Restrictions on Competition in Municipal Competitive Procurement in Sweden

The bidding process in public procurement in Sweden is a first-price sealed bid auction. Although there is a competitive effect on the bids in this type of auction, the contracting entity can, through the choice of procurement procedure, restrict the number of bidders. This paper studies this choice and imposes an implementation cost on the contracting entity to motivate such a restriction. The results, based on data for Swedish municipalities, suggest that contract specifications and municipality characteristics (that are assumed to influence the implementation cost) affect the volume of the procurement and the number of bidders but not necessarily the choice of procurement procedure.Special thanks to Karl-Gustaf Löfgren and Xavier de Luna for valuable comments and suggestions on this paper. Financial support from The Swedish Competition Authority and the Swedish Council for Research in Humanities and Social Sciences (HSFR) is gratefully acknowledged.