Effect of Institutions: Analysis of Japanese Municipal Public Procurement

Abstract

Using data from Japanese municipalities, this article analyzes the impact of institutional reform processes on the average winning bid for municipal public procurement. The results are (1) the general competitive bidding method led to a decrease in the average winning bid, and (2) bidding reform itself led to a decrease in the average winning bid. The former is a factor that results from the competition function, and the latter is an authority's commitment factor, which is rooted in an aggressive atmosphere for efficiency through the reformed bidding system; this factor is similar to the "Hawthorne Effect," in which changes in businesses' behavior during the course of a particular term may be related only to the special social situation, and social treatment that they encountered.

Nurturing domestic firms through public procurement: A comparison between Brazil and Japan

“…For examining the Japanese procurement experience in the pre-GPA period, this study relied on secondary sources. Comprehensive studies (including Arai, 2013;Kusunoki, 2007;Ohashi, 2008;Woodall, 1996) describe the public procurement system in Japan and examine the relationship between the government and local firms. A great part of the literature on Japan also emphasizes the benefits of the collaborative relationship between the government and the private sector (see, e.g., Dore, 2000;Wade, 2004), which is another topic explored in this paper due to the potential positive effects on public procurement.…”

“…In Japan, there was also pressure for reforms from the mid-1990s due to widespread criticism of bid rigging practices (so-called dangō , 談合) in tenders for public works contracts. Such collusion cases involved career politicians, public works bureaucrats, and local firms (Arai, 2013; Ohashi, 2008: 3; Ohno and Harada, 2006: 54; Woodall, 1996: 2).…”

Managing challenges in social care service triads – Exploring public procurement practices of Dutch municipalities

“…Other studies focus on the procurement procedures (related to external and process demands) and their effect on procurement outcome. Arai (2013) finds the introduction of competitive bidding leads to a decrease in the average winning bid and hence the price paid. Despite the low skills of workers at the contracting entities, using open procedures still has a positive effect on supply side competition (Ochrana and Pavel, 2013).…”

O uso do poder público de compra em políticas industriais: uma comparação entre Brasil e Japão

“…Japan's ratification of the GPA increased pressure for changes in domestic regulations in order to enable the participation of foreign firms in the country's procurement processes (Gier, 1996:639). Demand for reforms in the Japanese procurement law also intensified during the 1990s due to widespread criticism of bid rigging practices (dangō 談合) in bids for public works contracts, involving politicians, civil servants and local firms (Woodall, 1996:2;Ohashi, 2009:268;Ohno and Harada, 2006:54;Arai, 2013).…”