Guidelines for Cost-Effective Public Procurement - Economic Research Forum (ERF)

Guidelines for Cost-Effective Public Procurement

Bedri Kamil Onur Tas


Date:
October, 2018

NO.
40

Length:
7 pages

Topic:
H8. Miscellaneous Issues
D4. Market Structure and Pricing
H5. National Government Expenditures and Related Policies

In a nutshell

  • Public procurement comprises a significant part of GDP in both developing and developed countries.
  • I provide fundamental conditions for cost-effective public procurement using empirical findings from Turkish public procurement.
  • The presence of a competitive environment (i.e. the number of bidders in auctions) is the major determinant of public procurement efficiency.
  • There is an optimal level of competition in public procurement:
  1. Procurement costs are higher when the number of bidders is below the optimal level.
  2. Too much competition might have unintended effects and increase procurement price.
  3. Optimal level of competition changes with respect to procurement type (service, goods, and construction).
  4. Depending on the type of procurement, the lowest possible procurement prices are achieved when there are five to 10 bidders.
  • Entrant firms decrease procurement costs, but are less likely to survive in the public procurement market compared to incumbents.
Research Fellows

Bedri Kamil Onur Tas

Associate Professor, TOBB University of Economics and Technology


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