Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed

Antonio Estache and Atsushi Iimi

No 2008_022, Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: 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. Without doubt a key is competition in public procurement systems. We analyze procurement data from multi- and bi-lateral official development assistance in three main infrastructure sectors: roads, electricity, and water and sanitation. It is found that the competition effect is underutilized in some areas. 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. It is also shown that not only competition but also auction design, especially lot division, is crucial for containing procurement costs. Based on the estimated efficient unit cost of infrastructure procurement, the annual financial needs are estimated at approximately 370 billion U.S. dollars. By promoting competition, the developing world might be able to save at most 7.6 percent of total infrastructure development costs.

Keywords: Public procurement; auction theory; infrastructure development; corruption; governance (search for similar items in EconPapers)
Pages: 39 p.
Date: 2008-03
New Economics Papers: this item is included in nep-ppm
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Citations: View citations in EconPapers (18)

Published by: ECARES, Université Libre de Bruxelles, Bruxelles

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Working Paper: Procurement efficiency for infrastructure development and financial needs reassessed (2008)
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