Contract Size and Small Firm Competition in Public Procurement

Elon Strömbäck ()
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Elon Strömbäck: Department of Economics, Umeå School of Business and Economics, Postal: Umeå University, S 901 87 Umeå, Sweden

No 914, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: The European Commission encourages public authorities to split procurement contracts into multiple contracts in order to increase the competiveness of small and medium sized enterprises (SMEs). In this paper, I use data from Swedish public procurement auctions for internal regular cleaning service contracts to study the effect of contract size and number of contracts on SME participation and the probability of submitting the winning bid. I found that SME participation is negatively related to both contract size and the number of contracts in the procurement. A possible interpretation is that reduced contract size in order to stimulate SME participation is counteracted by reduced incentives for them to enter into procurements with multiple contracts. Medium-sized firms are also more successful when bidding for smaller contracts relative to large firms. Nevertheless, the results indicate that the SMEs’ award rate is positively correlated with the number of contracts in the procurement.

Keywords: Procurement design; Split-award; Endogenous entry; Small and medium sized enterprises (search for similar items in EconPapers)
JEL-codes: D44 H11 H57 L23 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2015-09-15
New Economics Papers: this item is included in nep-com, nep-cse, nep-cta, nep-ent and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0914

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