Re-examining procurement tenders with respect to price: a transaction cost model of Portland procurement agencies

Abstract

Past research has provided a variety of model approaches which are intended for the use of detecting improprieties in the bidding process for public procurement auctions. Recent literature has moved beyond traditional bid price models and seeks to incorporate various non-price factors, such as vendor utility, into bid rigging modelling efforts. In response, the following research aims to incorporate specific non-price factors such as vendor distance to site, vehicles owned, etc., to demonstrate, while using transaction cost economic (TCE) theory, that these complex price models – hedonic price models – can incorporate non-price factors as a function of vendor price mechanisms. Future implications of hedonic techniques in procurement bidding analysis are also discussed with regard to their potential usefulness for detecting collusive behaviour. Data, which contains both bids accused of collusion and competitive bids, were collected and coded to include variables omitted from other OLS models. The hedonic model tested was found to improve upon modelling capabilities of standard OLS models creating possibilities for more extensive research into detailed price modelling focusing on bidding improprieties.