Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia

Type Working Paper
Title Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia
Author(s)
Publication (Day/Month/Year) 2014
URL http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2475691
Abstract
Poorly functioning, and often corrupt, public procurement procedures are widely faulted for the low quality of infrastructure provision in developing countries. Can electronic procurement (e-procurement), which reduces both the cost of acquiring tender information and personal interaction between bidders and procurement officials, ameliorate these problems? In this paper we develop a unique micro-dataset on public works procurement from two fast-growing economies, India and Indonesia, and use regional and time variation in the adoption of e-procurement across both countries to examine its impact. We find no evidence that e-procurement reduces prices paid by the government, but do find that it is associated with quality improvements. In India, where we observe an independent measure of construction quality, e-procurement improves theaverage road quality, and in Indonesia, e-procurement reduces delays in completion of public works projects. Bidding data suggests that an important channel of influence is selection – regions with e-procurement have a broader distribution of winners, with (better) winning bidders more likely to come from outside the region where the work takes place. On net, the results suggest that e-procurement facilitates entry from higher quality contractors.

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