How Governments Promote Monopolies: Public Procurement in India

Abstract

Government officials exert tremendous power when they buy goods and services from private companies. By setting the terms and conditions under which public procurement takes place, public officials help determine which companies will thrive and which ones will fail. This is one of the important ways governments help create and sustain monopolies in the private sector. But since the bidding process to sell products or services to the government is supposed to be an open and fair competition, how does it become skewed toward businesses that already dominate markets? We examine a particular source of bias: the eligibility criteria for bidding in public procurement tenders. These criteria often allow a few large, private companies to bid on government contracts, but they exclude a large number of small and medium-sized enterprises. We study the terms by which offers are solicited in India through tenders floated for transportation projects: roads, highways, bridges, and civil construction. We find that the eligibility criteria impose an unnecessarily heavy burden on small firms, potentially knocking them out of the competition and discouraging them from participating in other procurement processes. In this way, the process reinforces monopolies instead of breaking them up. While this study focuses on India, the results also apply to similar economies.

Public procurement during the pandemic: experience of India and China

“…4.1 Indian experience Public procurement in India is characterized by corruption, unreasonableness, delays and high levels of inefficiency (Hazarika and Jena, 2017;Goyal, 2019). The contracts are too rigid and said to be heavily biased against suppliers (Verma, 2020b).…”

“…Given the significant share of public procurement in government’s budgets and its distributional consequences particularly in developing countries, it has come to be regarded as a “strategic” tool in policy intervention (Rolfstam, 2009; Kattel and Lember, 2010; Grandia and Meehan, 2017; Snider and Rendon, 2008; Patrucco, 2017; Storsjö and Kachali, 2017; Guarnieri and Gomes, 2019; Harland et al , 2021). At the same time, public procurement policies are often institutionally more demanding than private procurement (Telgen et al , 2012), inefficient (Hunja, 2003; Schapper et al , 2006) and characterized by rent-seeking and high transaction costs (Bosio et al , 2020; Goyal, 2019; Kovacic, 1992). In other words, therefore, public procurement is an important policy button but structurally hard to reform.…”

Efeito da reputação do comprador público nos preços de aquisição de produtos comuns em pregões eletrônicos

“…Na revisão de literatura sobre contratações públicas, realizada por Patrucco et al (2017), os autores afirmam que a análise do ambiente do fornecedor permanece praticamente intocada Universidade Católica de Brasília -UCB Brasília-DF Normalmente, estudos que abordam esse ambiente estão voltados para o processo de contratações públicas e para as PMEs. Por exemplo, Obanda (2011), Goyal (2019) e Olusegun e Akinbode (2016) mostram que a flutuação no custo dos itens, tempo para elaboração de propostas e falta de transparência são fatores que afastam as PMEs do processo de contratações públicas. Vincze et al (2010) e Olusegun (2018) mostram que critérios de elegibilidade desproporcionais (cláusulas proibitivas, tamanho da empresa ou capacidade de entrega) também são fatores que afastam as PMEs do processo de contratações públicas.…”

“…Além disso, compradores públicos podem aumentar os Custos de Transação relacionados à entrega de bens e serviços na medida em que os prazos de entrega são encurtados (Vincze et al, 2010;Goyal, 2019) e há presença de muitos locais de entrega no processo de contratação (Bayramov et al, 2017), o que se reflete nos custos de entrega e de logística.…”

“…Nessa situação, prazos de entrega curtos podem não só aumentar os Custos de Transação com a entrega de bens e serviços (Vincze et al, 2010), mas serem utilizados oportunisticamente para dificultar a participação das PMEs no processo de contratação (Goyal, 2019). Conforme avaliação da ME, os compradores públicos com a pior reputação em relação ao prazo de entrega curto e à logística descentralizada foram: FHEMIG (0,12) e PMMG (0,20).…”