Chapter 5. Procurement Choices and Infrastructure Costs

Donor Contracting Conditions and Public Procurement: Causal Evidence from Kenyan Electrification

“…A rich theoretical literature has studied bundling problems, particularly in the context of the seller's problem (Daskalakis et al 2017;Manelli and Vincent 2006;Rochet and Stole 2003), but empirical evidence from procurement auctions for major public infrastructure projects is scant, despite the ubiquity of these contract design issues. For instance, Makovšek and Bridge (2021) state that "it is still not fully clear whether contracts that bundle the design-and-build phase outperform the traditional design-bid-build contract, where the two phases are procured separately." Few studies causally estimate the impact of bundling contracts (Hoppe et al (2013)'s experiment among 400 university students is one exception).…”

“…Multilateral agencies face a similar procurement problem to governments: for instance, between 2000 and 2022 the World Bank financed more than 311,000 contracts with private sector contractors for the procurement of more than $185 billion in works, goods, or services for more than 21,000 projects, many of them in infrastructure construction. Yet, writing in Glaeser and Poterba (2021), Makovšek and Bridge (2021) state that "empirically we know relatively little about how procurement choices affect contract outcomes in (infrastructure) procurement," highlighting the importance of "contracts that bundle the design-and-build phase". And while a rich literature on foreign aid donors studies policy conditionality (Archibong et al 2021;Andersen et al 2022;Easterly 2002), much less is understood about the procedural conditions that recipient governments face.…”