Public procurement procedures prescribed by legislation not only enhance transparency and competition but also entail certain transaction costs for both customers and suppliers. These costs are important to the efficiency of the procurement system. However, very few previous studies have focused on estimating procurement costs. This paper proposes a methodology for public procurement cost evaluation. We show how procurement costs can be calculated using a formalized survey of public customers. This methodology was tested with a representative group of public customers operating in one region of the Russian Federation. We formulate the policy implications of our study as they relate to the improvement of public procurement regulations and argue that this methodological approach can be applied in other developing and transitioning economies.
ABSTRACT. Why do some countries (often developing and emerging
economies) adopt special laws on PPP, whilst in others PPPs are governed
by the legislation on public procurement and related bylaws? This paper
explains the above global discrepancies from an institutional perspective. In
a contract-theoretical framework we demonstrate how PPPs can enable
projects that are not feasible through standard public procurement
arrangements. Incentives for private partners are created through extra
benefits (often non-contractible) from their collaboration with the
government (e.g. risk reduction, reputational gains, access to additional
resources, lower bureaucratic burden, etc.). In a well-developed institutional
environment these benefits are implicitly guaranteed, suggesting no need in
a specialized PPP-enabling legislation. Otherwise, a PPP law should establish
an institutional architecture to provide the above benefits.
In this paper, we regard public procurement as an instrument used by the government for indirect support of enterprises. In this context, we have investigated the place that public procurement occupy in statebusiness interrelations. Using data from a large survey of Russian manufacturing enterprises conducted in 2009 we show that in Russia public procurement cannot be regarded as a component in the system of exchanges, and the extent of combination between direct and indirect support depends on the level of government. At the federal level direct and indirect instruments of government support complement each other. At the regional and local levels the effect of mutual complementation can be observed only in relations with firms, which conceal information about their ownership structure and are supposedly affiliated with regional and local bureaucrats. In relations with other firms at regional and local levels direct and indirect support substitutes each other.