Different design - different cost: An empirical analysis of combinatorial public procurement bidding of road maintenance (original) (raw)
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Social Science Research Network, 2011
Combinatorial procurement auctions enable suppliers to pass their potential cost synergies on to the procuring entity and may therefore lead to lower costs and enhance efficiency. However, bidders might find it profitable to inflate their stand-alone bids in order to favour their package bids. Using data from standard and combinatorial procurement auctions, we find that bids on individual contracts in simultaneous standard auctions without the option to submit package bids are significantly lower than the corresponding stand-alone bids in combinatorial auctions. Further, no significant difference in procurer's cost as explained by auction format is found.
Auction Formats and Award Rules in Swedish Procurement Auctions
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This paper provides an empirical analysis of outcomes from Swedish procurement auctions given award criterion and auction format. The auctions are single unit first-price sealed bid auctions or its simultaneous counterpart, and contracts can be awarded to lowest bidder or in accordance with qualitative criteria. The empirical results provide no evidence of differences in winning bids depending on the auction format. The award rule on the other hand matters, a horizontal comparison show higher winning bids on contracts awarded to some other but the lowest bidder. The effect of bidder interaction and bidder identity is also considered. JEL: D44, H57 * Financial support from the Swedish Competition Authority is gratefully acknowledged as insightful comments from Linda Andersson, Johan Lundberg, and Lars Westin.
Design of Public Procurement Auctions: Evidence from Cleaning Contracts
SSRN Electronic Journal, 2000
We compare beauty contests with first-price sealed-bid and scoring auctions, using data on public procurement of cleaning services in Swedish municipalities. The lowest submitted and winning bids are similar in all auction designs despite a higher price sensitivity of procurement bureaucrats in scoring (and first-price) auctions. There is more entry in beauty contests, by firms favored in them. Reduced entry into the scoring and price only auctions largely explains why the procurement costs are not lowered compared to beauty contests.
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International Economic Review, 59(2), 391-419, 2018
This article contrasts two auction formats often used in public procurement: first price auctions with ex post screening of bid responsiveness and average bid auctions (ABAs), in which the bidder closest to the average bid wins. The equilibrium analysis reveals that their ranking is ambiguous in terms of revenues, but the ABA is typically less efficient. Using a data set of Italian public procurement auctions run alternately under the two formats, a structural model of bidding is estimated for the subsample of first price auctions and used to quantify the efficiency loss under counterfactual ABAs.
Bidding behavior in a repeated procurement auction: A summary
European Economic Review, 2000
This paper considers bidding behavior in a repeated procurement auction setting. We study highway procurement data for the state of California between December 1994 and October 1998. We consider a dynamic bidding model that takes into account the presence of intertemporal constraints such as capacity constraints. We estimate the model non-parametrically and assess the presence of dynamic constraints in bidding.
PACKAGE BIDS AND STAND-ALONE BIDS IN COMBINATORIAL PROCUREMENT AUCTIONS
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Combinatorial bidding or package bidding in multi-unit public procurement auctions is becoming more and more common although the single bidding still is the most frequently applied mechanism. One reason for allowing combination bids in procurement auctions is that the mechanism may pass firms' potential cost synergies on the procuring entity leading to a reduction of the cost upon the procuring
Bid-rigging in Swedish Procurement Auctions
Using a unique data set of procurement auctions carried out by the Swedish National Road Administration, this paper addresses the issue of bid rigging in the Swedish asphalt-paving sector. Both market char-acteristics and the fact that the Swedish Competition Authority in 2003 initiated legal proceedings against a group of …rms active in the market in-dicate the existence of collusive behaviour. If …rms act competitively, they should submit independent bids, conditional on …rm-and auction-speci…c di¤erences. Reduced-form equations are estimated and the hypothesis of conditional independence is tested by analysing if the di¤erence between observed and predicted bids correlates between …rms. If negative corre-lation is observed, one possible explanation is bid rigging. The overall results indicate that collusion may be widespread in the industry and suggest further investigation of the market.
Asymmetry in Procurement Auctions: Evidence from Snow Removal Contracts
The Economic Journal, 2006
Differences in cost efficiency and productivity across firms may introduce asymmetries in procurement auctions. Relying on a structural approach, this paper investigates potential asymmetry among firms bidding for snow removal contracts in Montréal (Canada). The empirical results show that firms located in close proximity have a cost advantage relative to other firms in the most urbanized part of Montréal because of prohibitive equipment storage costs. The extent of inefficiency due to asymmetry is empirically assessed. Various policy experiments are performed. A bidding preference policy shows that the city could expect to reduce its costs for allocating snow removal contracts.
Restrictions on Competition in Municipal Competitive Procurement in Sweden
International Advances in Economic Research, 2005
The bidding process in public procurement in Sweden is a first-price sealed bid auction. Although there is a competitive effect on the bids in this type of auction, the contracting entity can through the choice of procurement procedure, restrict the number of bidders. This paper studies this choice and imposes an implementation cost on the contracting entity to motivate such a restriction. The results, based on data for Swedish municipalities, suggest that contract specifications and municipality characteristics (that are assumed to influence the implementation cost); affect the volume of the procurement and the number of bidders, but not necessarily the choice of procurement procedure.