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This paper aims to measure the cost of procurement because public procurement procedures prescribed by legislation not only enhance transparency and competition but also entail certain transaction costs for both customers and suppliers.

These costs are important to the efficiency of the procurement system. However, very few previous studies have focused on estimating procurement costs. This paper proposes a methodology for public procurement cost evaluation.

This paper shows how procurement costs can be calculated using a formalized survey of public customers. This methodology was tested with a representative group of public customers operating in one region of the Russian Federation.

The authors formulate the policy implications of this paper, as they relate to the improvement of public procurement regulations and argue that this methodological approach can be applied in other developing and transitioning economies.

Within construction procurement, transaction cost economics offers a mechanism to understand “unseen” costs associated with the pre- and post-contract work. Pre-contract, these include costs related to information gathering and procurement. Post-contract they include activities of contract administration and enforcement. The purpose of this paper is to estimate the magnitude of transaction costs (TCs) for different procurement systems used in construction projects in New Zealand. Specifically estimating the relative values of TCs for Traditional and Design-Build delivery systems for the purpose of comparison.

This study develops a conceptual model for the relationship between procurement systems and TC. The model was operationalized and developed into a questionnaire. A cross-sectional sample approach was deployed, involving pilot and survey questionnaires, and results verification through “real world” cases. Data were sought from construction professionals in management, design and operations (i.e. project managers, architects, engineers, quantity surveyors, and procurement officers). TCs were measured using time-spent conducting procurement-related activities as a surrogate for cost. Professionals evaluate their time-spent in procurement activities using a Likert scale 1-5, comparing the Traditional and Design-Build delivery systems. Data were triangulated with “real world” cases to test and explain the developed model. The test included validity and reliability, path analysis, regression analysis, factor analysis, and structural equation modelling (SEM). The primary analytical technique used was SEM to yield information on goodness-of-fit, model development and comparison, and confirmatory strategies. SPSS Amos 21 statistical software was used for data analysis and model development.

The results suggest that procurement systems have indirect impact on TCs. The relationship between procurement system and TCs is fully mediated by costs of information, procurement, administration, and enforcement. Applying the developed models (the Traditional and Design-Build) to “real world” cases, it was found that TCs in the Traditional system amounts to 18.5 percent of the annual salary cost of a project manager (as an indicator quantum), while in the Design-Build system, it amounts to 14.5 percent of the annual salary cost of a project manager. TCs were calculated using regression equations based on factor loadings in the Traditional and Design-Build models.

This study applies new theoretical model for the link between procurement system and TCs, investigating and empirically demonstrating the influence of procurement system on TCs in construction. It also offers a new plausible explanation for the factors influencing TCs in procurement. The study emphasizes “in-house” TCs from the perspective of the professionals. The findings have practical implications on construction business practice due to their robust empirical nature and theoretical framework, which might enhance the performance of the construction industry.

This study contributes to the procurement selection in construction, by introducing a new conceptual model for the link between procurement system and TCs. It has extended the current practices for procurement selection by estimating TCs for the Traditional and Design-Build systems for comparison.

The purpose of this paper is to examine the transaction costs involved in managing procurement contracts in the public sector, particularly at the lower and higher level of local governments from the clients’ perspective.

The paper uses new institutional economics, specifically the transaction cost approach. A multiple case study design was used, in which five local government authorities (LGAs) were selected from the Kigoma and Tanga regions of Tanzania. Interviews with heads of procurement management units, focus groups and secondary sources were used to collect information for lower level LGAs.

Very high information, negotiation and monitoring transaction costs were revealed at the post-contractual stage for higher levels of local government in all cases. Transaction costs were associated with institutional problems, lack of financial resources and attitudes towards accountability, transparency and competition. It was also found that lower levels of local government are faced with very high transaction costs for all procurement stages due to a lack of procurement contract management capacity among ward and village procurement project committees, low levels of support from higher level LGAs, a lack of simple Swahili-standardised documents and guidelines for lower level procurement contract management which reflect current legal issues and the lack of a legal framework for procurement at the lower level of local government. These costs are associated with poor accountability and a lack of competition, transparency and efficiency throughout public procurement chains.

There is no estimate for quantitative approaches, because it is was difficult to measure transaction costs associated with accountability, transparency and efficiency.

The paper contributes knowledge on qualitative levels of transaction costs for procurement contract management for both higher and lower levels of LGAs from the clients’ viewpoint.

The purpose of this paper is to develop a decision model for choosing the tendering procedure in PPP that minimizes the transaction costs borne by the public sector.

A conceptual model that relates the procurement procedures described in the EU legal framework to launch PPPs and the transaction costs, considering the level of information managed by each procurement procedure has been developed. The authors use this conceptual model to develop propositions about the impact that specific project- and country-related factors have on the choice of the procurement procedure that minimizes the transaction costs.

The application of the proposed model to the case of the Italian highway “Cispadana” shows its usefulness in orienting the public authority’s choice between the different tendering procedures, taking into account project- and country-related factors.

The present study fills the gap existing in the literature on transaction costs of PPP projects and the procurement procedure used to launch those projects by developing a model that relates the level of transaction costs with a set of key factors, namely the level of information managed during the tendering process, the number of bidders, the project size, the project complexity, and the institutional environment.

As for practitioners, the main contribution of this study lies in offering a tool for supporting the public authority in the decision-making process about the tendering procedures in PPPs without imposing the selection of a specific procedure.

The approach developed provides a new tool to support the contracting authority in the design and choice of the tendering procedures in PPP.

Material procurement constitutes a large share of the overall cost of construction projects. Understanding the factors influencing the cost of quality (COQ) in the procurement process could help identify opportunities for lowering quality cost without compromising quality. The paper aims to discuss these issues.

In this paper, a COQ model for the construction material procurement process is developed using the traditional prevention–appraisal–failure (PAF) approach. Using data from a $4bn aluminum smelter construction project, the authors conducted a simulation of the COQ model to evaluate various quality assurance policies.

This paper confirms that raising the prevention cost leads to a drop in failure cost as well as COQ for the project studied. While the authors are unable to provide blanket recommendations as the results are derived from a single project case study, it does suggest that construction material procurement processes would benefit from a higher prevention expenditure. And for certain cases where the authors observe a deviation from the traditional Juran’s model of COQ – the high appraisal cost in the procurement process – reduction of appraisal expenditure may in fact be more beneficial than its increase.

The research results suggest that appraisal expenditure should be tailored to each purchase order in order to maximize the total benefits. Additionally, this paper presents the first COQ model developed for the construction material procurement process. Another unique feature of the model is its inclusion of supplier-side costs, which are excluded in the conventional COQ analysis.

The single-most important parameter of a public procurement system is the threshold above which the framework applies. The optimization problem consists of finding a reasonable trade-off between the gains from public procurement and the administrative costs associated with procurement rules. In the present study, based on a sample of central and local government procurement operations in Sweden, an optimal threshold value in the range of 5,000—6,000 EUR is computed based on the requirement that the average gain should supersede the average cost. If a larger proportion of procurements is required to gain from the regulation imposed, a threshold value of 20,000—25,000 EUR should apply. The general conclusion is that there are strong arguments for maintaining procurement rules below the European Union threshold.

The paper seeks to understand the conditions that motivate Asian supermarkets' choices for vegetable sourcing through wholesale procurement or preferred supplier systems.

Insights from transaction cost theory are used to analyze the evolution of fresh produce procurement regimes by supermarkets in Bangkok and Nanjing.

Trade‐offs between higher production‐cum‐investment costs (i.e. fixed investments, variable production costs and economies of scale) with expected savings in transaction costs (governance and opportunistic behaviour) are registered that could hinder contractual delivery.

Transaction costs play an important role in shaping procurement regimes. Information, negotiation and monitoring costs are high in early phases of market development, but may be reduced when retailers establish direct and contractual relations with selected producers. Such preferred supplier arrangements may be helpful to reduce risks related to delivery frequency and product quality, but require substantial investments that only become feasible when opportunistic behaviour is adequately controlled. The nature of supplier‐buyer relations alters in a number of subsequent phases from chain optimisation to integral chain care.

With the establishment of large‐scale supermarkets in Asia, buyers need more information about the quality of products and the creditworthiness and reputation of sellers and therefore increasingly rely on contractual delivery relationships. For preferred supplier regimes, scale economies and enforcement of mutual trust are key issues to establish stable relations.

The shift from wholesale purchase towards preferred supplier regimes in emerging economies involves large investments that can only be met if governance costs are reduced.

Procuring relief products and services is a challenging process for humanitarian organizations (HOs), yet it accounts for approximately 65% of relief operations’ costs (Moshtari et al., 2021). This paper aims to examine how procurement internal controls, materials and purchasing procedure standardization influence information integration and procurement performance.

In this study, partial least square structural equation models and multigroup analysis were used to analyze data collected from 170 HOs.

Procurement internal controls and material and purchasing procedure standardization fully mediate between information integration and procurement performance.

The study focuses only on HOs. Since humanitarian procurement projects take place over a period of several years, it is difficult to capture the long-term effects of information integration, procurement internal controls, material and purchasing procedure standardization and procurement performance. In this regard, a longitudinal study could be undertaken, provided that the required resources are available.

Procurement managers should implement information integration practices within acceptable procurement internal controls and standardize material and purchasing procedures to boost procurement performance.

By integrating information through procurement internal controls and standardizing material and purchasing procedures, procurement performance in a humanitarian setting can be systematically optimized.

This paper aims to investigate the role of micro, small and medium enterprises (MSMEs) within the Canadian public procurement, by seeking to identify barriers and supporting factors of MSMEs’ participation and success in public tenders.

The empirical analysis builds on a unique survey run by the Canadian federal government, which addressed firms either participating or not participating in public tenders. Model estimation on the survey data relies on sample selection methodologies, which allow separating determinants of MSMEs’ decision to participate from determinants of success.

Results provide evidence that costs stemming from asset specificity and uncertainty (e.g. costs of bidding, requirements for participation, bundling of contracts and award rules based on minimum price) affect participation in public procurement. Within MSMEs, micro-firms are the most discouraged from participating. However, after controlling for factors affecting participation, micro-firms emerge as having a higher success rate, possibly because of high specialization and joint participation with larger firms.

Because of the cross-sectional nature of the data used for hypotheses testing, endogeneity may arise if ex post variables affect ex ante decisions. This may apply if participation in procurement feeds on success in past tenders.

Findings may inform policies for the inclusion of smaller firms in the public marketplace.

To the best of the authors’ knowledge, this study is the first attempting to disentangle determinants of participation in public tenders from determinants of success. Separating the two aspects helps fine-tune SME-friendly public procurement policies, by identifying actions that effectively facilitate success of MSMEs in public tenders.

Adversarial contracting methods are used for most public infrastructure procurement and timely delivery on budget remains a problem. In the past 20 years, OECD countries have adopted a number of alternative procurement methods that are based on collaborative principles including public private partnerships, long-term outsourcing arrangements and relationship/alliance contracts. We review the theoretical principles that operate for both adversarial and collaborative contracting methods. We identify the characteristics of non-adversarial contracting methods such as the output specification, qualitative selection criteria, the alignment of incentives, discrete allocation of residual control rights, life cycle costing, and risk-weighted value for money measurement that are delivering better procurement outcomes for government.