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Contract Size and Small Firm Competition in Public Procurement

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  • Strömbäck, Elon

    (Department of Economics, Umeå School of Business and Economics)

Abstract

The European Commission encourages public authorities to split procurement contracts into multiple contracts in order to increase the competiveness of small and medium sized enterprises (SMEs). In this paper, I use data from Swedish public procurement auctions for internal regular cleaning service contracts to study the effect of contract size and number of contracts on SME participation and the probability of submitting the winning bid. I found that SME participation is negatively related to both contract size and the number of contracts in the procurement. A possible interpretation is that reduced contract size in order to stimulate SME participation is counteracted by reduced incentives for them to enter into procurements with multiple contracts. Medium-sized firms are also more successful when bidding for smaller contracts relative to large firms. Nevertheless, the results indicate that the SMEs’ award rate is positively correlated with the number of contracts in the procurement.

Suggested Citation

  • Strömbäck, Elon, 2015. "Contract Size and Small Firm Competition in Public Procurement," Umeå Economic Studies 914, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0914
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    File URL: http://www.usbe.umu.se/enheter/econ/ues/ues914/
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    More about this item

    Keywords

    Procurement design; Split-award; Endogenous entry; Small and medium sized enterprises;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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