When can lotteries improve public procurement processes?
We study the potential benefits of adding a lottery component to cut the main risks associated with standard negotiated and rule-based auction procurement procedures. We show that adopting a two stage approach in which bureaucrats first negotiate with a small number of bidders to assess their eligibility and, next, rely on a lottery to award the contract reduces corruption risks often observed in negotiated procedures. For rule-based procedures, we show that a “third-price lottery” in which the two highest bidders are selected with equal probability and the project is contracted at a price corresponding to the third highest bid can reduce limited liability, renegotiation, bid rigging and collusion risks.
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| Language: | English |
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Inter-American Development Bank
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| Subjects: | Procurement, Auction, Small Business, Public Procurement, Auditing, Procurement Management, Knowledge, Economy, Educational Institution, D44 - Auctions, D73 - Bureaucracy • Administrative Processes in Public Organizations • Corruption, H57 - Procurement, rules;discretion;lotteries, |
| Online Access: | http://dx.doi.org/10.18235/0004522 https://publications.iadb.org/en/when-can-lotteries-improve-public-procurement-processes |
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