The effect of negotiations frequency on the vehicles price in public sector in Indonesia

Abstract

E-Purchasing systems allow buyers and sellers to communicate directly and to negotiate. A relatively recent addition to public procurement practice in Indonesia, this research investigates how negotiation affects transacted price, particularly in the vehicle commodity. More than 40,000 transactions were examined; transactions consisted of central government purchasing organizations and also at the local government level. Statistical analysis involved Ordinary Least Square (OLS) and Multinomial Logit regression. Findings reveal that more frequent negotiations lead to a lower final price and that some government buyer organizations experience greater impact of negotiation than others. We discuss implications for Indonesian government policies, and for future research.