No abstract

This article adopts an ordered-probit estimation procedure to investigate the influence of competitive tendering on contract price and perjormance. Using a two-equation recursive system the findings of Domberger, Hall and Li (1995) turned out to be robust to the orderedprobit methodology which confirmed the strong negative effect of competitive tendering on contract price. The evidence also suggested that performance was either enhanced or remained the sume in the presence of competition. Overall, the results of this investigation support the view that competitive tendering generates efficiency gains without adverse effects on quality of service.* We wish to thank Ian Walker, Denzil Fiebig, Christine Hall, Don Harding, a referee, and the editors of theilustralian Economic Review, David Johnson and Peter Kenyon, for helpful comments on earlier drafts. This article stems from a major research project on the performance of competitively tendered contracts for which original, unpublished data had to be collected. We are grateful to the many contracting organisations that participated in this study. Financial support was provided by the Australian Research Council and the New South Wales Treasury through collaborative research grant no. C49380004. Responsibility for errors and omissions remains our own.