Do firms submit fewer tender bids with high inflation? An analysis of firms’ participation in public procurement in the EU
ISSN: 1535-0118
Article publication date: 15 October 2024
Issue publication date: 13 November 2024
Abstract
Purpose
This paper aims to explore the effect of sustained high inflation on public procurement participation in the European Union, both in terms of the average number of bids submitted and in the proportion of bids by small- and medium-sized enterprises (SMEs) out of all submitted bids.
Design/methodology/approach
Regression modelling, using contract award notices in the Tender Electronics Daily database between 2018 and 2022, at quarterly intervals.
Findings
Each inflation point increase is associated with a decline in the average number of offers received per tender by 0.43%. A more marked reduction of 8.6% in the average number of offers and a decrease in 3.4 percentage points in the SME participation rate are observed for firms operating in sectors that experienced very high levels of inflation (>20% year-on-year rate of change), compared with a situation of low inflation (0–5%).
Social implications
Claims about difficulties in delivering public contracts for the set price should be taken with a grain of salt, unless businesses operate in sectors experiencing very high inflation levels. Measures to foster competition could also reduce price pressures.
Originality/value
To the best of the authors’ knowledge, this is the first study to quantitatively assess the association between high inflation and public procurement participation. Two methodological novelties are introduced: the operationalisation of sectoral-level inflation down to two-digit NACE codes, based mainly on producer prices; and a matching between two-digit NACE codes for inflation and the common procurement vocabulary codes to classify calls to bid for public contracts by economic activity.
Keywords
Acknowledgements
The authors would like to thank the editors of the journal and three anonymous reviewers for their comments and constructive feedback. The authors would also like to thank Francesco Giffoni, Emanuela Sirtori, Gabija Skardžiūtė, Julija Čura, Viltė Girdzijauskaitė, Akvilė Kareniauskaitė, Vilius Stančiauskas, Greta Rožėnaitė, Sara Banfi, Alessandra Tracogna, Mark Whittle, Andrew Sikorski and Elias Nacer – all of whom contributed to the 2023 DG GROW study on SMEs and high inflation, which served as an inspiration for this paper. Any remaining error is our own.
Citation
Klimavičiūtė, L., Schito, M. and Barcevičius, E. (2024), "Do firms submit fewer tender bids with high inflation? An analysis of firms’ participation in public procurement in the EU", Journal of Public Procurement, Vol. 24 No. 4, pp. 478-506. https://doi.org/10.1108/JOPP-12-2023-0093
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited