Disadvantaged business enterprise goals in government procurement contracting: An analysis of bidding behavior and costs

Dakshina De Silva, Timothy Dunne, Georgia Kosmopoulou and Carlos Lamarche

International Journal of Industrial Organization, 2012, vol. 30, issue 4, 377-388

Abstract: Programs that encourage the participation of disadvantaged business enterprises (DBE) as subcontractors have been a part of government procurement auctions for over three decades. In this paper, we examine the impact of a program that requires prime contractors to subcontract out a portion of a highway procurement project to DBE firms. We study how DBE subcontracting requirements affect bidding behavior in federally funded projects. Within a symmetric independent private value framework, we use the equilibrium bidding function to obtain the cost distribution of firms undertaking projects either with or without subcontracting goals. We then use nonparametric estimation methods to uncover and compare the cost of firm bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between projects that have subcontracting goals and those that do not.

Keywords: Government procurement; Auctions; Bidding; Affirmative action; Minority businesses (search for similar items in EconPapers)
JEL-codes: D44 H4 H57 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Working Paper: Disadvantaged business enterprise goals in government procurement contracting: an analysis of bidding behavior and costs (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:30:y:2012:i:4:p:377-388

DOI: 10.1016/j.ijindorg.2011.12.003

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