Introducing E-Procurement in Bangladesh: The Promise of Efficiency and Openness

Governments around the world spend about one-third of their budgets through public procurementsystems where electronic administration of public tenders promises great benefits. However, surprisingly little isknown about how, under which circumstances, and through which features electronic systems work. To address thesequestions, this paper looks at the introduction of an electronic procurement system compared to a fullypaper-based system in Bangladesh in 2011–16. The impact of the electronic procurement system on access to publictenders, their economy, and administrative efficiency is estimated. Contracts were matched both within procuringentities and years, and fixed effects regressions were runto address biases emanating from nonrandom assignment to treatment. The findings show an overwhelmingly positiveimpact. Access improves, with the number of bidders increasing by 1.6–2.2 and the probability of a single bidderdecreasing by 7.8–13.5 percentage points. Economy also improves as discounts firms offer increase by 7.4–8.0percentage points. Administrative efficiency greatly improves too: the total time of processing a tender—startingfrom the public call for tenders to contract signature—drops by 15.6–19.2 days. However, it is possible that lowperformance and rent-seeking were displaced to the contract implementation phase, which remained principallypaper-administered. These results indicate that the government directly saved US$460 million to US$513 millionin the analyzed electronic tenders, largely due to increased winning rebates and lower advertising costs. Considering theindirect macro effects, the introduction of electronic procurement increased Bangladesh’s gross domestic product by0.48 to 0.54 percent, or US$1.4 billion to US$1.6 billion in 2019.