Bidder asymmetry in infrastructure procurement : are there any fringe bidders ?

Asymmetric auctions are among the most rapidly growing areas in the auction literature. The potential benefits from improved auction efficiency are expected to be enormous in public procurement auctions related to official development projects. Entrant bidders are considered a key to enhance competition in an auction and break potential collusive arrangements among incumbent bidders. Asymmetric auction theory predicts that weak (fringe) bidders would bid more aggressively when they are faced with a strong (incumbent) opponent. Using official development assistance procurement data, this paper finds that in the major infrastructure sectors, entrants submitted systematically aggressive bids in the presence of an incumbent bidder. The findings also show that a high concentration of incumbents in an auction would harm auction efficiency, raising procurement costs. The results suggest that auctioneers should encourage fringe bidders to actively participate in the bidding process while maintaining the quality of the projects. This is conducive to enhancing competitive circumstances in public procurements and improving allocative efficiency.Investment and Investment Climate,Government Procurement,Debt Markets,E-Business,Infrastructure Economics

Joint bidding in infrastructure procurement

To utilize public resources efficiently, it is required to take full advantage of competition in public procurement auctions. Joint bidding practices are one of the possible ways of facilitating auction competition. In theory, there are pros and cons. It may enable firms to pool their financial and experiential resources and remove barriers to entry. On the other hand, it may reduce the degree of competition and can be used as a cover for collusive behavior. The paper empirically addresses whether joint bidding is pro- or anti-competitive in Official Development Assistance procurement auctions for infrastructure projects. It reveals the possible risk of relying too much on a foreign bidding coalition and may suggest the necessity of overseeing it. The data reveal no strong evidence that joint bidding practices are compatible with competition policy, except for a few cases. In road procurements, coalitional bidding involving both local and foreign firms has been found pro-competitive. In the water and sewage sector, local joint bidding may be useful to draw out better offers from potential contractors. Joint bidding composed of only foreign companies is mostly considered anti-competitive.Investment and Investment Climate,ICT Policy and Strategies,Markets and Market Access,Public Sector Corruption&Anticorruption Measures,Access to Markets

Managing suppliers for collection development: the UK higher education perspective

This chapter follows the adoption of the new procurement discipline by academic libraries since the demise of the NBA. It first examines the standard procurement cycle, with particular reference to libraries and book supply. It then discusses library purchasing consortia and their contribution to managing and developing the library market place for books, identifying three phases of operation. It closes with some reflections on the future prospects of collection development. Traditional collection development is seen as being turned on its head – we no longer seek to collect the huge range of works of scholars of all other institutions in order to make them available to the (relatively) small number of our own scholars; instead we collect the works of our own and make them available to all

Location-Based Preferences in Federal and Federally Funded Contracting: An Overview of the Law

[Excerpt] The recession that began in December 2007 has prompted increased interest among some Members of Congress and their constituents in legal authorities that could require or allow federal agencies to prefer contractors in one state or locality over those in other states or localities. Federal spending on procurement contracts has remained high, reaching $523.9 billion in FY2009, at a time when many other businesses have scaled back their purchases of goods and services. However, this spending has historically been localized in three to five states, which receive nearly half of all federal procurement dollars, prompting concerns about whether other states receive their “fair share.” Such concerns may be overstated, given that many contracts must be performed in or near Washington, DC, and shifting the place of performance of existing contracts from one state to another would generally not decrease overall unemployment. Nonetheless, geographic distribution of federal spending and federal funding is often a concern during economic downturns. This report discusses constitutional and other legal issues related to the creation and implementation of location-based preferences in federal contracting, as well as summarizes key authorities requiring or allowing federal agencies to “favor” contractors located in specific places. The report does not address federal preferences for domestic products or provisions of federal law that could, depending upon their implementation, effectively prefer local contractors, such as project labor agreements

Managing at the Speed of Light: Improving Mission-Support Performance

The House and Senate Energy and Water Development Appropriations Subcommittees requested this study to help DOE's three major mission-support organizations improve their operations to better meet the current and future needs of the department. The passage of the Recovery Act only increased the importance of having DOE's mission-support offices working in the most effective, efficient, and timely manner as possible. While following rules and regulations is essential, the foremost task of the mission-support offices is to support the department's mission, i.e., the programs that DOE is implementing, whether in Washington D.C. or in the field. As a result, the Panel offered specific recommendations to strengthen the mission-focus and improve the management of each of the following support functions based on five "management mandates":- Strategic Vision- Leadership- Mission and Customer Service Orientation- Tactical Implementation- Agility/AdaptabilityKey FindingsThe Panel made several recommendations in each of the functional areas examined and some overarching recommendations for the corporate management of the mission-support offices that they believed would result in significant improvements to DOE's mission-support operations. The Panel believed that adopting these recommendations will not only make DOE a better functioning organization, but that most of them are essential if DOE is to put its very large allocation of Recovery Act funding to its intended uses as quickly as possible

Three Essays on Public Procurement

Abstract The following dissertation presents three essays on the theory and empirics of public procurement—the process by which government defines its needs for goods and services and acquires them using contracts. The objective of this dissertation is to address three unresolved questions in the literature regarding how the characteristics of products governments procure, and the environments in which they are bought and sold, shape government and non-governmental actors’ decision making at different points in the procurement process. The first essay develops an expanded theory of government’s decision to directly deliver public services—social welfare, energy utilities, select forms of security provision, and other services for citizens—or contract out these responsibilities to third parties. The essay takes as its point departure that transaction cost economics—the theory that a product is “made” or “bought” based on the ease or difficulty with which it can be defined, produced, and exchanged via a contract—does not adequately account for the environmental context within which governments select among alternative service delivery modes. The essay rectifies this deficiency by drawing on resource dependence theory, a complementary theory arguing that the make-or-buy decision turns on the nature of the public service marketplace: the number of alternative sellers with which a government can do business, and the amount of revenue sellers derive from this government vis-à-vis their other customers. The argument is that combined, these factors shape the degree of power government can exercise in a contracting relationship, directly influencing the choice to make or buy a service as well as moderating the impact of service-specific characteristics. This argument is specified in a set of hypotheses and a model for testing in future empirical research. The second essay examines how the characteristics of products government chooses to buy (rather than make) influence competition among sellers vying for its business. Drawing from transaction cost economics, the essay argues product complexity—defined and operationalized in terms of asset specificity, or the degree of relationship-specific physical and human capital investments required to produce and deliver a product—is a key determinant of competition. More specifically, the essay argues (i) at higher levels of complexity, and thus of asset specificity, sellers may deem the risks of doing business with the government as too high to warrant submitting a bid, but (ii) while lower levels of complexity may decrease these risks, they may also discourage competition by creating a collective action dilemma: for a simpler product, individual sellers may not submit a bid because they believe the competition will be too intense, and their probability of winning too low. This reasoning points to two effects—a project risk effect (simpler products invite more bids) and a win probability effect (simpler products invite less bids)—and implies competing hypotheses for how complexity influences competition. The essay presents an econometric test of these hypotheses using a sample of information technology procurements drawn from U.S. procurement federal data, finding that the effects mostly offset one another. The effects likely operate with greater force (in one direction or another) in larger, program-based procurements (e.g., of major weapons or information systems) that can span many years and involve multiple individual contracts for development, production, maintenance, and upgrades. Thus, a more complete theoretical story that links complexity and competition would likely need to make its propositions contingent on the depth and duration of the underlying business relationship, as well as the nature of the product being procured. The third essay examines the conditions under which government adopts and implements alternative strategies to procure products after it has selected and awarded its business to one from a competing set of sellers. Specifically, the essay examines the conditions under which government implements a knowledge-based procurement strategy predicated on incremental delivery of product capabilities and a sequential approach to product development and production (typically seen as a best practice), or a strategy predicated on delivering product capabilities in a single-step fashion and using a concurrent approach to development and production activities. The essay starts from the observation that procurements executed in accordance with knowledge-based principles consistently feature strong leadership—individuals purported to be pivotal in ensuring procurements adhere to a strategy anchored in knowledge—and posits that leader commitment influences adoption of the knowledge-based approach through a “credible commitment” mechanism. In essence, tenured leaders serve an advocacy role for the procurements they oversee, ensuring the procurements receive sufficient support and protecting them from policymakers wishing to commit resources to other projects (including those for which failure to follow a knowledge-based strategy could invite future problems, but, at least in the short-run, appear that they will take less time and provide more capability). In this way, sustained leadership provides teams tasked with managing procurements incentives to “stay the course,” maintaining adherence to a knowledge-based strategy, pursuing modest capability objectives, and taking the time necessary for sequential development and production. The essay samples and examines a set of four successfully executed United States weapon system procurements to probe the plausibility of the credible commitment mechanism, finding and presenting evidence that leaders do influence employment of knowledge-based strategies in part through this channel