Corruption in procurement and public purchase

Abstract

The paper studies capture and extortion in public purchase. It shows that capture yields a dead-weight loss while extortion does not. Based on the calibration of the model the total cost of capture is between 1.2 and 2.88 times the amount of the bribes.The theoretical analysis focuses on capture fight. The legal framework that emerges from the normative analysis involves open tender for larger purchases and no monitoring for the smaller ones. The rule is independent of a country's characteristics. Large public purchases should hence be ruled by international legislation. For markets of medium range national legislation differs. When susceptibility to corruption rises, there is a shift from the capture to the extortion regime. JEL Classification Numbers: D73, D82, H57, K42.

Public Procurement and Rent-Seeking: The Case of Paraguay

“…While this assumption cannot be directly tested, because in practice corruption and bribes are not observed, the model based on this null hypothesis will generate a number of testable predictions discussed below. The first prediction, which is from Auriol (2006), is that, independently of the type of commodity, a corrupt procurement official favors limited tendering procedures, thereby maximizing the price of the purchase and his bribe. We thus expect corrupt Paraguayan public institutions to rely on the exceptional purchase mechanisms.…”

“…commodities such as medicine or cars, which require a warranty or a certification, are characterized by larger values of c I − c f * , justifying that firms choose formality. 19 For more details see Auriol (2006).…”

A festschrift for Graham Ive

“…In recent years, we have seen an imposing body of work on construction-related issues in mainstream economics journals, including contract forms (Bajari and Tadelis, 2001;Ewerhart and Fieseler, 2003), award procedure Ganuza, 2007;Bajari et al, 2014), risk sharing (Olsen and Osmundsen, 2005), subcontracting (Tadelis, 2002), bidding behaviour , procurement efficiency (Jensen and Stonecash, 2005;Bajari et al, 2014), corruption in procurement (Auriol, 2006), and public-private partnerships (Hart, 2003;Maskin and Tirole, 2008;De Bettignies and Ross, 2009). While modelled elegantly, these works may not be pieced together coherently enough to form an integrated understanding of construction economic activity.…”

An Economic Analysis of Debarment

“…The EU recently revised its procurement rules, but the new EU directive leaves much space for member states to decide the nuances of their rules on debarment. 5 In the United States and Canada, there are frequent debates about the functionality of debarment rules, with particular concerns about arbitrary exclusion of bidders and about consequences for the economy. 6 International development banks boldly apply debarment rules to their own procurement operations and those of their clients (Seiler and Madir 2012;Williams 2007;Søreide et al 2016).…”