Buyers, sellers and bids – The tendering market in public procurement

Abstract: This thesis studies the functioning of the tendering market in public procurement. The effects of the characteristics of buyers, sellers and bids in the tendering market are analyzed. A dataset of construction tenders in the county of Kalmar, Sweden is analyzed by using regression analysis. Several findings are made about how characteristics of size, level of organizational knowledge and location of buyers and sellers affect the functioning of the tendering market in public procurement. The market for public tenders is a part of the public procurement market which is described in the thesis from a European and Swedish perspective. The roles of public procurement authorities and of the supplying firms in this market are described and the interactions of these players are analyzed. Tendering involves an auction procedure and the thesis treats some aspects of auction theory. The subject of the thesis, to study the functioning of the public procurement market based on the characteristics of the players within it is a new approach but the characteristics that are studied in the thesis and their effects on the behavior of the participant in the public procurement market have all to some extent been described in the literature. A short presentation of the main findings of the analysis: -The location of a firm, here meaning the site of its headquarter, has an influence on the frequency with which the firm is bidding. The effect is a small positive correlation between the firm being local (in the place where the contract of the tender is to be carried out) and its participation in tender. -The organizational knowledge of a firm is positively correlated with the frequency with which it submits bids in public tenders. -The more organizational knowledge there is in the buying public entity, the smaller will the price variation be in the bids submitted in a tender. -There is a negative relationship between the size of the tender and the variation in price among the bids received. -Being a local firm slightly increases the chance of winning a tender. The study gives an indication that the studying of the described characteristics do have effects on the behavior of the participants in the market and it opens for further research in the area.