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:
- Procurement costs are higher when the number of bidders is below the optimal level.
- Too much competition might have unintended effects and increase procurement price.
- Optimal level of competition changes with respect to procurement type (service, goods, and construction).
- 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.
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