A Bid Strategy for Earlier Payment: Evidence and Implications of Front-End Loading in Procurement

Justin Marion and Benjamin Rosa

No 33606, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Liquidity management is key in industries with variable cash flows. We study how businesses in the highway construction industry manage cash flow by strategically bidding more on work with an earlier payout—a practice known as front-end loading. We find that small contractors, infrequent bidders, and Disadvantaged Business Enterprises front-end load more intensely, indicating a stronger preference for earlier payment. An equilibrium bidding model highlights a novel pathway through which this preference can affect procurement and its managerial and policy implications.

JEL-codes: D44 D82 D86 H57 L74 R42 (search for similar items in EconPapers)
Date: 2025-03
Note: IO
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