Optimizing the Size of Public Road Contracts

27 Pages Posted: 20 Apr 2016

See all articles by Atsushi Iimi

Atsushi Iimi

International Monetary Fund (IMF); World Bank

Radia Benamghar

World Bank

Date Written: April 1, 2012


Procurement packaging has important effects on not only the bidders' bidding behavior, but also contractors' performance. By changing the size of public contracts, procurers can encourage (or discourage) market competition and improve contract performance, avoiding unnecessary cost overruns and project delays. In practice, there is no single solution about how to package public contracts. With procurement data from road projects in Nepal, this paper examines the optimal size of road contracts in rural areas. The optimum varies depending on policy objectives. To maximize the bidder participation, the length of road should be about 11 kilometers. To minimize cost overruns and delays, the contracts should be much larger at 17 and 21 kilometers, respectively. Compared with the current procurement practices, the findings suggest that procurers take more advantage of enlarging road packages, although contracts that are too large may increase the risk of discouraging firms from participating in public tenders.

Keywords: Government Procurement, Transport Economics Policy & Planning, Debt Markets, Post Conflict Reconstruction, Contract Law

Suggested Citation

Iimi, Atsushi and Benamghar, Radia, Optimizing the Size of Public Road Contracts (April 1, 2012). World Bank Policy Research Working Paper No. 6028. Available at SSRN: https://ssrn.com/abstract=2035784

Atsushi Iimi (Contact Author)

International Monetary Fund (IMF)

700 19th Street, N.W.
Washington, DC 20431
United States

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Radia Benamghar

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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