
    15. Tammi, Timo & Saastamoinen, Jani & Reijonen, Helen, 2020. "Public procurement as a vehicle of innovation – What does the inverted-U relationship between competition and innovativeness tell us?," Technological Forecasting and Social Change, Elsevier, vol. 153(C).
    16. Barbosa, Klenio & Boyer, Pierre C., 2021. "Discrimination in Dynamic Procurement Design with Learning-by-doing," International Journal of Industrial Organization, Elsevier, vol. 77(C).
    17. Pierre-Henri Morand & François Maréchal, 2021. "Achats responsables et achat local : théorie et enseignements des données ouvertes françaises," Post-Print hal-03392039, HAL.
    18. Candelaria Barrios & Esther Flores & M. Ángeles Martínez & Marta Ruiz-Martínez, 2023. "Are the Major Knowledge-producing Countries Converging in Science and Technology Capabilities?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4534-4560, December.
    19. Castelnovo, Paolo & Clò, Stefano & Florio, Massimo, 2023. "A quasi-experimental design to assess the innovative impact of public procurement: An application to the Italian space industry," Technovation, Elsevier, vol. 121(C).
    20. Peter Bogetoft & Kurt Nielsen, 2002. "DEA Based Yardstick Competition in Natural Resource Management," CIE Discussion Papers 2002-04, University of Copenhagen. Department of Economics. Centre for Industrial Economics.

    More about this item

    Keywords

    Public procurement; SMEs; Innovation; Quality evaluation; Most economically advantageous tender;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

    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:kap:jtecht:v:42:y:2017:i:5:d:10.1007_s10961-016-9477-4. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.