Procurement Spending Research Articles

Development of machine learning models for categorisation of Nigerian Government's procurement spending to UNSPSC procurement taxonomy

Development of machine learning models for categorisation of Nigerian Government's procurement spending to UNSPSC procurement taxonomy

Audit threats and year-end spending by government agencies: experimental evidence from Chile

PurposeThe paper aims to estimate the capacity of supreme audit institutions’ (SAIs) audits to deter potentially wasteful year-end procurement spending. It also studies heterogeneous responses to SAIs’ audits depending on whether agencies’ top managers are appointed through a competitive procedure or not.Design/methodology/approachA letter signed by the head of Chile’s SAI was sent to a hundred randomly chosen agencies two weeks before the end of the fiscal year, with instructions on year-end spending accounting and an audit threat. In addition, a hundred agencies that did not receive the letter were used as a control group.FindingsAgencies that received the letter reduced year-end aggregate procurement spending by 33% relative to controls. Purchases of office supplies, safety equipment, personal care products and paper products experienced the most considerable reductions. The decrease in year-end spending was smaller for agencies with at least one top manager appointed through a competitive procedure.Research limitations/implicationsA SAI’s audit threat significantly reduced year-end procurement spending. Larger reductions in agencies headed by political appointees and across categories of goods that have been flagged as likely to be purchased to exhaust the budget suggest the avoided expenditures would have been wasteful. Further research is needed to determine if the net social value of year-end procurement spending deterred by SAIs audits is negative as suggested.Social implicationsThis paper has implications for the institutional support of SAIs audits and civil service.Originality/valueThis paper provides novel experimental evidence of SAIs’ audits’ deterrence power on public agencies’ year-end procurement spending.

Promoting Access to Innovative Anticancer Medicines: A Review of Drug Price and National Reimbursement Negotiation in China.

Providing universal access to high-cost medications like anticancer drugs is not an easy feat. Although basic medical insurance has covered over 95% of China's population since 2012, reimbursement for high-priced medicines is limited. In 2015, the Chinese government proposed establishing an open and transparent price negotiation mechanism for some patented and expensive drugs, where oncology was among the prioritized areas. In 2016, three drugs (gefitinib, icotinib, and tenofovir disoprox) underwent negotiation with the government, eventually reducing their prices by over 50% so that they could be prioritized during reimbursement processes. Focusing on anticancer medicines, this study comprehensively summarizes the progress in drug price and national reimbursement negotiation in China. Furthermore, we investigated the changes and development regarding negotiated anticancer medicines from quantity negotiated, classification, indication coverage, utilization, and procurement spending. Our findings could provide a reference for follow-up negotiations and reimbursement policies for high-value anticancer medications in other countries. From 2016 to 2021, 82 anticancer medicines were newly incorporated into the national reimbursement drug list (NRDL) via 6 rounds of negotiation. The majority of these were innovative pharmaceutics (ie, protein kinase inhibitors (28) and monoclonal antibodies (13)). Drug pricing and national reimbursement negotiation led to a marked decrease in prices and a sharp increase in the utilization of negotiated anticancer medicines. Following negotiations, the defined daily doses (DDDs) of innovative anticancer medicines experienced remarkable growth. Their proportion in total anticancer drugs DDDs also increased from 3.4% in 2014 to 20.9% in 2019. However, although drug prices decreased substantially after the negotiations, insurance spending still showed an upward trend owing to the significant increase in utilization. This calls for the government to carefully monitor the rational use of these expensive medicines and explore innovative payment models.

Market Re-Design of Framework Agreements in Chile Reduces Government Procurement Spending

Market Re-Design of Framework Agreements in Chile Reduces Government Procurement Spending

Government Contracting, Labor Intensity, and the Local Effects of Fiscal Consolidation: Evidence from the Budget Control Act of 2011

The U.S. federal government awards billions of dollars of contracts annually to private-sector firms to produce a wide range of goods and services. However, little is known about how a reduction in federal procurement, also referred to as fiscal consolidation, impacts local labor markets. In this paper, we leverage the institutional details of the Budget Control Act of 2011 (BCA) and highly detailed transaction-level data for procurement by all federal agencies to estimate the effect of fiscal consolidation on local employment and wages. Our identification strategy uses a shift-share instrument and is based on the exogeneity of the BCA-induced spending cuts across industries, i.e. exogenous shocks. Our results show that relative to wages, employment appears to be the key margin for local labor market adjustment in the wake of consolidation. In particular, we estimate that a $1 million reduction in federal procurement spending reduces employment by more than 10 jobs, while a $1 decline in spending only reduces aggregate wages by about $0.19. We also show that the local labor market effects of consolidation depend on the sectors receiving federal dollars. Federal contracts in high labor-intensive industries reduce employment by more than those in low labor-intensive industries, while the effect on aggregate wages is relatively modest and constant across sectors. These findings have implications both for understanding regional economic development and for improving regional resiliency to negative demand shocks.

Socially responsible ideas among Swedish public procurers: An exploratory study

Public procurement is increasingly being recognized as a tool to promote corporate social responsibility and a vehicle to help governments achieve their social development goals. Due to their power to intervene and their reliance on tax money, public sector organizations are focused on expanding the inclusion of social responsibility in their public procurement strategies. At the EU level, there is a strong focus on providing new opportunities for public authorities to promote socially responsible public procurement. Utilizing translation theory and following the travel of ideas framework in a Scandinavian institutionalism approach, this study maps the adoption, development, and implementation of social responsibility in public procurement through the five stages of materialization, categorization, transportation, institutionalization, and re-travel. Qualitative data were collected through in-depth interviews with public procurement authorities from municipalities, regional councils, and governmental organizations in Sweden. The findings show that the travel of social responsibility policies in public procurement follows a new Scandinavian institutionalism approach that has brought policy makers freedom in prioritizing social issues but leaves them confused about what to prioritize.Furthermore, while the results show a positive relationship in organizations between their size, measured as full-time procurement employees, and their maturity level in terms of social responsibility, this maturity level is not associated with their procurement spending. The study findings have important implications for research on socially responsible public procurement. Additionally, the data collected from public organizations suggest several ways that policy makers can include, promote, and institutionalize social responsibility in their procurement strategies to reduce disparity and improve social welfare.

The Effect of E-Procurement Policy on Corruption in Government Procurement: Evidence from Indonesia

ABSTRACT This study investigates the effect of E-Procurement policy on corruption in government procurement across 34 provinces in Indonesia. Using the difference-in-differences (DD) approach, this study analyses the panel data of 103 government procurement corruption cases handled by Indonesia’s Corruption Eradication Commission (KPK) from 2005 to 2017. This study finds that the use of E-Procurement significantly decreases the amount of government procurement corruption in provinces that have relatively high government procurement spending or capital expenditure. This finding shows the positive effect of E-Procurement on reducing the number of corruption cases in government procurement; it is in line with previous studies suggesting that E-Procurement supports the implementation of good governance in government procurement.

Impact of National Volume-Based Procurement on the Procurement Volumes and Spending for Antiviral Medications of Hepatitis B Virus.

Introduction: Although persistent inhibition of HBV replication by antiviral therapy has shown to slow disease progression, cost-related access barriers to these essential medicines are becoming salient. The national volume-based procurement (NVBP) was piloted in China and led to substantial reduction in the list price of prescription drugs. To examine the impact of NVBP on selected antiviral medication costs per defined daily dose (DDD), procurement volumes, and spending. Methods: We employed an interrupted time series design to examine changes in cost per defined daily dose (DDD), procurement volumes, and spending for NVBP bid-winning antiviral medications (tenofovir disoproxil fumarate and entecavir) in 11 pilot cities from 2017 to 2020. Procurement transaction data were obtained from 9,454 hospitals in the Chinese Hospital Pharmaceutical Audit (CHPA) database. In the secondary analysis, the control group comprised two non-NVBP drugs (adefovir and lamivudine) procured in 11 cities not exposed to the NVBP. Results: Cost per DDD of the two hepatitis B virus (HBV) antiviral medications reduced by CNY1.598 (p = 0.002) immediately following the implementation of NVBP, dropping from an average cost of CNY16.483 per DDD at baseline to CNY6.420 at the end of the observation period. NVBP implementation resulted in a substantial reduction in daily costs of antivirals and an increase in monthly procurement volumes by 6.674 million DDDs (p = 0.017), while monthly spending was reduced by CNY138.26 million (p = 0.002). In the secondary ITS analysis with a control group, the average cost per DDD of the NVBP bid-winning antivirals declined by CNY4.537 (p < 0.001), monthly procurement volumes increased by 7.209 million DDDs (p = 0.002), and monthly spending dropped by CNY138.83 million (p < 0.001). Conclusion: Volume-based procurement piloted in China may be effective for reducing price and total expenditures and improving drug utilization, which is especially important for HBV patients who need constant access to antiviral therapies.

Narrow Concept of Accountability in Public Sector Expenditure: Measuring Accountability Proportionately and Progressively

Accountability is one of the main elements of the realization of good governance which is currently being pursued in Indonesia. The government is asked to report the results of the programs that have been implemented so that the public can assess whether the government has worked economically, efficiently and effectively. Accountability can be seen from an accounting perspective, a functional perspective and an accountability system perspective. This Scientific Journal uses normative legal research and uses a statutory approach and a legal concept approach. the development of the public service paradigm from a broad concept of accountability to a narrow concept of accountability in public sector procurement spending that uses providers of goods and services, both as business entities and individuals, is done through the selection of providers of goods and services. The power to set policies is exercised by the legislature, specifically in the policy of setting the state budget, known as budget rights. Meanwhile, the executive power in the field of state finances is known as the general power for managing state finances. Based on this, the concept of governance which emphasizes the mechanism in carrying out functions by actors involved in certain sectors has not shown a certain mechanism, as well as the principle of accountability which is an element of governance that is still an accountability concept with general evaluative character (umbrella concept). The very broad, general and evaluative, is very difficult to define practically and empirically because there are no operational standards for accountable behavior.

Development of machine learning models for categorisation of Nigerian government's procurement spending to UNSPSC procurement taxonomy

Development of machine learning models for categorisation of Nigerian government's procurement spending to UNSPSC procurement taxonomy

The asymmetric government spending multipliers: Evidence from US regions

This paper tests the asymmetry in government spending multipliers using the panel data in the US postwar states. Empirical results show that output and employment rate respond asymmetrically to military procurement spending shocks with different signs and magnitudes. Our findings suggest that expansionary multipliers are much larger than contractionary multipliers, and that small-scale spending shocks tend to have a greater impact than large-scale ones.

Kompetisi dan Efisiensi pada Pengadaan Pemerintah: Bukti Empiris pada Kementerian/ Lembaga di Indonesia

This study investigates the effect of the number of bidders at the final evaluation stage before determining the winner on the ratio of the winner's bid price and the estimate price (HPS) on the tender and selection packages to ministries/institutions in Indonesia. This study uses 82,560 data cross-section on tender and selection packages obtained using techniques website scraping on 49 LPSE websites of Ministries/Institutions in Indonesia from 2008 to March 2020. To determine this effect, this study uses OLS and IV-2SLS methods to reduce the potential for bias due to endogeneity. This study found that there was an effect of the number of bidders in the final evaluation stage on the ratio of the winner's bid price and HPS, which would reduce the ratio by 0.0335 units or save procurement spending by tender or selection by 3.35% on the value of HPS. In addition, we also found that there was an indirect effect on the value of the procurement package, the prequalification method and the evaluation pattern on the number of bidders in the final evaluation stage before determining the winner.

The impact of industry consolidation on government procurement: Evidence from Department of Defense contracting

We study the relationship between market structure and public procurement outcomes. In particular, we ask whether and to what extent consolidation-driven increases in industry concentration affect the way in which the government procures its goods and services. We focus on the defense industry, by far the largest contributor to federal procurement spending in the U.S. This industry experienced a sharp increase in the level of concentration during the 1990s, driven by a series of large mergers between defense contractors. Using detailed microdata on Department of Defense (DoD) contract awards, we estimate the causal effect of industry concentration on a series of procurement outcomes, leveraging the differential impact of these mergers across product markets. We find that market concentration caused the procurement process to become less competitive, with an increase in the share of spending awarded without competition, or via single-bid solicitations. Increased concentration also induced a shift from the use of fixed-price contracts towards cost-plus contracts. However, we find no evidence that consolidation led to a significant increase in acquisition costs. We infer that the government’s buyer power, especially relevant in this context given the government is often the only purchaser, constrained firms from exercising any additional market power gained by consolidation.

Does decentralising public procurement affect the quality of governance? Evidence from local government in Europe

ABSTRACT In this article, we consider the impact on the quality of governance when assigning public procurement spending to local authorities. While fiscal decentralisation is generally expected to yield improvements in governance because it empowers better informed voters and public officials who can tailor policies to local needs, we hypothesise that the expected benefits may not emerge when decentralising public procurement because this may facilitate rent-seeking by special interests and because it would potentially forego economies of scale, organisational benefits and spillover effects. Consistent with this, our empirical evidence, based on a sample of 30 European countries over the period 1996 to 2015, shows that decentralising public procurement down to the local level does not promote good governance. Our evidence is robust to the introduction of different checks and specifications and shows that the impact of decentralisation on governance depends on the nature of the spending category decentralised.

Political representation and public contracting: Evidence from municipal legislatures

This study examines how partisan representation in multiparty legislatures affects direct expenditures, contract-allocation design and selection of politically-connected firms as suppliers in public procurement. For identification, I exploit quasi-random variation in partisan electoral outcomes near the effective representation thresholds in Czech proportional municipal elections. My regression discontinuity estimates suggest that partisan representation matters for public procurement: for instance, if local-level political parties barely enter legislatures at the expense of the national parties, municipalities decrease their direct procurement spending and allocate fewer contracts to the corporate donors of the national parties. Fewer contracts are awarded especially in pre-election years and in auctions restricting competition among procurement suppliers. The results are not associated with higher government fragmentation or selection of more competent candidates, but rather with reduced political power of the national parties.

Implementing category management of services – a new methodology

Purpose In an increasingly budget-constrained environment, the Department of Defense (DoD) must maximize the value of fiscal resources obligated on service contracts. Over half of DoD procurement spending between 2008 and 2012 was obligated on service contracts (GAO, 2013). Many services are common across the enterprise and recurring in nature; however, they are treated as unique and procured individually at the base level, year after year, rather than collectively in accordance with a larger, enterprise-wide category management strategy. The purpose of this paper is to focus on creating a methodology that treats common, recurring service requirements in a more strategic manner. Design/methodology/approach The authors develop a standardized, repeatable methodology that uses relevant cost drivers to analyze service requirements to identify more efficient procurement strategies. Furthermore, they create a clustering continuum to organize services based on proximity between the customer-supplier bases. This paper uses a commercial business mapping software to analyze cost driver data, produce visualizations and illustrate strategic opportunities for category management initiatives. DoD requirements for Integrated Solid Waste Management (ISWM) within the Los Angeles area are evaluated using the software and methodology to demonstrate a model for practical application. Findings The authors find that commercial software can be used to cluster requiring activities needing common, recurring services. This standardized, repeatable method can be applied to any category of services with any number of cost drivers. By identifying optimal requiring activity clusters, procurement agencies can more effectively implement category management strategies for service requirements. Research limitations/implications The initial approach of this paper was to develop a macro-level, one-size-fits-all model to centralize procurement. The authors found this approach inadequate as they tried to group service requirements of wildly differing characteristics. They experienced other significant limiting factors related to data availability and data collection. Social implications Clustering common and recurring DoD service requirements would result in standardized levels of service at all installations. The demand savings from clustering would promote the implementation of best practices for that service requirement across the DoD, which would eliminate non-value-added activities currently performed at some installations, or gold-plating of requirements, which is also likely occurring. Originality/value This paper is the first to use an analytics-based methodology to cluster common, recurring public services. It is the first method that offers a standardized, repeatable approach to implementing category management of service requirements to achieve cost savings.

U.S. chief procurement officers’ perspectives on public procurement

Each year public procurement officials in the United States spend trillions of dollars to purchase goods and services for public use. The volume of public procurement spending compels public administration and supply chain management scholars to examine these procurement practices. Based on a unique dataset composed of a series of qualitative and quantitative interviews with chief procurement officers (CPOs) and their team members from 45 states and 2 territories in the United States, this paper explores the key institutional factors affecting state-level public procurement in the U.S., explores variation in the definition of contract performance, and assess the importance of multiple factors in creating procurement contracts. We present an agenda for future research on state-level public procurement in the U.S that has important implications for the theory and practice of public procurement.

The revolution in federal procurement, 1980–present

AbstractThis paper examines revolutionary changes in the federal procurement regime that have taken place over roughly the past thirty-five years. The procurement process has long been formalized, but contractors were dispersed across the country and tended to furnish tangible goods in singular and discrete transactions. As a result of technology, global competition and security threats, ideological shifts, and fiscal changes, procurement spending exploded after 9/11 and today the regime forms “information communities” in which private companies exert both political and economic influence and supply staffing and information to the federal government within a continuous and seamless relationship where lines demarcating responsibilities and personnel are blurred.

Tactical Production and Distribution Planning in Urban Logistics under Vehicle Operational Restrictions

Significant uncertainty associated with Chinese urban logistics, caused by random vehicle operational restrictions due to severe weather (e.g., smog) in addiction to normal traffic variation makes the tactical production and distribution planning decisions quite challenging. In this paper, we propose a two-stage stochastic integer programming model for an optimal production distribution capacity planning problem under the aforementioned uncertainties. We aim to minimize both procurement spending and the expected operational cost under logistic uncertainty. Given the computational burden of solving the resultant stochastic integer program for real-world instances, we develop an improved stochastic branch-and-bound (SBB) algorithm embedding with Tabu search method. We conduct the numerical study to verify the superiority of the proposed algorithm. We also offer managerial insights to practitioners and policy recommendations to municipal governments based on the numerical study results.

Implementation Practices of Public Procurement Plans and Policies

Public procurement issues have drawn many concerns and became a public debate because the rules and regulations are constantly reformed and restructured. Public procurement contributions in the world economy are very significant. In Indonesia, according to the Ministry of Finance, public procurement spending for 2009 was 33.4 percent of total government spending. This study aims to determine implementation practices of Public Procurement Plans or Rencana Umum Pengadaan (RUP) in Bitung City. The multiple statistical regression equation is used to process data from 47 respondents from regional apparatus task forces (SKPD) and the results show that the influence of independent variables (X) on dependent variable (Y) is 87.3 percent (R2), while 12.7 percent is influenced by other factors. The result of F-test shows 36.231&gt; F- table 3.21. The calculated probability value is 0.000 which is smaller than 0.05. The partial test (t-test) from 9 independent variables (X) identifies 7 variables that have significant effects on the scores of RUP implementation (Y). The overall results of t-test show that the implementation practices of public procurement plans have significant effects of the higher compliance rates on the output of goods and services.