Procurement Efficiency for Infrastructure Development and Financial Needs Reassessed

Infrastructure is the engine for economic growth. The international donor community has spent about 70-100 billion U.S. dollars on infrastructure development in developing countries every year. However, it is arguable whether these financial resources are used efficiently, particularly whether the current infrastructure procurement prices are appropriate. Without doubt a key is competition to curb public procurement costs. This paper analyzes procurement data from multi and bilateral official development projects in three infrastructure sectors: roads, electricity, and water and sanitation. The findings show that the competition effect is underutilized. To take full advantage of competition, at least seven bidders are needed in the road and water sectors, while three may be enough in the power sector. The paper also shows that not only competition, but also auction design, especially lot division, is crucial for reducing unit costs of infrastructure. Based on the estimated efficient unit costs, the annual financial needs are estimated at approximately 360 billion U.S. dollars. By promoting competition, the developing world might be able to save at most 8.2 percent of total infrastructure development costs.

Bibliographic Details

Main Authors:	Estache, Antonio, Iimi, Atsushi
Language:	English
Published:	World Bank, Washington, DC 2008-07
Subjects:	AFFILIATED ORGANIZATIONS, ASYMMETRIC INFORMATION, AUCTION, AUCTION DESIGN, AUCTION MARKETS, AUCTIONS, BENEFICIARIES, BID, BID PRICE, BIDDERS, BIDDING, BIDS, BOND UNDERWRITERS, BUSINESS DEVELOPMENT, BUSINESS ENVIRONMENT, BUSINESS OPPORTUNITIES, COMMODITY, COMPETITIVE BIDDING, COMPETITIVENESS, CONCESSION, CONTRACT DESIGN, DATA COVERAGE, DEBT, DEBT RELIEF, DEBT REPAYMENTS, DEVELOPING COUNTRIES, DIGITAL ASSISTANTS, DISBURSEMENT, DUMMY VARIABLE, DUMMY VARIABLES, EAST EUROPE, ECONOMIC DEVELOPMENT, ECONOMIC EFFICIENCY, ECONOMIC GROWTH, ECONOMIC INFRASTRUCTURE, ECONOMIES OF SCALE, ELASTICITY, ELECTRICITY, ELECTRICITY GENERATION, ELECTRICITY GENERATORS, ELECTRICITY INFRASTRUCTURE, ELECTRICITY SECTOR, ENTERPRISE SURVEY, ENTERPRISE SURVEYS, EQUIPMENT, EXTERNAL BORROWINGS, EXTERNAL DEBT, EXTERNALITIES, FINANCIAL RESOURCES, FOREIGN COMPANIES, FOREIGN FIRMS, GENERATION, GENERATORS, GOVERNMENT CONTRACT, GOVERNMENT CONTRACTS, GOVERNMENT EXPENDITURE, HEALTH EDUCATION, HIGHWAY, HIGHWAY CONSTRUCTION, HOLDING, HOST COUNTRY, HUMAN CAPITAL, IMPLEMENTATION PLAN, INFORMAL PAYMENT, INFRASTRUCTURE CAPACITY, INFRASTRUCTURE CONTRACT, INFRASTRUCTURE COST, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE DEVELOPMENT PROJECTS, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE PROJECTS, INFRASTRUCTURE SECTOR, INFRASTRUCTURE SERVICES, INFRASTRUCTURE SPENDING, INFRASTRUCTURES, INSTALLATION, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INVESTING, INVESTMENT CLIMATE, INVESTMENT COSTS, INVESTMENT NEEDS, LANES, LENGTH OF ROAD, LENGTH OF ROADS, LEVEL OF COMPETITION, LOCAL BUSINESS, LOCAL MARKETS, MANUFACTURING, MIDDLE EAST, MUNICIPAL BOND, NATURAL RESOURCES, NETWORKS, NORTH AFRICA, POLITICAL ECONOMY, POLITICAL STABILITY, POWER, POWER SECTOR, PRICE AUCTION, PRICE COMPETITION, PRIVATE FINANCING, PRIVATE INFORMATION, PRIVATE SECTOR, PRIVATE SECTOR DEVELOPMENT, PROCUREMENT, PROCUREMENT PROCESS, PROCUREMENTS, PUBLIC ADMINISTRATION, PUBLIC INFRASTRUCTURE, PUBLIC INVESTMENT, PUBLIC INVESTMENTS, PUBLIC PROCUREMENT, PUBLIC ROAD, PUBLIC SERVICES, PUBLIC WORKS, RELIABILITY, RESERVE, RESULT, RESULTS, ROAD, ROAD COSTS, ROAD PROJECTS, ROAD SECTOR, ROADS, SANITATION, SANITATION SECTOR, SERVICE CONTRACTS, SOCIAL SERVICES, STANDARD CONTRACT, STOCKS, SUB-SAHARAN AFRICA, TELECOM, TELECOMMUNICATIONS, TENDERING, TRANSACTION, TRANSACTION COSTS, TRANSMISSION, TRANSMISSION LINES, TRANSPARENCY, TRANSPORT, TRUE, TUNNEL, USES, WATER CONSUMPTION, WATER DISTRIBUTION, WATER INFRASTRUCTURE, WATER SERVICE, WATER SUPPLY INFRASTRUCTURE, WATER SUPPLY SECTOR, WEB,
Online Access:	http://documents.worldbank.org/curated/en/2008/07/9646019/procurement-efficiency-infrastructure-development-financial-needs-reassessed https://hdl.handle.net/10986/6854
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