Public procurement transaction costs: a country-level assessment
This paper presents a public procurement transaction cost evaluation using a large-scale survey of procurers and suppliers. The study was conducted in Russia in 2017. The results of the survey confirmed that the lower the contract value, the more expensive the procurement procedure. An empirical analysis of factors impacting public procurement cost evaluation also revealed considerable differences between respondents with and without experience in complex procurement procedures. The paper makes an important contribution to the academic literature by elaborating a new approach to public procurement cost evaluation, as well as providing an empirical evaluation of direct transaction costs of public procurement.
The survey-based approach to the evaluation of public procurement costs described in this paper can be used by other countries and regions. Although the average overall transaction costs for public procurements in the case study country amounted to about 1% of the total value of concluded contracts, this figure was 6.6% to 8.1% for small purchases. This figure exceeds the budget saving from competitive procurement and calls for a need to simplify regulations around smaller procurements. This analysis of the procurement costs on Russian data will allow other developing countries to avoid the mistakes made in Russia, as well providing a way to realistically and affordably measure their procurement transaction costs.