Optimizing the Size of Public Road Contracts
Procurement packaging has important effects on not only the bidders' bidding behavior, but also contractors' performance. By changing the size of public contracts, procurers can encourage (or discourage) market competition and improve con...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2012/04/16209005/optimizing-size-public-road-contracts http://hdl.handle.net/10986/6030 |
| Summary: | Procurement packaging has important
effects on not only the bidders' bidding behavior, but
also contractors' performance. By changing the size of
public contracts, procurers can encourage (or discourage)
market competition and improve contract performance,
avoiding unnecessary cost overruns and project delays. In
practice, there is no single solution about how to package
public contracts. With procurement data from road projects
in Nepal, this paper examines the optimal size of road
contracts in rural areas. The optimum varies depending on
policy objectives. To maximize the bidder participation, the
length of road should be about 11 kilometers. To minimize
cost overruns and delays, the contracts should be much
larger at 17 and 21 kilometers, respectively. Compared with
the current procurement practices, the findings suggest that
procurers take more advantage of enlarging road packages,
although contracts that are too large may increase the risk
of discouraging firms from participating in public tenders. |
|---|