Abstract
Improvement of public procurement system is one of the most important government tasks in Russia and its importance increases during periods of economic turbulence. The paper notes two interrelated sources of budget inefficiency in Russian procurement system due to the imperfection of the mechanisms which determine the reserve price (or initial maximum contract price in Russian procurement) as well as the design of procurement procedures. This article highlights some of the problems and distorting incentives associated with the determination of the reserve price for competitive procedures using the example of bricks purchasing. This article also proposes an approach which contributes to adjusting the existent mechanisms and reduce reported negative effects.
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