Competition for Procurement Shares

We propose a new procurement procedure which allocates shares of the total amount to be procured depending on the bids of suppliers. Among the properties of the mechanism are: (i) Bidders have an incentive to participate in the procurement procedure, as equilibrium payos are strictly positive. (ii) The mechanism allows to vary the extent to which armative action objectives, like promoting local industries, are pursued. (iii) Surprisingly, even accomplishing armative action goals, procurement expenditures might be lower than under a classical auction format.Procurement Auction; Armative Action

Competition for procurement shares

We propose a new procurement procedure which allocates shares of the total amount to be procured depending on the bids of suppliers. Among the properties of the mechanism are: (i) Bidders have an incentive to participate in the procurement procedure, as equilibrium payoffs are strictly positive. (ii) The mechanism allows to vary the extent to which affirmative action objectives, like promoting local industries, are pursued. (iii) Surprisingly, even accomplishing affirmative action goals, procurement expenditures might be lower than under a classical auction format

Optimal Service-Based Competition with Heterogeneous Suppliers

We investigate how a competition can be designed to maximize expected profit for a buyer who wishes to allocate demand among a diverse set of suppliers when his profit is dependent on the supplier’s service levels. The candidate suppliers are heterogeneous in their capacities and cost structures, and compete for shares of the buyer’s demand based on their promised service levels. To characterize the optimal competition, we first identify a family of allocation functions that are service maximizing, meaning they can intensify the competition to a point where each supplier provides its maximum feasible service level and the outcome of the competition is a predefined set of demand shares. We show that using a service maximizing allocation function is a necessary condition for solving the buyer’s problem. We then characterize the optimal demand allocation set and, when they are endogenous, the optimal procurement prices. When both demand allocation and procurement prices can be chosen by the buyer, we find that the competition also maximizes supply chain profit. Through a set of numerical examples, we show that the benefit of using this optimal competition design, including its specified demand allocation function and suggested procurement prices, can be significant

Public Procurement in Developing Countries: Objectives, Principles and Required Professional Skills

Over the last fifteen (15) years, developing countries have continued to reform their public procurement in an attempt to increase competition, transparency, accountability and value for money. However, the significance of these reforms is not fully appreciated and compliance appears to be inconsistent since the reforms are treated as guidance for optimal implementation rather than a requirement tied to the provision of funding. Therefore, this paper is based on the literature review and the author experience in public sector procurement. The paper is organized in the following manner; it begins with detailed description of public procurement then discusses the procurement objectives and principles. The author also shares very pertinent professional skills required from the procurement stakeholders so as to impact the procurement process. The author concludes that, achieving best procurement practice depends widely on leadership and competence of the procurement stakeholders in the organization. As a result, procurement officers should understand all the procurement objectives and principles since it all encompasses the concepts of efficiency and effective procurement, transparency, accountability, competitiveness, confidentiality, non-discrimination and fairness. Keywords: Public Procurement, Procurement Systems, Procurement Objectives, Principles and Professionalis

Unsound strategic bidding and the competition perspective

Public procurement represents almost 17 % of the EUs gross domestic product (GDP) which is why it is important to understand what unsound strategic bidding (UNSB) is and what the consequences could be if not prevented. Furthermore, it is often bigger companies that are willing to take the risk that comes with utilizing UNSB. If such UNSB is not prevented it will probably distort competition in the long run. At first it will probably cause the prices to get lower on the market for the contracting authorities; but, later on it will enable bigger companies to expand and acquire larger market shares and finally cause fewer players in particular markets. So the question that arises is, how can this situation be prevented? UNSB isn’t per se illegal, at the moment. But, as this thesis will argue, competition will be distorted if UNSB is not prevented and, therefore, the legislator should overlook the interaction between competition and public procurement. The Swedish public procurement act (LOU) is a procedural law that explains how the contracting authorities should execute a procurement procedure and there are certain remedies in order to stop certain types of the UNSB behaviour, if they become noticed. But, how can the UNSB types that are not solved by LOU be prevented? In my opinion competition law could be a solution. Competition law will discourage companies from using bid rigging and all other sorts of anti-competitive agreements that could occur under a public procurement procedure. My opinion is that these two systems should coordinate with each other to ensure effective competition. Furthermore, it should be noted that all UNSB problems cannot be prevented, currently, under LOU and therefore there is a need to educate the personnel at the contracting authorities so as they might detect such UNSB behaviours as well as to do competition assessments. These potential remedies wouldprevent the UNSB behaviours before they occur. Notably, the remedies that are under LOU, especially those for exclusion of a supplier and rejection of abnormally low tenders, are needed to be coordinated with the provisions under competition law especially ch. 2 § 1 and 7 in the Swedish competition act in order for the prevention to be successful

Challenges to Slovakia and Poland health policy decisions: use of investment treaties to claim compensation for reversal of privatisation/liberalisation policies

Investment treaties, and possibly the EU Treaty itself, are being used by multinational companies Penta and Eureko to try and force the Slovak government to pay compensation for reversing health privatisation and liberalisation policies. Similar action has been used against the Polish government by Eureko to win compensation worth nearly 2 billion Euros and a policy commitment to further privatisation

The economics of defence in France and the UK

France and the UK face similar geostrategic circumstances: both were once Great Powers and still retain their positions among the five permanent members of the UN Security Council. During the Cold War both were dwarfed by the super-powers and were thus extremely sensitive about their status: what the French called their grandeur and the British called their seat at the top table. Despite their strategic similarities, they have differed in many of their defence policy choices and in particular how they balanced their strategic aspirations with their limited financial resources. Thus a comparison of British and French defence policies provides a revealing case study of military choices

Product market reform and innovation in the EU

European Union countries have implemented widespread reforms to productmarkets in order to stimulate competition, innovation and economic growth. We provideempirical evidence that the reforms carried out under the EU Single Market Programme(SMP) were associated with increased product market competition, as measured by areduction in average profitability, and with a subsequent increase in innovation intensityand productivity growth for manufacturing sectors. In our analysis we exploit exogenousvariation in the expected impact of the SMP across countries and industries to identify theeffects of reforms on average profitability, and the effects of profitability on innovationand productivity growth. European Union countries have implemented widespread reforms to productmarkets in order to stimulate competition, innovation and economic growth. We provideempirical evidence that the reforms carried out under the EU Single Market Programme(SMP) were associated with increased product market competition, as measured by areduction in average profitability, and with a subsequent increase in innovation intensityand productivity growth for manufacturing sectors. In our analysis we exploit exogenousvariation in the expected impact of the SMP across countries and industries to identify theeffects of reforms on average profitability, and the effects of profitability on innovationand productivity growth

Bidding markets with financial constraints

We develop a model of bidding markets with financial constraints a la Che and Gale (1998b) in which two firms optimally choose their budgets. First, we provide an alternative explanation for the dispersion of markups and “money left on the table” across procurement auctions. Interestingly, this explanation does not hinge on significant private information but on differences, both endogenous and exogenous, in the availability of financial resources. Second, we explain why the empirical analysis of the size of markups may be biased downwards or upwards with a bias positively correlated with the availability of financial resources when the researcher assumes that the data are generated by the standard auction model. Third, we show that large concentration and persistent asymmetries in market shares together with occasional leadership reversals can arise as a consequence of the firms internal financial decisions even in the absence of exogenous shocks