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Small business participation procurement policy: Subcontracting vs Allotment

Author

Listed:
  • François MARECHAL

    (University of Franche-Comté, CRESE)

  • Pierre-Henri MORAND

    (University of Franche-Comté, CRESE)

Abstract

Allotment and subcontracting are the two procedures enabling small businesses to participate in procurement. We compare these two procedures in the context of a procurement contract awarded by a first-price sealed-bid auction. We assume that the public buyer wishes to fulfil two different goals: to minimize expected costs of the contract for the public buyer and to maximize small businesses’ profit. We show that, under specific cost-technology conditions we determine, the allotment procedure not only enables extensive participation by small businesses but also can achieve the goal of minimizing expected total costs for the public buyer.

Suggested Citation

  • François MARECHAL & Pierre-Henri MORAND, 2012. "Small business participation procurement policy: Subcontracting vs Allotment," Discussion Papers (REL - Recherches Economiques de Louvain) 2012021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvre:2012021
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    Cited by:

    1. Julie Brux & Claudine Desrieux, 2014. "To allot or not to allot public services? An incomplete contract approach," European Journal of Law and Economics, Springer, vol. 37(3), pages 455-476, June.

    More about this item

    Keywords

    Small Business; Auction; Procurement;

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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