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Disadvantaged Business Enterprise Goals in Government Procurement Contracting: An Analysis of Bidding Behavior and Costs.

By Dakshina G. De Silva, Timothy Dunne, Georgia Kosmopoulou and Carlos Lamarche


Programs that encourage the participation of disadvantaged business enterprises (DBE) as subcontractors have been a part of government procurement auctions for over three decades. This paper examines the impact of DBE programs on highway procurement auctions. We study how DBE subcontracting requirements affect bidding behavior in federally funded projects. Specifically, these rules require prime contractors to subcontract out a portion of a project to a DBE. Within a symmetric independent private value framework, we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals. We then use nonparametric estimation methods to uncover and compare the cost of firms bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between auctions that have subcontracting goals and those that do not

Topics: JEL Classi…cation, H4, H57, D44. Keywords, Government procurement, auctions. The authors would like to thank Andrés Aradillas-López, Han Hong, Joakim G. Laguros, Lawrence J. White and
Year: 2010
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