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Empirical Economics

, Volume 56, Issue 2, pp 679–701 | Cite as

Further econometric evidence on the extent and sources of cost savings in competitively tendered contracts

  • Jorge González ChapelaEmail author
  • José M. Labeaga
  • Luis A. Medrano
Article
  • 89 Downloads

Abstract

By estimating a flexible nonlinear regression model of savings on an original dataset of service procurements conducted by the Spanish Armed Forces, this paper provides robust and precise novel econometric evidence on the extent and sources of cost savings in public procurement. The net effect on savings of the policy-amenable and economically advantageous variables that we estimate, such as the size of the procured function, the importance of price in the contract award criteria, and the number of bidders who participate in the tendering, may help contracting agencies to select management practices and to forecast the price paid out. We find that savings increase proportionally to the size of the procured function, that an increase of 10 percentage points in the importance of price increases savings by approximately 2% of the function’s size, and that savings are generally reduced by restricting the number of bidders. A comparison with estimates reported in previous studies is also made.

Keywords

Public procurement Size elasticity of savings Exponential regression Spanish Armed Forces 

JEL Classification

H57 C51 

Notes

Compliance with ethical standards

Conflict of interest

The authors declare that they have no conflict of interest.

Supplementary material

181_2017_1365_MOESM1_ESM.zip (216 kb)
Supplementary material 1 (zip 215 KB)

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2017

Authors and Affiliations

  • Jorge González Chapela
    • 1
    Email author
  • José M. Labeaga
    • 2
  • Luis A. Medrano
    • 1
  1. 1.Centro Universitario de la Defensa de ZaragozaZaragozaSpain
  2. 2.Department of Economic Analysis IINational Distance Education UniversityMadridSpain

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