Promoting competitive markets: The role of public procurement

The study presented here examines how public procurement agencies address establishing and maintaining competitive markets; a topic still in its academic infancy. Cases are used to address impediments and improve understanding of strategic priorities in managing for competitive markets. Public policy academics have observed many competing policies in the wider public sector. Specifically, this paper identifies a need for research on supplier incentives at a market level, on the post contract management of suppliers and as an important sub-set, key supplier relationship management, along with professional development.     

Assessing the implementation of sustainable public procurement using quantitative text-analysis tools: A large-scale analysis of Belgian public procurement notices

Public organizations are using sustainable public procurement (SPP) as a policy tool to address societal and environmental issues. Having a policy on SPP however does not guarantee implementation. Several barriers have for example been identified that prevent public procurers from implementing SPP in their procurement projects, such as financial constraints, lack of knowledge or motivation. The question therefore arises how much SPP public organizations actually implement in their procurement projects. However, existing studies often focus on the environmental part of SPP and often rely on using interviews or surveys to assess the perceived degree of SPP (which have been accused of being subject to social desirability bias and low response rates). Little is therefore known about what SPP is in practice, and how frequently it is implemented. In this study, we therefore provide a detailed operationalization of SPP that encompasses the full concept. We subsequently assess the implementation of SPP in practice using text mining techniques to analyse over 140.000 Belgian public procurement notices that were published between 2011 and 2016. The research shows that in more than 70% of the notices (with an annex) SPP is implemented, but there appears to be a downward trend. It seems that SPP is implemented less over time, rather than more. Environmentally friendly procurement was, relative to other types of SPP, prevalent over time and across regions. For SPP to live up to its potential there are thus still barriers to be overcome.     

Capturing the value creation in public procurement: A practice-based view

Public procurement has struggled to fulfill its mission to create public value due to a narrow interpretation of value emphasizing the costs of procured goods and services. A holistic view of multidimensional value creation in the context of public procurement has received limited research attention despite a significant body of research on the potential benefits associated with public procurement. The purpose of this paper is to fill this gap by analyzing the value components and means of value creation developed through public procurement activities. We conduct a systematic literature review and content analysis of 171 research articles to determine the constituents of the value of public procurement and the practices needed to achieve them. Using the theoretical lens of the practice-based view, we propose a conceptual framework that holistically integrates different components of the value of public procurement for the public buyer, supplier, and user, along with the practices needed to achieve them. The study contributes to the literature by offering a multidimensional conceptual framework, a structured review of value components and associated practices, and the application of the practice-based view as the theoretical lens, all of which have implications for practice and theory.     

Innovation and public procurement: Terminology,concepts, and applications

The growing awareness of public procurement as an innovation policy tool has recently sparked the interest of both policy makers and researchers. While an increasing number of studies is being published every year, an overview of the field is missing. Researchers, practitioners, and policy makers are often using ambiguous wording and have not yet reached consensus on the terminology and concepts involved. This state of affairs leads to research fragmentation and lack of knowledge convergence. For the purpose of contributing to knowledge synthesis and consolidation, this article provides a structured review of the literature on innovation in public procurement. From categorizing publications based on innovation drivers, concepts, and research approaches, the emerging structure of the field is described and synthesized into a framework of innovation in public procurement. The proposed framework differentiates between literature streams on (1) innovations in the public procurement process, (2) innovation of public services by means of procurement, and (3) the use of public procurement as a tool for demand-side innovation policy-making. For each of these streams of literature, different focus areas as well as research gaps and opportunities for future research are identified. Based on analysis of existing research, the proposed framework provides an overview of state-of-the-art knowledge, a unified terminology, and a holistic understanding of innovation in public procurement. The framework is both a point of departure for future research and a source of knowledge for practitioners.     

Public–private partnership—Development of long-term relationships in public procurement in Germany

Hybrid partnerships are well established in the private sector combining market efficiency with the possibility of hierarchical steering mechanisms. By implementing Public–Private Partnerships (PPPs), public authorities seek to benefit from cooperation with specialised suppliers. However, many complex factors, including legal regulations, have to be considered in relation to outsourcing activities in the public sector. The decision on public–private cooperation is not driven only by economic principles. This paper deals with the economic and legal decision process of PPPs. The theoretical and legal framework is then applied and illustrated through a case study of the German Aerospace Center (Deutsches Zentrum für Luft- und Raumfahrt e.V./DLR).     

Supporting decision-making process in facilities management services procurement: A methodological approach

The aim of this paper is to make a contribution to the decision-making process related to procurement of facilities management services in the public sector, particularly with reference to local authorities. Adopting a contingency approach, a model for selecting sourcing strategies is presented. Some empirical evidence resulting from the analysis of various managers’ experiences is reported and, based on the results of the testing of the model, theoretical and managerial implications are discussed.     

Barriers to innovation through public procurement: A supplier perspective

Public procurement is increasingly viewed as having important potential to drive innovation. Despite this interest, numerous barriers prevent the public sector from acting as an intelligent and informed customer. This paper seeks to understand how barriers related to processes, competences, procedures and relationships in public procurement influence suppliers? ability to innovate and to reap the benefits of innovation. We address this by exploiting a dedicated survey of public sector suppliers in the UK, using a probit model to investigate the influence of structural, market and innovation determinants on suppliers? perception of these barriers.     

Price/time/intellectual efficiency of procurement: Uncovering the related factors in Chinese public authorities

High efficiency is one of the important goals of public procurement (PP); however, research on PP efficiency is still not sufficient, especially in the context of developing countries. With a focus on the purchasing phase, this study measures three aspects of procurement efficiency of public authorities: price, time and intellectual efficiency. The relevant factors of these three aspects are explored and examined. 838 PP contracts in Chengdu city, China were collected in the first half of 2018 using a web crawler programme. Regression method is used to analyse the data. This study finds that the price efficiency of PP is negatively associated with the implementation of green public procurement (GPP) but is positively associated with the evaluation method (the weight of bidding price during evaluation) and the number of bidders. Time efficiency is negatively associated with GPP implementation. Intellectual efficiency is negatively associated with the size of the procurement. This study accomplishes the following: I. extends research to a still relatively unexplored context: developing countries; II. adds to the studies on public procurement efficiency; and III. investigates the influence of GPP implementation on PP efficiency in a developing country.     

The long shadow of public policy; Barriers to a value-based approach in healthcare procurement

Procurement in the UKs National Health Service (NHS) is facing its most significant financial challenge. Despite the sheer scale and complexities of the public healthcare sector, the Government's solutions are all too often packaged as "collaborate more", "standardise products" and "leverage spend". Unfortunately, these over simplistic solutions take a myopic view of market drivers, conflate spend with potential savings and fail to deliver value. Many contracts have already been commercially optimised yet the funding crisis continues to deepen. New value-based procurement approaches are needed to drive longer-term innovation and cost reduction and to move debates from efficiencies to embrace effectiveness in integrated supply chains. In this research, we adopt the resource-based view (RBV) as a lens to explore the extent to which NHS resources support the strategic adoption of value-based approaches. An empirical case study on a regional cluster of six NHS Trusts in England, confirms the dominance of narrow price-based approaches that create barriers to moving towards longer-term, valuebased procurement. The antecedent roots of price-based approaches are unpicked through a hermeneutic analysis of recent Government commissioned reports to show how these have set the tone, culture and priorities for healthcare procurement in the UK. The analysis provides explanatory power to the case study by illustrating how Government reports have led to, and legitimised the dominance of price-based approaches and caused relational and resource-based barriers to adopting value-based procurement, despite stakeholder enthusiasm. The findings provide unique insights into why public procurement has struggled to reach beyond its traditional cost orientated scope. We contribute to an extended consideration of the RBV in public organisations through identifying the role of the policy environment in determining and legitimatising an organisation's strategic direction.     

Transaction costs, relational contracting and public private partnerships: a case study of UK defence

This paper is concerned with the economics of public private partnerships (PPPs)/private finance initiative (PFIs) and in particular the role of transaction costs and the importance of trust in relational contracting. The discussion is illustrated by reference to the UK defence sector. The paper begins by discussing the nature of PPPs/PFIs before moving on to consider how the economics of contracting literature can shed light on their strengths and weaknesses. The transaction cost literature is reviewed alongside a resource-based perspective of procurement decisions. The concepts of trust and reputation are then considered in the context of minimising procurement transaction costs. The theoretical framework developed is then applied and illustrated through a case study of UK defence contracting, in an attempt to assess whether the use of PPPs will necessarily lead to improved economic efficiency. The case study highlights both the scope of PPPs/PFIs and their potential transaction costs in defence procurement, with the normal perils in terms of contracting given information asymmetry, asset specificity and the resulting scope for opportunistic behaviour.     

Preventing rather than punishing: An early warning model of malfeasance in public procurement

Is it possible to predict malfeasance in public procurement? With the proliferation of e-procurement systems in the public sector, anti-corruption agencies and watchdog organizations have access to valuable sources of information with which to identify transactions that are likely to become troublesome and why. In this article, we discuss the promises and challenges of using machine learning models to predict inefficiency and corruption in public procurement. We illustrate this approach with a dataset with more than two million public procurement contracts in Colombia. We trained machine learning models to predict which of them will result in corruption investigations, a breach of contract, or implementation inefficiencies. We then discuss how our models can help practitioners better understand the drivers of corruption and inefficiency in public procurement. Our approach will be useful to governments interested in exploiting large administrative datasets to improve the provision of public goods, and it highlights some of the tradeoffs and challenges that they might face throughout this process.     

Evidence of the impacts of public e-procurement: The Portuguese experience

This paper analyses public e-procurement implementation and emphasizes its main difficulties and impacts in relation to the type of public organizations. The primary impacts and changes in the Portuguese public sector are analyzed within the new legal framework, which adopts mandatory e-procurement for any open, restricted or negotiated procedure. In this sense, two surveys carried out in consecutive years were conducted to assess the implementation difficulties and impact of e-procurement in the Portuguese public sector.The major value of this research is that it presents and discusses, for the first time, evidences about difficulties and impacts on the mandatory adoption of public e-procurement, based on the case of Portugal. The results show that the entities’ administrative level influences the e-procurement implementation, which is influenced by the innovation adoption process.     

Towards a common understanding of the differences between purchasing, procurement and commissioning in the UK public sector

This paper recognises that commissioning has now become an important term in the lexicon of UK public policy but the term ‘commissioning’ is taking on a different meaning than that traditionally used within the purchasing and supply management community. The frequent inter-changeability of the terms ‘commissioning’, ‘procurement’ and ‘purchasing’ is now causing confusion and means different things to different people. Therefore the academic community needs to help practitioners understand the differences and implications. A document analysis of various UK Central Government departments’ commissioning frameworks was used to establish the key themes and compare commissioning, procurement and purchasing. This paper discusses the similarities and differences, and argues that commissioning is different from procurement, but that commissioning offers major opportunities for Procurement practitioners to make a strategic contribution.     

New roles for end-users in innovative public procurement: case study on user engaging property procurement

Improving valued outcomes of public procurement lies in user and community co-production. Applying insight from network role theory, this case study tackles challenges faced by both procurer and supplier in interacting with diverse service end-users in various procurement situations. The findings are based on interview, participant observation, and documentation data from three innovative property procurement projects. We suggest four situation-specific roles end-users adopt: conventional, cooperative, collaborative, and controlling. The article reasserts the dispute of viewing end-user’s role only through interpretation of either private-sector consumer or public-sector citizen, while a mix of both views is needed.     

Risk management by SPV partners in toll road public private partnerships

ABSTRACT

Research on risk management in Public Private Partnerships (PPPs) has largely overlooked that the Special Purpose Vehicle (SPV) is made up of several project partners with different interests and objectives to manage risk. This paper makes an important contribution to this literature as it articulates SPV partners’ perceptions of how they manage risk in toll road PPPs. Our case studies show that the different skillsets of both the international and domestic partners with their sub-contractors provide opportunities for mitigating and managing risk but also pose potential problems in terms of measuring and obtaining value for money for taxpayers.     

One crisis,different paths to supply resilience: The case of ventilator procurement for the COVID-19 pandemic

This research explores supply resilience through an equifinality lens to establish how buying organizations impacted differently by the same extreme event can strategize and all successfully secure supply. We conduct case study research and use secondary data to investigate how three European governments sourced for ventilators during the first wave of COVID-19. The pandemic had an unprecedented impact on the ventilator market. It disrupted already limited supply and triggered a demand surge. We find multiple paths to supply resilience contingent on redundant capacity and local sourcing options at the pandemic's onset. Low redundancy combined with limited local sourcing options is associated with more diverse strategies and flexibility. The most notable strategy is spurring supplier innovation by fostering collaboration among actors in disparate industries. High redundancy combined with multiple local sourcing options is associated with more focused strategies and agility. One (counter-intuitive) strategy is the rationalization of the supply base.     

The clash of managerial and professional logics in public procurement: Implications for innovation in the health-care sector

This article addresses the enactment of public procurement and its influence on adoption and diffusion of innovation, using a case study of public procurement of a low-tech medical device innovation in Swedish healthcare. Based on interviews and documentation, the article illustrates the various perspectives of the different professions involved in the complex task of setting the requirement specification for the tender. The technology identities of the medical device (innovation) are constructed and negotiated by the actors: procurement administrators, health-care professionals and suppliers within the adoption space. Examining the enactment of the procurement process as part of the adoption space is a way to deepen our understanding of the social component within public procurement.     

Service specification in pre-tender phase of public procurement - A triadic model of meaningful involvement

The purpose of this research is to define the actor roles and collaborative practices that are central to service specification co-development in relation to the pre-tender phase of public procurement. We propose a new model of meaningful stakeholder involvement in the context of public service specification as a triadic setting. In addition to the theoretical value, the proposed model guides public procurement units on how to define their roles as intermediaries and to design a service specification process involving internal customers and providers of a service. The approach adopted highlights the meaningfulness of involvement by referring to the types of cooperative roles and practices that are both suitable for the situation and well understood and implemented by the cooperative parties. Service specification co-development is defined as a triadic setting involving buyers, service providers, and internal customers. This study consists of two longitudinal empirical public procurement cases viewed with the aid of a theoretical framework drawn from the general involvement and public-sector-specific involvement literature. Managerial implications relate to involving stakeholders early in the process, focusing on value creating activities, and sharing relevant information throughout the pre-tender phase.     

The changing role of procurement: Developing professional effectiveness

The major objectives of this paper are to explore, from the perspective of 18 senior procurement professionals interviewed, the current status of their role and identify the skills they need to develop, in order to effectively manage the changes they are experiencing. The interviews revealed a schism in perception of the procurement role between professionals (strategic) and their organisations (transactional). Although skills have a direct impact on the ability of procurement professionals to fulfil their role proficiently, the degree of organisational support and internal acknowledgement of the role's importance, were found to be a major barrier to the development and progress of procurement professionals. A Procurement Skills Effectiveness Framework is presented to enable managers to assess the likely sophistication level of procurement and its impact, given a set of procurement skills and the degree and type of internal support for the role.     

Detection of collusion in government procurement auctions

Research on bidder collusion in procurement auctions is reasonably successful in unveiling the mechanisms of collusion among the bidders. But it is relatively weak in forwarding effective practical methods of collusion detection before the winner is declared, because they presuppose the knowledge of collusion in specific auctions. Past studies, however, point out the need for working with bid price-to-reserve price ratios rather than bid prices or winning bid prices, to be free from the problem of heteroscedasticity. They also draw an important inference that the set of collusive data are significantly different from the set of competitive data. On the basis of these basic facts, the current paper outlines a seven-step approach to collusion detection. The approach makes rudimentary statistical analysis of bid price-to-reserve price ratios for all the bidders. The analysis comprises tests of equality of means, medians and variance and tests of skewness, autocorrelation and normality of the ratios. It divides the ratios into two significantly different clusters. The cluster with the higher mean and variance values of the ratios corresponds to collusive bidding with the other cluster corresponding to competitive bidding. The paper proposes the construction of a process control chart to detect occurrence of collusion in an auction immediately after the price bids are opened. The approach is illustrated by applying it to data from procurement auctions for construction projects in a State Department of the Republic of India.