Non-competitive Contracts Research Articles

1920~1930년대 초량토목출장소 낙동강개수공사의 시행과 성격

The Nakdong River Improvement Project, part of the larger Joseon River Improvement Initiative, spanned fifteen years and was largely coordinated through irrigation associations, which included lands owned by Japanese and some Korean landlords and capitalists. Despite the project’s ostensible goal of protecting the lives and properties of local residents—including both Koreans and Japanese—from flood risks, it was principally designed to advance the interests of the colonial regime and the landlord-capitalist class. This project showcases the blend of colonial and modern elements in infrastructure development, led and executed under Japanese direction with their technological expertise. The Choryang Civil Engineering Office and related facilities operated within a colonial employment structure, relegating Koreans mostly to unskilled manual labor and minimizing their roles in management or skilled positions. Contractors and suppliers were predominantly Japanese, using non-competitive contracts that largely excluded Korean involvement. Consequently, the main beneficiaries of the hydraulic and irrigation improvements were primarily the landowning classes, specifically Japanese and some Korean landlords and capitalists. The implementation of the Nakdong River Improvement Project catalyzed a multifaceted interplay of interests that extended beyond basic ethnic or socioeconomic dichotomies such as Korean versus Japanese or capitalists versus laborers. Despite this complexity, the execution of the project distinctly embodied the dynamics of colonial power, demonstrating the modern correlation of capital and technology with authority.

Your Competitive Side Is Calling: An Analysis of Florida Contract Performance

Abstract Competition over the allocation of scarce resources motivates many public policy choices, and increasingly influences the management of public organizations. With the rise of the business‐like approach espoused by adherents of “new public management,” competitive mechanisms are increasingly used in the public sector to improve organization and program performance. Despite the wide acceptance of competition as a viable method to improve public management, little large n empirical work has been done to determine whether competition improves performance, especially in the networked, cross‐sectoral setting of modern governance. Analyzing nearly 20,000 Florida contracts over a three‐year period, this research explores whether competitive sourcing procedures lead to improved contractor performance. Results show that competitive sourcing may be associated with higher contract spending and undesirable contract outcomes. Other factors, including experience, existing relationships, and lower transaction costs, are more likely to lead to better performance. Practitioner Points Competition is theorized to drive down costs, encourage innovation, and help hold contractors accountable for their work. Competitively sourced contracts are more likely to experience cost overruns and to terminate early than noncompetitive contracts, suggesting that competition may not always be the best approach. Instead, agency‐contractor relationships and goal alignment are better predictors of good performance.

Partisan Procurement: Contracting with the United States Federal Government, 2003–2015

AbstractThe U.S. federal government spends huge sums buying goods and services from outside of the public sector. Given the sums involved, strategic government purchasing can have electoral consequences. In this article, we suggest that more politicized agencies show favoritism to businesses in key electoral constituencies and to firms connected to political parties. We evaluate these claims using new data on U.S. government contracts from 2003 to 2015. We find that executive departments, particularly more politicized department‐wide offices, are the most likely to have contracts characterized by noncompetitive procedures and outcomes, indicating favoritism. Politically responsive agencies—but only those—give out more noncompetitive contracts in battleground states. We also observe greater turnover in firms receiving government contracts after a party change in the White House, but only in the more politicized agencies. We conclude that agency designs that limit appointee representation in procurement decisions reduce political favoritism.

Corruption in the Times of Pandemia

The public health and economic crisis caused by the COVID-19 pandemic has pushed governments to substantially and swiftly increase spending. Consequently, public procurement rules have been relaxed in many places to expedite transactions. However, this may also create opportunities for inefficiency and corruption. Using contract-level information on public spending from Colombia’s e-procurement platform, and a difference-in-differences identification strategy, we find that municipalities classified by a machine learning algorithm as more prone to corruption react to the spending surge by using a larger proportion of discretionary non-competitive contracts and increasing their average value, especially to procure crisis-related items. In these places, contracts signed during the emergency are more likely to have cost overruns, be awarded to campaign donors, and exhibit a range of implementation inefficiencies. Our evidence suggests that large negative shocks such as the recent COVID-19 pandemic may increase waste and corruption.

The Impact of JAXA's Procurement System Transition on New Entry

This article attempts to show how the procurement methods employed by Japan Aerospace Exploration Agency (JAXA) affect new entries in procurements in Japan. The authors analyzed and aggregated data associated with the transition of the procurement system at the aerospace agency and studied how the transition stimulated new entrants to participate in JAXA's research and development (R&D) procurements. Before fiscal year 2008, JAXA depended mostly on noncompetitive contracts and conducted only a few bids. After the government's recommendation in 2008, JAXA introduced more “competition” in its procurement system. Opportunities for new entrants seem to have increased since this event. However, the actual data show that additional competition for R&D procurements has not had a significant impact on new entries. To promote new entries in R&D procurements at the aerospace agency, the procurement system needs to be reformed.

The Profitability of Non-Competitive Defence Contracts: The UK Experience

This paper explains and assesses the UK experience with determining prices and profitability for non-competitive defence contracts. Three periods are considered, namely pre-1968, the 1968 Profit Formula Agreement and the changes introduced in 2014. Two cases of ‘excessive’ profits were major determinants of the 1968 Profit Formula Agreement; but continued dissatisfaction with the 1968 Agreement led to changes in 2014. The historical overview of UK experience provides a basis for understanding current UK policy and offers insights for other countries facing similar policy challenges. A critique is presented of UK policy on single source pricing and profitability.

Cost and price auditing: effectiveness in the procurement of defense services in Spain

Abstract Contract auditing, or cost and price auditing, has been applied in Spain as a means of determining prices in non-competitive defense contracts since 1989. Factors such as Spain's participation in international defense organizations, the characteristics of the defense market and the contractual legal framework for the procurement of defense goods and services help underscore the need for the Spanish Ministry of Defense to implement cost and price auditing. With the evolution of cost and price auditing in Spain in mind, this paper analyses the entire process, describes the audit procedures that are most commonly used today and assesses the main results achieved, in terms of financial savings. The results obtained show that cost and price auditing does indeed contribute to a more efficient use of public resources.

Procurement with Reverse Auction and Flexible Noncompetitive Contracts

This article investigates a hybrid procurement mechanism that combines a reverse auction with flexible noncompetitive contracts. A buyer adopts such mechanism to procure multiple units of a product from a group of potential suppliers. Specifically, the buyer first offers contracts to some suppliers who, if accepting the contract, do not participate in the auction while committing to selling a unit to the buyer at the price of the subsequent auction. For the suppliers rejecting the offers, they can join the subsequent auction with the other suppliers to compete on the remaining units. When the buyer offers only one flexible noncompetitive contract, we find that the selected supplier may accept the offer regardless of whether he knows his exact cost information. Meanwhile, the buyer can benefit from offering such a contract, as opposed to solely conducting a regular reverse auction or offering a noncompetitive contract that does not allow suppliers declining offers to join the subsequent auction. Moreover, we find that the suppliers' information about their own costs has a significant impact on the buyer's decision. When the buyer makes multiple offers, we analyze the resulting game behavior of the selected suppliers and demonstrate that the buyer can benefit more than just offering one such contract. Therefore, the hybrid procurement mechanism can be mutually beneficial for both the buyer and the selected suppliers.

Procurement with Reverse Auction and Flexible Noncompetitive Contracts

This paper investigates a hybrid procurement mechanism that combines a reverse auction with flexible noncompetitive contracts. A buyer adopts such mechanism to procure multiple units of a product from a group of potential suppliers. Specifically, the buyer first offers contracts to some suppliers who, if accepting the contract, do not participate in the auction while committing to selling a unit to the buyer at the price of the subsequent auction. For the suppliers rejecting the offers, they can join the subsequent auction with the other suppliers to compete on the remaining units. When the buyer offers only one flexible noncompetitive contract, we find the selected supplier may accept the offer regardless of whether he knows his exact cost information. Meanwhile, the buyer can benefit from offering such a contract, as opposed to solely conducting a regular reverse auction or offering a noncompetitive contract that does not allow suppliers declining offers to join the subsequent auction. Moreover, we find that the suppliers’ information about their own costs has a significant impact on the buyer’s decision. When the buyer makes multiple offers, we analyze the resulting game behavior of the selected suppliers and demonstrate that the buyer can benefit more than just offering one such contract. Therefore, the hybrid procurement mechanism can be mutually beneficial for both the buyer and the selected suppliers.

Backseat Drivers: The Political Economy of Trade Liberalization

Protection for Exporters: Power and Discrimination in Transatlantic Trade Relations 1930–2010. By Andreas Dur. Ithaca, NY: Cornell University Press, 2010. 246 pp., $39.95 paperback (ISBN-13: 978-0-801-44823-2). When the U.S. Air Force decided to update its fleet of air-to-air refuelling tankers, global rivals Boeing and Airbus both submitted competing bids for the $35billion contract. American-owned Boeing was under pressure after losing international market share and was the odds-on favourite due to a history of securing non-competitive military contracts. The surprising award of the contract to European-owned Airbus led Boeing to immediately reiterate accusations that Airbus was receiving illegal subsidies. This resulted in the U.S. government launching an investigation into the bidding process and re-tendering the contract (U.S. GAO 2008). The activation of government in response to a distressed firm is not unusual and, in fact, the WTO (2010a,b) has found both the United States and the EU have provided billions of dollars of illegal support to Boeing and Airbus. However, this case raises the broader question, addressed by Dur's volume, of the extent to which, historically, bilateral trade policies in the United States and EU should be understood as primarily driven by exporter interests. The distinction Protection for Exporters offers from existing work on the political economy of trade policy is subtle, but significant. The idea that trade policy is for sale is intuitive and has been extensively modelled in the economics literature (see for example, Grossman and Helpman 1994; Baldwin and Magee 2000). Existing work on endogenous trade policy details the …

E-sourcing in Procurement: Theory and Behavior in Reverse Auctions with Noncompetitive Contracts

One of the goals of procurement is to establish a competitive price while affording the buyer some flexibility in selecting the suppliers to deal with. Reverse auctions do not have this flexibility, because it is the auction rules and not the buyer that determines the winner. In practice, however, hybrid mechanisms that remove some suppliers and a corresponding amount of demand from the auction market are quite common. We find that in theory such hybrid mechanisms increase competition and make buyers better off as long as suppliers are willing to accept noncompetitive contracts. It turns out that suppliers often do because under a wide variety of conditions, these contracts have a positive expected profit. Our theory relies on two behavioral assumptions: (1) bidders in a multiunit uniform-price reverse auction will follow the dominant strategy of bidding truthfully, and (2) the suppliers who have been removed from the market will accept noncompetitive contracts that have a positive expected profit. Our experiment demonstrates that bidders in the auction behave very close to following the dominant strategy regardless of whether this auction is a stand-alone or a part of a hybrid mechanism. We also find that suppliers accept noncompetitive contracts sufficiently often (although not always) to make the hybrid mechanism outperform the reverse auction in the laboratory as well as in theory.

E-Sourcing in Procurement: Theory and Behavior in Reverse Auctions with Non-Competitive Contracts

One of the goals of procurement is to establish a fair price while affording the buyer some flexibility in selecting the suppliers to deal with. Reverse auctions do not have this flexibility, because it is the auction rules and not the buyer that determine the winner. But an important advantage of having this flexibility is that it allows buyers and suppliers to establish long-term relationships. This is one of the reasons that buyers often combine non-competitive purchasing with auctions. We find that in theory such hybrid mechanisms that remove some suppliers and a corresponding amount of demand from the auction market increase competition and make buyers better off as long as suppliers are willing to accept non-competitive contracts. And it turns out that suppliers often do because under a wide variety of conditions these contracts have a positive expected profit. Our theory relies on two behavioral assumptions: (1) bidders in a multi-unit uniform-price reverse auction will follow the dominant strategy of bidding truthfully, and (2) the suppliers who have been removed from the market will accept non-competitive contracts that have a positive expected profit. Our experiment demonstrates that bidders in the auction behave very close to following the dominant strategy regardless of whether this auction is a stand-alone or a part of a hybrid mechanism. We also find that suppliers accept non-competitive contracts sufficiently often (although not always) to make the hybrid mechanism outperform the reverse auction in the laboratory as well as in theory.

Effects of competition on medicare administrative costs

This paper examines the effects of introducing competitive contracting into the Medicare Part B program. The administrative costs of contractors (carriers) who process Medicare claims for medical services are examined to determine relative efficiencies of firms operating under either competitive or non-competitive contracts. Pooled time-series cross-sectional data are used to estimate an average total cost function. Findings are that (1) appreciable cost reductions were obtained by the introduction of competition, (2) economies of scale are present in Medicare claims processing, and (3) carriers who are non-profit organizations (i.e.,Blue Shield plans) do not exhibit higher costs than comparable commercial insurance companies.