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

No 1102, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

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 methodsto uncover and compare the cost of firms bidding on a class of asphalt projects related to surface treatment in Texas. The analysis shows little differences in the cost structure between auctions that have subcontracting goals and those that do not.

Keywords: Auctions; Government purchasing (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ppm
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Journal Article: Disadvantaged business enterprise goals in government procurement contracting: An analysis of bidding behavior and costs (2012)
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