An Ordered‐Probit Analysis of Price and Performance in Competitively Tendered Contracts

Simon Domberger and Eric Ah Lik Li

Australian Economic Review, 1995, vol. 28, issue 2, 14-22

Abstract: Abstract This article adopts an ordered‐probit estimation procedure to investigate the influence of competitive tendering on contract price and performance. Using a two‐equation recursive system the findings of Domberger, Hall and Li (1995) turned out to be robust to the ordered‐probit methodology which confirmed the strong negative effect of competitive tendering on contract price. The evidence also suggested that performance was either enhanced or remained the same in the presence of competition. Overall, the results of this investigation support the view that competitive tendering generates efficiency gains without adverse effects on quality of service.

Date: 1995
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