The impact of electronic procurement of public works contracts in Indonesia and India

Electronic procurement is widely believed to enhance transparency in procurement practice by addressing two concerns with manual procurement practices: collusion among bidders; and corruption. E-procurement can reduce collusion among bidders by providing information about tenders to a wide range of interested firms, allowing more firms to participate and breaking up local bidding cartels. E-procurement also mitigates corruption by reducing the degree to which government officials withhold information from non-favoured bidders. By ensuring public access to all procurement data, e-procurement also enhances transparency and the possibility of public oversight. Moreover, the central role of technology in e-procurement can drive technology adoption by firms and give way to more economic activity to meet the needs of the systems that develop around e-procurement. But despite the widespread enthusiasm, there is little rigorous evidence of its impact. This research project will focus on India and Indonesia, both of which recently introduced e-procurement into portions of their public works departments. A challenge in evaluating e-procurement is the need to separate the effect of e-procurement from other changes in the country at the same time. This research project will take advantage of the fact that different states and provinces adopted the project at different times. The research will use ‘difference-in-difference’ – a popular technique used in evaluating social and labour market reforms – to compare the bidding, costs and quality for procurement in states and provinces with those that had not yet adopted e-procurement. The researchers will examine the impact of e-procurement on the bidding process and contracting costs, including bidding practices (whether e-procurement affects the number of companies that register for and pass pre-qualification, and the characteristics of the winning bidder), cost outcomes (whether moving to e-procurement lowers the average contract cost), and quality of roads (in India, roads are randomly inspected for quality purposes. The researchers will be able to use these data to examine whether final quality is improved by a move to e-procurement practices). This research will provide valuable insights on effective checks and balances on governments in developing countries.

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