Analysis of Factors of Overpricing in Public Procurement: A Study for Low-performing EU Countries

ABSTRACT

The paper deals with the issue of overpricing of public procurement in low-performing EU countries. It examines a uniquely large sample of public procurement in 11 Central and Eastern European countries. Hierarchical regression is used to analyze the factors that influence public contract. Our results indicate that institutional factors have a greater impact on overpricing than individual decisions by the contracting authority. Our analysis for low-performing EU countries provides interesting results and also draws attention to behavior that is not typical of the better established and more advanced EU countries. Our results are particularly important for public policy in each country, as they show the direction of regulatory action in the field of public procurement. The results introduce a debate on the appropriateness of “one size fits all” regulations within the EU.     

Procurement policy: The missing element in financial management education

This study emphasizes the need to include purchasing, or procurement, as a topic in the graduate-level public administration curriculum. It notes the absence of purchasing research in mainstream public administration journals and in leading public financial management textbooks. The study also reports the results of a survey mailed to the purchasing directors of the 46 largest U.S. counties outside Florida. The survey was designed to familiarize academians and practitioners with various administrative, legal, structural, and procedural dimensions of county procurement policies. Areas of greatest deficiency are those dealing with protest and appeals procedures and contract monitoring, and to a lesser extent procedures for declaring an emergency, entering into intergovernmental purchasing agreements, and contracting with minority businesses. The most comprehensively-covered elements are those delineating award authority, small purchase authority, methods of soliciting bids, definitions of emergencies and professional services, and procedures for contracting professional services.     

A Comparative Analysis of SME Friendly Public Procurement: Results from Canada,Hungary and Italy

This paper studies SMEs’ participation in public procurement in light of perceived barriers and expected benefits of accessing the public marketplace. It presents a comparative analysis of SMEs’ participation in three countries that share similar approaches to SME-friendly public procurement. A common survey protocol was developed to be administered to SMEs in the three countries. Data collected were then analysed using regression methods. Findings suggest that some issues that are typically considered critical barriers, namely administrative requirements and award based on lowest price do not hinder participation. However, findings also suggest that firms’ characteristics associated with size are still relevant hindrances, and that SMEs’ involvement are affected by a shortage of tangible (human and financial) and intangible resources (experience). These findings provide guidance to fine-tune public procurement policies directed to SMEs.     

Is local authority procurement supporting SMEs? An analysis of practice in English local authorities

The UK coalition government wishes to improve the access of small- and medium-sized enterprises (SMEs) to public procurement, in recognition of their importance to the economy and for the benefits they can bring to public procurement and the wider public sector. Local government provides a significant opportunity for small firms, spending £84 billion of the total procurement spend of £230 billion. However, about two-thirds of both small businesses and local authorities think that SMEs face barriers in successfully accessing public procurement. This paper examines how councils are supporting SMEs in the procurement process by analysing 67 entry forms to the ‘Best Councils to do business with’ competition. This unique data source has provided insight into councils’ attitudes and procurement practices, and demonstrates that although a wide range of supportive actions are being employed there is considerable diversity across councils. Ambiguities and tensions in policies, between local and central government, have also emerged.     

Government contracting and procurement: a critical process for both the public and private sectors

The costs and benefits of government purchases of goods and services from businesses are examined from the perspective of both public and private sector officials. Generally, governments see more benefits than costs, often because of fiscal stress. Businesses, especially newer, smaller firms are more likely to see more costs than benefits. The article concludes with ten projections for changes in public procurement systems by the year 2000. These are: (1) expansion of current vendor pools; (2) intergovernmental adoption of standardized forms and procedures for getting and staying on government vendor lists; (3) mainstreaming of purchasing into the government financial management decision-making loop; (4) more rigorous training requirements for government purchasing personnel; (5) greater use of public-private task forces to reform procurement policies and practices; (6) greater use of surveys inside and outside government to identify specific problem areas and structure reforms; (7) expansion of the auditing and contract monitoring section of purchasing departments; (8) extension of bidding/contract monitoring and evaluation requirements and procedures to subcontractors of prime government contractors; (9) greater efforts to include quality dimensions in cost estimates; and (10) more tension and litigation over “protectionism” in public procurement.     

Partial Privatisation in Local Services Delivery: An Empirical Analysis of the Choice of Mixed Firms

Mixed public–private firms are increasingly used in several European countries. This paper makes use of survey data from Spanish municipalities to examine the motivations of local governments for engaging in partial privatisation of local service delivery of water distribution and solid waste collection. The empirical analysis indicates that mixed firms emerge as a pragmatic middle way between purely public and purely private production. Indeed, local governments make use of mixed firms when cost considerations, financial constraints and private interests exert contradictory pressures. Political and ideological factors play no significant role in that decision.     

Politicians,organisations and the public ‐ the provision of gypsy sites

Under the Best Value regime, the government requires local authorities to involve the public in determining the provision of services. Indeed, the Best Value legislation provides a legal basis for consulting citizens and the local community in relation to better management of local government functions. The guidance on Best Value also encourages local authorities to place performance management within a community strategy framework. These combined actions will, it is hoped, result in more innovative, effective and efficient provision. Arguably, however, the success of increased participation will be influenced by how and why the public are involved. This study draws on case study research to ask whether involving the public does result in innovative changes and to what extent those involved are empowered through the process, concluding that success for both the authority and service users is influenced by factors such as cost structures and whether the original intent includes careful consideration of how those involved might benefit from the process.     

THE SHINING LIGHTS? PUBLIC SERVICE AWARDS AS AN APPROACH TO SERVICE IMPROVEMENT

Award schemes have proliferated in the public sector worldwide – yet there is little analysis of their role in improving public services through celebrating performance and sharing good practice. This paper theorizes this development, establishing a research agenda to examine the functioning, attractiveness and effectiveness of award schemes, which may be classified as being threshold or competitive schemes. The paper examines a major English competitive award, the Beacon Scheme, and focuses initially on its attractiveness to applicants. The research constructed a database of applications and awards of all English local authorities over six years as well as using interviews and observation. The analysis examined trends over a changing policy context, along with differences in application rates across eligible authorities and perceptions of the scheme. The analysis is used inductively to construct criteria by which the attractiveness of award schemes and their effectiveness in service improvement can be conceptualized.     

Local Public-Services Provision under Public–Private Partnerships: Contractual Design and Contracting Parties Incentives

When deciding to resort to a PPP contract for the provision of a local public service, local governments have to consider the demand risk allocation between the contracting parties. In this article, I investigate the effects of demand risk allocation on the accountability of procuring authorities regarding consumers changing demand, as well as on the cost-reducing effort incentives of the private public-service provider. I show that contracts in which the private provider bears demand risk motivate more the public authority from responding to customer needs. This is due to the fact that consumers are empowered when the private provider bears demand risk, that is, they have the possibility to oust the private provider in case of non-satisfaction with the service provision, which provides procuring authorities with more credibility in side-trading and then more incentives to be responsive. As a consequence, I show that there is a lower matching with consumers’ preferences over time when demand risk is on the public authority rather than on the private provider, and this is corroborated in the light of two famous case studies. However, contracts in which the private provider does not bear demand risk motivate more the private provider from investing in cost-reducing efforts. I highlight then a tradeoff in the allocation of demand risk between productive and allocative efficiency. The striking policy implication of this article for local governments would be that the current trend towards a greater resort to contracts where private providers bear little or no demand risk may not be optimal. Local governments should impose demand risk on private providers within PPP contracts when they expect that consumers’ preferences over the service provision will change over time.     

A replication of “Contracting out: For What? With Whom?”

In the 1980s, governments around the world adopted New Public Management ideas about inserting competition into government as a way to improve the performance of public organizations. In many nations, contracting out was one method of making governments more businesslike. Yet, there have been few studies of how government contracting behaviors have changed since the early 1980s. We replicate Ferris and Graddy's classic 1986 study of local government production and sector choice to assess how public procurement has changed over the past 35 years. Our findings show that today, contracting out is more commonly used across 25 local government service areas. In contrast to the original study, much of the growth has been in government-to-government contracts. For profit firms are also winning more contracts for high transaction cost work, while nonprofits are receiving fewer government contracts in nearly every service area. Our analysis suggests that contracting out remains of the highest importance in 21st-century governance and that additional research is needed on how to manage contracts to achieve the best value.     

Contingent and Non-Contingent Working in Local Government: Contrasting Psychological Contracts

Given that the contingent worker is likely to be a familiar presence in the public service workplace of the future, this paper explores the consequences of contingent work arrangements on the attitudes and behaviour of employees using the psychological contract as a framework for analysis. Drawing upon survey evidence from a sample of permanent, fixed term and temporary staff employed in a British local authority, our results suggest that contract status plays an important role in how individuals view the exchange relationship with their employer and how they respond to the inducements received from that relationship. Specifically, contingent employees are less committed to the organization and engage in organizational citizenship behaviour (OCB) to a lesser degree than their permanent counterparts. However, contrary to our hypothesis, the relationship between the inducements provided by the employer and OCB is stronger for contingent employees. Such findings have implications for the treatment of contingent and non-contingent employees in the public services.     

DOES DISPERSED PUBLIC OWNERSHIP IMPAIR EFFICIENCY? THE CASE OF REFUSE COLLECTION IN NORWAY

Corporate governance theory suggests that companies with dispersed and indirect ownership suffer from agency costs. A worst case is where several political authorities jointly own a company, which allows managers to operate with inferior efficiency. In political economy, the manager is not the major agency problem. Elected politicians may impair efficiency to improve their re‐election prospects. Since politicians have less influence in jointly owned firms, such companies are expected to perform better than those owned by a single public authority. Consistent with corporate governance – but not political economy – the empirical analysis suggests that dispersed municipal ownership impairs cost efficiency. In the Norwegian case of municipal refuse collection presented here, costs of dispersed ownership often outstrip gains from economies of scale. Use of jointly owned companies is not necessarily a proper response to efficiency problems inherent a fragmented local government structure.     

The Impacts of Different Regulatory Regimes on the Effectiveness of Public Procurement

The combination of two reforms in Russia, reform of public-sector entities and of public procurement, enables us to estimate the results of a transition from rigid to more flexible regulations in public procurement (PP). We consider two public universities in 2011–2012. The procurements of one university were regulated by rigid Federal Law during the entire period; the procurements of the other university were regulated by Federal Law until June 2011 and then by a more flexible regulation. Using the difference-in-differences methodology, we assess how the transition to this new regulation affects the main PP parameters. We show that more flexible regulation leads to a decline in bid competition but improves contract execution.     

Small Firms’ Formalisation: The Stick Treatment

Firm informality is pervasive throughout the developing world, Bangladesh being no exception. The informal status of many firms substantially reduces the tax basis and therefore impacts the provision of public goods. The literature on encouraging formalisation has predominantly focused on reducing the direct costs of formalisation and has found negligible impacts of such policies. In this paper, we focus on a stick intervention, which to the best of our knowledge is the first one in a developing country setting that deals with the most direct and dominant form of informality, that is registration with the tax authority with a direct link to the country’s potential revenue base and thus public goods provision. We implement an experiment in which randomly selected firms are visited by tax representatives who deliver an official letter from the Bangladesh National Tax Authority stating that the firm is not registered and the consequential punishment if the firm fails to register. We find that the intervention increases the rate of registration among treated firms, while firms located in the same market but not treated do not seem to respond significantly. We also find that only larger revenue firms at baseline respond to the threat and register. Our findings have at least two important policy implications: i) the enforcement angle, which could be an important tool to encourage formalisation; and ii) targeting of government resources for formalisation to high-end informal firms. The effects are generally small in levels and this leaves open the question of why many firms still do not register.     

Assessing the European Union's engagement with transnational policy networks on conflict-prone natural resources

Transnational policy networks (TPNs) are attracting greater scholarly interest given their impact on the contemporary conduct of international affairs. While this has been a welcome development for International Relations scholars and provided some preliminary insights, there is a need for more scholarly studies of TPNs that delve into specific issue-areas on a comparative basis. The paper addresses the above need by providing analyses of the role of European Union (EU)-based actors – the European Commission, member states, civil society organizations, and firms – in regulatory frameworks on conflict-prone natural resources such as oil, diamonds, coltan, tin, tungsten, and gold. To that end, the paper draws upon participant observations, interviews with state and non-state actors, and access to primary documents in order to provide a comparative examination of EU-based state and non-state actors within the Extractive Industries Transparency Initiative and draft EU legislation that seeks to prevent the trade of conflict-prone minerals.     

ON THE PERFORMANCE OF COMPETITIVELY TENDERED, PUBLIC SECTOR CLEANING CONTRACTS

Quantitative analysis of competitive tendering and contracting typically focuses on their effect on the cost of providing public sector services. In this article we turn to the systematic factors that appear to influence the performance of cleaning contracts. This is defined as compliance with contract specification, public perception of service quality and other qualitative measures of service characteristics as observed by the contracting authority. Our analysis attempts to isolate particular features of contract design, monitoring and enforcement that influence performance positively or negatively. Econometric results based on a sample of public sector cleaning contracts suggest that contractor selection procedures and contract enforcement mechanisms have the greatest influence on performance.     

Redesigning the Hollow State: A Study of Florida Child Welfare Service Reform through the Lens of Principal-Agent Theory

While principal-agency theory has greatly facilitated our understanding of governance and management in the hollow state, close examinations of how system designs affect agency problems has been rare. The purpose of this study is to explicitly investigate the effects of different contract configurations on agent shirking, which is a common problem in third-party service delivery arrangements. Florida's recent statewide privatization and reconfiguration of its child welfare service delivery system are analyzed for this purpose. Data were collected through intensive document reviews and interviews with the public managers and the contract agents who were involved in the reform. Major structural components of the redesigned system (such as overall contract configuration, procurement policies, oversight mechanism, payment methods, and vendor governance structures) are examined and compared with those of the old system. The results of the analysis suggest that the Florida reform installed several structural devices intending to curb agent shirking that plagued the old system. The most significant changes involve a transition of the contracting scheme from a fragmented quasimarket based on dyadic contracting to an integrated service network based on a managed care model, a shift of the focus of the contract oversight from compliance and process to service outcomes, and a transfer of programmatic and financial risks and uncertainties from the government to vendors. Further, the findings of the study reveal some unintended consequences of the reform. For example, the reconfigured system that empowers communities also promotes local parochialism that hinders the government's statewide policymaking ability. The reform that consolidates contracts into the hands of a few large vendors under a standardized contract management system unites the vendors around their common interests to confront their government principal.     

Lesbian,Gay and Bisexual Populations: The Role of English Local Government

Abstract

The role of local government has recently come under debate, in the context of state retrenchment, public sector cuts and the marketisation of welfare. Recent discussions have centred on local authorities as leaders, on enterprise and on democracy, but there has been little discussion of local authorities in relation to equalities issues and minority groups. This article examines the role of local government in relation to one minority grouping, Lesbian, Gay and Bisexual (LGB) people, drawing on empirical material gathered from 2007 to 2010 as part of a large Economic and Social Research Council research project. It describes the importance of equalities legislation and related implementation mechanisms in driving forward the LGB equalities agenda, explores aspects of welfare delivery to LGB people and addresses democratic processes. The article suggests that a collision of different forces is currently taking place: the legislation supports the protection of the LGB communities, but this support is undermined by the recession-related and ideologically driven public sector cuts. In addition, aggregate approaches to local democracy may override the interests of minority groups such as LGB people.     

Organisational choices in public procurement: what can public management learn from the private sector?

ABSTRACT

In the public context, the efficient and effective management of procurement activities has a crucial impact on the achievement of operational and broader government objectives. In particular, the potential contribution of procurement within local governments has been broadly recognized, and organisational procurement choices represent a strategic aspect that must be managed to contribute to these objectives. Through the analysis of data on 371 Italian municipalities, this paper discusses how to design procurement organisation variables for local governments. Three possible organisational models are identified (i.e., authoritative procurement, silo procurement, and local procurement) and discussed from the perspective of internal and external contingencies that may affect organisational decisions.     

PUBLIC PROCUREMENT,PUBLIC VALUE AND THE NORTHERN IRELAND UNEMPLOYMENT PILOT PROJECT

This paper analyses the regulatory, commercial and socio‐economic goals underlying UK public procurement policy, highlighting the conflicts inherent between them and arguing that there is an overemphasis on commercial goals. A critique of the market model leads to consideration of the utility of the ‘public value’ concept as a means of assessing the achievement of public procurement goals in a balanced way through a greater emphasis on public consultation and the impacts and outcomes of procurement. An analytical framework is proposed, based on public value, against which to assess the delivery of public procurement policies. The framework is used to analyse a pilot project conducted in Northern Ireland on increasing employment through public service and construction projects. The paper demonstrates the achievement of a range of procurement goals and values and concludes by calling both for further research into the validity of the concept of public value and more extensive application of the framework.