The One and Only: Single Bidding in Public Procurement

Abstract

Approximately 23% of public procurement contracts in the European Union are awarded to the sole firm that submits a bid. The public procurement contracts market constitutes around one-seventh of GDP in developed countries, rendering any inefficiencies on this market a first-order problem. In this paper, I exploit a reform implemented in the Czech Republic that made it impossible to award contracts with only one bid. Using a difference-in-differences strategy, I first show that the reform reduced prices by 10% relative to the estimated costs for single-bid public procurement contracts. Second, I provide evidence that procuring authorities started to provide significantly longer descriptions of procurement contracts and extended the timeframe for firms to prepare their bids. Last, I show that the prices of procurement contracts supplied by politically connected and anonymously owned firms were not reduced after the reform.

Keywords: Single-bidding, Public procurement, Political connections, Corruption

JEL Classification: D44, D72, H57