Effect of competition among suppliers on public procurement efficiency

Abstract

Electronic reverse auctions (eRA) have grown popular in the procurement communities recently. This trend is expected to continue as its benefits have been proved by the results in the companies across many fields. Their results depend on the actual market conditions while the literature emphasises the importance of the number of bidders in eRA for its result. In the paper, we present the evidence of the impact of competition among suppliers biding within eRA on the efficiency of the tender, assessed via savings calculated as a difference between the Initial price and the Contract price. For this purpose, the method of correlation and regression analysis on the public procurement data provided by Electronic Contracting System has been applied. Moreover, we provide an analysis focused on a distinction between the savings caused by higher competition in goods and services, where our expectations of higher savings in services have been confirmed.