Can E-Procurement Reduce Bid Rigging in Public Auctions?

Abstract

The adoption of e-procurement may reduce bid rigging in public auctions by limiting in-person meetings of bidders. Using the data from construction auctions tendered by a Japanese local government where paper-based manual procurement is replaced by e-procurement, we find that the adoption of e-procurement reduced bids in a section of the market where the bids were initially higher than the other section of the market. The degree of reduction was smaller in an auction when the bidders were likely to be in the same industrial community, suggesting that the effect of e-procurement by limiting in-person meetings is smaller when the bidders have chances to communicate through other than the procurement processes.