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Further econometric evidence on the extent and sources of cost savings in competitively tendered contracts

Author

Listed:
  • Jorge González Chapela

    (Centro Universitario de la Defensa de Zaragoza)

  • José M. Labeaga

    (National Distance Education University)

  • Luis A. Medrano

    (Centro Universitario de la Defensa de Zaragoza)

Abstract

By estimating a flexible nonlinear regression model of savings on an original dataset of service procurements conducted by the Spanish Armed Forces, this paper provides robust and precise novel econometric evidence on the extent and sources of cost savings in public procurement. The net effect on savings of the policy-amenable and economically advantageous variables that we estimate, such as the size of the procured function, the importance of price in the contract award criteria, and the number of bidders who participate in the tendering, may help contracting agencies to select management practices and to forecast the price paid out. We find that savings increase proportionally to the size of the procured function, that an increase of 10 percentage points in the importance of price increases savings by approximately 2% of the function’s size, and that savings are generally reduced by restricting the number of bidders. A comparison with estimates reported in previous studies is also made.

Suggested Citation

  • Jorge González Chapela & José M. Labeaga & Luis A. Medrano, 2019. "Further econometric evidence on the extent and sources of cost savings in competitively tendered contracts," Empirical Economics, Springer, vol. 56(2), pages 679-701, February.
    • Handle: RePEc:spr:empeco:v:56:y:2019:i:2:d:10.1007_s00181-017-1365-8
    DOI: 10.1007/s00181-017-1365-8
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    More about this item

    Keywords

    Public procurement; Size elasticity of savings; Exponential regression; Spanish Armed Forces;
    All these keywords.

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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