Resident Bid Preference, Affiliation, and Procurement Competition: Evidence from New Mexico

Abstract

In public procurement auctions, governments routinely offer preferences to qualified firms in the form of bid discounts. Previous studies on bid discounting do not account for affiliation – a form of cost dependence between bidders that is likely to occur in a public procurement environment. Utilizing data from the New Mexico Department of Transportation’s Resident Preference Program, I develop and estimate an empirical model of firm bidding and entry that allows for affiliation in firms’ project costs. I find evidence of affiliation and show how it changes preference auction outcomes.

Subcontractor Networks and Affiliated Private Costs: Evidence forom Oklahoma Bridge Contracts

“…4 Second, bidders must reach out to subcontractors before submitting bids. Third, bidders minimize their costs on a project, which is a common assumption in the auction literature (Marion 2009;Miller 2014;Rosa 2019). This assumption is important as minimization is a nondecreasing function in all its arguments.…”

“…2 In a follow up paper, Li and Zhang (2015) studies how this affiliation affects firms' decision to mergers using a structural model. The existence of common subcontractors and suppliers in the market motivated the inclusion of affiliation in Nakabayashi (2013) when studying small business set asides, and Rosa (2019) when studying bid preference programs. On the other hand, Krasnokutskaya and Seim (2011) dismiss the inclusion of affiliation in their work on California's bid preferring program, citing the relativity small value that common subcontractors contribute to projects in their sample.…”

Migrant Care’s Role in Advocating the Educational Needs of Migrant Workers’ Children

“…Migrant Care can advocate for the Indonesian government to help issue official documents to deal with the education problems of children of migrant workers. The official documents that can be advocated by Migrant Care to the Indonesian government are as follows (Rosa, 2019;Murphy & Rodis, 2020;Purch et al, 2020): a) Passport Issuance Migrant Care may be able to persuade the government to implement online registration for Indonesian migrant workers seeking passports while abroad. This online passport issuance registration program aims to make life easier for migrant workers working abroad, particularly those who work in remote locations.…”

Subcontracting requirements and the cost of government procurement

“…Nakabayashi (2013) investigates set-asides for small and medium enterprises in Japanese public construction projects and finds that enough of these smaller enterprises would exit the procurement market in the absence of set-asides to increase the overall cost of procurement. Empirical studies on bid discounting, which is yet another type of preference program include Krasnokutskaya and Seim (2011) and Marion (2007), who study a bid discount program for small businesses in California, and Rosa (2019), who investigates bid discounts for residents in New Mexico. Hubbard and Paarsch (2009) use numerical simulations to explore how discounts affect equilibrium bidding.…”