Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed
Infrastructure is the engine for economic growth. The international donor community has spent about 70-100 billion U.S. dollars on infrastructure development in developing countries every year. However, it is arguable whether these financial resour...
| Main Authors: | , |
|---|---|
| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2008/07/9646019/procurement-efficiency-infrastructure-development-financial-needs-reassessed http://hdl.handle.net/10986/6854 |
| Summary: | Infrastructure is the engine for
economic growth. The international donor community has spent
about 70-100 billion U.S. dollars on infrastructure
development in developing countries every year. However, it
is arguable whether these financial resources are used
efficiently, particularly whether the current infrastructure
procurement prices are appropriate. Without doubt a key is
competition to curb public procurement costs. This paper
analyzes procurement data from multi and bilateral official
development projects in three infrastructure sectors: roads,
electricity, and water and sanitation. The findings show
that the competition effect is underutilized. To take full
advantage of competition, at least seven bidders are needed
in the road and water sectors, while three may be enough in
the power sector. The paper also shows that not only
competition, but also auction design, especially lot
division, is crucial for reducing unit costs of
infrastructure. Based on the estimated efficient unit costs,
the annual financial needs are estimated at approximately
360 billion U.S. dollars. By promoting competition, the
developing world might be able to save at most 8.2 percent
of total infrastructure development costs. |
|---|