(Un)Bundling Infrastructure Procurement: Evidence from Water Supply and Sewage Projects
AbstractCompetition in public procurement auctions in the water supply and sanitation sector is largely limited. This is partly because of high technical complexity and partly because of auction design flaws. The division of lot contracts is an important policy choice for auctioneers to achieve efficiency. In general, there is a tradeoff between competition in auctions and size of contracts. Larger works could benefit from economies of scale and scope, but, large contracts might undermine competition. With the data on public procurement auctions for water and sewage projects in developing countries, it is shown that the bidder entry is crucially endogenous, especially determined by the auctioneer’s bundling and unbundling strategy. If water treatment plant and distribution network works are bundled in a single lot package, competition would be significantly reduced, and this adverse entry effect would in turn raise public procurement costs of infrastructure. There is no evidence of positive scope economies in the bidder cost structure. It is important to account for the underlying cost structure for designing efficient auction mechanisms.
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Bibliographic InfoPaper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number 2009_007.
Length: 19 p.
Date of creation: 2009
Date of revision:
Publication status: Published by:
Public procurement; auction theory; infrastructure development; governance;
Other versions of this item:
- Estache, Antonio & Iimi, Atsushi, 2011. "(Un)bundling infrastructure procurement: Evidence from water supply and sewage projects," Utilities Policy, Elsevier, vol. 19(2), pages 104-114, June.
- Estache, Antonio & Iimi, Atsushi, 2009. "(UN)Bundling infrastructure procurement : evidence from water supply and sewage projects," Policy Research Working Paper Series 4854, The World Bank.
- D44 - Microeconomics - - Market Structure and Pricing - - - Auctions
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
- H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
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