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Project Performance and Bid Evaluation:Evidence from World Bank Procurement Auctions

Qi Zhang

No 184, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: Open competitive bidding with the contract awarded to the bidder offering the lowest bid price is commonly the recommended method for public procurement. However, the benefits of this form of bidding are subject to certain conditions, such as a good number of available bidders and no post-contract adaptations. This paper quantitatively evaluates the implications of the extent to which these conditions are satisfied for contract performance. It combines the performance ratings of World Bank financed projects with the information on bidding for World Bank procurement contracts and uses natural resources as exogenous variations to show that in resource-rich countries, where the conditions are less likely to be satisfied, awarding the contract to the bidder with the lowest bid price may not be the best procurement method in terms of contract performance. This is consistent with the evidence that World Bank financed projects performed better in non-resource-rich countries than in resource-rich countries over the last 40 years. This may explain why since 2016 the World Bank has shifted the focus of bid evaluation from the lowest bid to bids that provide the best overall value for money, taking into account risk, quality, cost and other factors as needed.

Keywords: procurement; auction; World Bank; project evaluation (search for similar items in EconPapers)
JEL-codes: D4 Q3 H4 H5 (search for similar items in EconPapers)
Date: 2016-11-01
New Economics Papers: this item is included in nep-dev and nep-ppm
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