The importance of evaluation of economic determinants in public procurement processes in Slovakia in 2010–2016

Main Article Content

Andrea Tkacova Beata Gavurova Jakub Danko Martin Cepel

Abstract

Research background: Public procurement is designed to efficiently spend public sector financial resources. This should lead to savings in public funds. Domestic and foreign studies point to the fact that sufficient competition on the supply side is the condition for achieving those savings. Slovakia currently belongs to a group of countries with low competition on the supply side of the tender. Every year, about 10,000 tenders will be made in Slovakia for 5 billion Eur. However, contracting authorities have difficulty with establishing the estimated contract value and defining non-discriminatory criteria. On the other hand, contractors lack the expertise to prepare tenders, specifications are often tailored to specific bidders or products, and the price criterion has a negative impact on the quality of the goods and services purchased.


Purpose of the article: The aim of the study was to investigate the impact of selected efficiency determinants on savings in public procurement in Slovakia in 2010–2016. The number of bids, the subcontractor's participation, the narrower competition and the impact of the narrower competition and the expected price on the number of bids have been examined.


Methods: The survey sample consisted of 800 randomly selected public procurement con-tracts from different sectors in 2010–2016. The contracts were split on the basis of the median estimate of the above-limit (409 contracts) and below-limit (391 contracts) contracts; the divestment value was the estimated price of 400,000 Euro (without the tax).


Findings & Value added: The number of offers positively influences the creation of savings in public procurement, an average of 5-6%. The impact of a narrow competition was significant, which led to a decrease in savings of 3-4% compared to the open competition if the sample was 800 contracts and over 400,000 Euro (without the tax). For below-limit orders, this determinant was shown to be statistically insignificant. The size of the contract did not affect the number of successful candidates. Also, the negative impact of narrower competition on the number of tenders was demonstrated. These findings are in line with the presented research studies. In the future, we plan to perform sectoral analyses to verify the validity of the hypotheses under review based on the results of our research.

Article Details

How to Cite
Tkacova, A., Gavurova, B., Danko, J., & Cepel, M. (2017). The importance of evaluation of economic determinants in public procurement processes in Slovakia in 2010–2016. Oeconomia Copernicana, 8(3), 367–382. https://doi.org/https://doi.org/10.24136/oc.v8i3.23
Section
Articles

References

Androniceanu, A. (2017). The three-dimensional approach of total quality management, an essential strategic option for business excellence. Amfiteatru Economic, 19(44).
Androniceanu, A. & Dragulanescu I. V. (2012). Sustainability of the organizational changes in the context of global economic crisis. Amfiteatru Economic, 14(32).
Androniceanu, A., & Ohanyan, G.(2016). Comparative approach on education and healthcare in Romania and Bulgaria as beneficiaries of the IMF financial assistance. Administratie si Management Public, 26.
Bajari, P., & Tadelis, S. (2001). Incentives versus transaction costs: a theory of procurement contracts. RAND Journal of Economics, 32(3). doi: 10.2307/2696361.
Bandiera, O., Prat, A., & Valletti, T. (2008). Active and passive waste in government spending: evidence from a policy experiment. CEIS Working Paper No. 115. doi: 10.2139/ssrn.1115339.
Beblavý, M., & Sičáková-Beblavá, E. (2006). Institutional dilemmas in the provision of public services. Bratislava: Transparency International Slovensko.
Becerra-Alonso, D., Androniceanu, A., & Georgescu, I., (2016). Sensitivity and vulnerability of European countries in time of crisis based on a new approach to data clustering and curvilinear analysis. Administratie si Management Public, 27.
Brown, T. L., & Potoski, M. (2003). Transaction cost and institutional explanations for government service production decisions. Journal of Public Administration Research and Theory, 13(4). doi: 10.1093/jopart/mug030.
Danger, K., & Capobianco, A. (2008). Guidelines for fighting bid rigging in public procurement. Retrieved from http://www.oecd.org/competition/cartels/ 42851044.pdf (2016-07-25).
Domberger, S., Hall, C., & Li, E. (1995). The determinants of price and quality in competitively tendered contracts. Economic Journal, 105(433). doi: 10.2307/2235110.
European Commission (2000). Measuring the impact of public procurement policy, first indicators. Retrieved from http://ec.europa.eu/internal_market/smn/ smn20/s20mn_c.htm (16.07.2016).
European Commission (2008). Price comparison, measuring competition, savings and their interlink. Working material of Advisory Commitee on Public Contracts.
European Commission (2011). Public procurement in Europe. Cost and effectiveness. Retrieved from ec.europa.eu/internal_market/publicprocurement/docs/ modernising_rules/cost-effectiveness_en.pdf (10.11.2016).
Fiorentino, L. (2006). Public procurement and competition. International Public Procurement Conference Proceedings. Retrieved from www.ippa.ws/IPPC2/ PROCEEDINGS/Article_34_ Florentino.pdf (10.11.2016).
Gilley, O. W., & Karels, G. V. (1981). The competitive effect in bonus bidding: new evidence. Bell Journal of Economics, 12(3).
Gómez-Lobo, A. & Szymanski, S. (2001). A law of large numbers: bidding and compulsory competitive tendering for refuse collection contracts. Review of Industrial Organization, 18(1).
Grega, M., & Nemec, J. (2015). Factors influencing final price of public procurement: evidence from Slovakia. Procedia Economics and Finance, 25.
Gupta, S. (2002). Competition and collusion in a government procurement auction market. Atlantic economic journal, 30(1). doi: 10.1007/BF02299143.
Halásková, M. (2015). Procuring public services and the role of territorial self-governments. In V. Klímová, & V. Žítek, (eds.). 18 th International Colloqium on Regional Sciences, Conference Proceedings. Brno: Masarykova Univerzita, 2015, pp. 367-374.
Halásková, M., & Halásková, R. (2015). Fiscal decentralisation and provision of local public services in selected EU countries. Lex localis - Journal of Local Self – Government, 13(3).
Hanák, T., & Muchová, P. (2015). Impact of competition on prices in public sector procurement. Procedia Computer Science, 64. doi: 10.1016/j.procs.2015. 08.601.
Jurčík, R. (2008). Partnership between the public and private sectors in the Czech Republic. Brno: Mzlu.
Krasnokutskaya, E., & Seim, K. (2011). Bid preference programs and participation in highway procurement auctions. American Economic Review, 101(6). doi: 10.1257/aer.101.6.2653.
Kuhlman J., & Johnson, S. (1983). The number of competitors and bid prices. Southern Economic Journal, 50(1). doi: 10.2307/1058052.
Millet, I., Parente, D. H., Fizel, J. L., & Venkataraman, R. R. (2004). Metrics for managing online procurement auctions. Interfaces, 34(3). doi: 10.1287/inte.1040.0073.
Mlčoch, L. (1996). Institutional Economics. Praha: Karolinum.
Nemec, J., Vítek, L., & Meričková, B. (2005). Contracting-out at local government level: theory and selected evidence from the Czech and Slovak Republics. Public Management Review, 7(4). doi: 10.1080/14719030500362900.
Ochrana, F. (2008a). Options to strengthen the criteria of economy, efficiency and effectiveness in the public procurement Act. Public contracts and PPP projects. Proceedings of the 2nd annual international scientific conference held on 15. – 16. 5. of 2008. Mzlu in Brno. Plzeň: Publishing house Aleš Čeněk.
Ochrana, F. (2008b). Input, evaluation and control of public contracts (economic analysis). Praha: Ekopress.
Ochrana, F., Pavel, J., & Vítek, L. (2010). Public sector and public finance. Financing of non-business and entrepreneurial activities. Praha: Grada Publishing.
OECD (2015). Fighting corruption and promoting integrity in public procurement. Retrieved from http://www.oecd-ilibrary.org/governance/fighting-corruption-and-promoting-integrity-in-public-procurement_9789264014008-en (15.05.2016).
Office of Fair Trading (OFT) (2004). Assessing the impact of public sector procurement on competition. Retrieved from www.oft.gov.uk/shared _oft/reports/comp_policy/oft742a.pdf (10.02.2014).
Pavel, J. (2007). Economic aspects of public procurement. Prague: Oeconomica Publishing House.
Pavel, J. (2008a). Analysis of the impact of competition on the cost of large-scale transport infrastructure structures. Political Economy, 3.
Pavel, J. (2008b). Impact of the number of bidders on the cost of construction contracts in the field of transport infrastructure 2004-2007. Retrieved from http://transint.xred.cz/doc/vz_dalnice2008.pdf (21.04.2016).
Pavel, J. (2009a). How does the number of bidders affect the price of a public contract? Retrieved from http://transparency.sk/wp-content/uploads/2010/01/Ako-ovplyvnuje-pocet-uchadzacov-o-verejnu-zakazku-cenu-verejnej-zakazky.pdf (19.05.2016).
Pavel, J. (2009b). Effectiveness of public procurement control systems in Slovakia. Transparency International Slovensko. Retrieved from http://backup.transpare ncy.sk/obstaravanie/regres_web.pdf (12.04.2016).
Pavel, J. (2009c). Public contracts in the Czech Republic. Study of the Economics Institute of Josef Hlávka, 2.
Pelc, V. (1996). Public procurement input. Praha: Linde.
Potůček, M. (2005). Public policy. Praha: Sociologické nakladatelství (Slon).
Potůček, M., Musil, J., & Mašková, M. (2008). Strategic choices for Czech society. Theoretical basis. Praha: Sociologické nakladatelství (Slon).
Rose-Ackerman, S. (2016). Corruption and government: causes, consequences and reform. Cambridge: Cambridge university press.
Šedivý, V. (1996). Public contracts in practice. Ostrava: Sagit.
Shrestha, P., & Pradhananga, N. (2010). Correlating bid price with the number of bidders and final construction cost of public street projects. Transportation Research Record: Journal of the Transportation Research Board, 2151. doi: 10.3141/2151-01.
Šípoš, G., & Klátik, P. (2013). Quality of public procurement in Slovakia in 2012. Retrieved from http://www.transparency.sk/wp-content/uploads/2013/01/TIS-Analyza-VO-2012-1.pdf (25.07.2016).
Soudek, J., & Skurhovec, J. (2013). Public procurement of homogeneous goods: the Czech Republic case study. Econpapers. Praque: Charles University. Retrieved from http://ac.els-cdn.com/S2212567115007686/1-s2.0-S221256 7115007686-main.pdf?_tid=bb348e82-4c33-11e7-99d9-00000aab0f6c&acdn at=1496917252_74e51b50af93df2dc32a65217ff108f4 (15.07.2016).
Špinerová, Z. (2014). Public procurement and its impact on financial indicators of companies in the construction sector. Acta Oeconomica Pragensia, 22(3).
Szymanski, S. (1996). The impact of compulsory competitive tendering on refuse collection services. Fiscal Studies, 17(3). doi: 10.1111/j.1475-5890.1996.tb 00491.x.
Tillmann, J. (1995). Public contract. Praha: Prospektum.
Vlach, J., & Ursíny, D. (2007). How to publicly cater well and properly. Bratislava: Adin.
Zachar, D., & Dančíková, Z. (2012). Analysis of the public procurement of hospitals in 2009 - 2012: intensity of competition in tenders is low. Retrieved from http://www.transparency.sk/wp-content/uploads/2012/08/TIS-aINEKO_Analyz a-verejneho-obstaravania-nemocnic.pdf (22.03.2016).
Zemanovičová, D., Semenčíková, L., & Šramelová, S. (2010). Cartel agreements in public procurement. Retrieved from http://www.antimon.gov.sk/data/files/96 _kartelove-dohody-vo-vo.pdf (21.05.2016).