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Design of public procurement auctions: evidence from cleaning contracts

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  • Ari Hyytinen
  • Sofia Lundberg
  • Otto Toivanen
Abstract
We analyze a regime change from beauty contests to first†price sealed†bid and scoring auctions, using Swedish data on public procurement of cleaning services. In beauty contests, the lowest bid often lost, leaving substantial money on the table. The procurement costs were similar before and after the regime change: (i) Entry strongly decreases the procurement cost but did not change. Entry would have decreased had the municipalities not adjusted the objects of auctions. (ii) Municipalities favored in†house suppliers in the old regime, leading to more aggressive bidding by others. With favoritism reduced, these changes balanced each other out.

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  • Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    • Handle: RePEc:bla:randje:v:49:y:2018:i:2:p:398-426
    DOI: 10.1111/1756-2171.12232
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    2. Dirk Czarnitzki & Paul Hünermund & Nima Moshgbar, 2018. "Public procurement as policy instrument for innovation," Working Papers of Department of Management, Strategy and Innovation, Leuven 606259, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    3. Tukiainen, Janne & Blesse, Sebastian & Bohne, Albrecht & Giuffrida, Leonardo M. & Jääskeläinen, Jan & Luukinen, Ari & Sieppi, Antti, 2024. "What are the priorities of bureaucrats? Evidence from conjoint experiments with procurement officials," Journal of Economic Behavior & Organization, Elsevier, vol. 227(C).
    4. Jaakko Meriläinen & Janne Tukiainen, 2019. "Public Procurement versus Laissez-Faire: Evidence from Household Waste Collection," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 446-463.
    5. Matteucci, Nicola, 2021. "Procuring NGA infrastructure: The performance of EMAT auctions in Italy," Telecommunications Policy, Elsevier, vol. 45(1).
    6. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.
    7. Camboni Riccardo & Valbonesi Paola, 2021. "Incumbent and Entrant Bidding in Scoring Rule Auctions: A Study on Italian Canteen Services," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(1), pages 1-43, January.
    8. Michael Klien & Michael Böheim & Matthias Firgo & Andreas Reinstaller & Peter Reschenhofer & Yvonne Wolfmayr, 2021. "Stärkung der Unabhängigkeit des Wirtschaftsstandortes Österreich bei kritischen Produkten," WIFO Studies, WIFO, number 67234.
    9. Yuanzhu Lu & Xundong Yin & Hu Zhang, 2023. "Does surround‐bidding corruption hurt procurers?," Manchester School, University of Manchester, vol. 91(4), pages 320-335, July.
    10. Leonardo M. Giuffrida & Gabriele Rovigatti, 2022. "Supplier selection and contract enforcement: Evidence from performance bonding," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 980-1019, November.
    11. Nogues Comas,Antoni Albert & Mendes Dos Santos,Nuno Filipe, 2021. "Measuring Public Procurement Rules and Practices : Benchmarking a Recurrent Infrastructure Contract," Policy Research Working Paper Series 9651, The World Bank.
    12. Jääskeläinen, Jan & Tukiainen, Janne, 2019. "Anatomy of public procurement," Working Papers 118, VATT Institute for Economic Research.
    13. Strömbäck, Elon, 2015. "Policy by Public Procurement: Opportunities and Pitfalls," Umeå Economic Studies 915, Umeå University, Department of Economics.

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    More about this item

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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