The cost of the public entities’ bad reputation in public procurement
by Matheus Pereira Libório; Patrícia Bernardes; Petr Ekel; Ivo Teixeira Gico Júnior; Sérgio Fernando Loureiro Rezende
International Journal of Procurement Management (IJPM), Vol. 19, No. 2, 2024

Abstract: This paper analyses the effect of the public entity's bad reputation on the prices of products purchased in electronic auctions. To do so, we used the analytical hierarchical process, considering critical criteria for the decision of suppliers to participate in electronic auctions. Data from 25,001 electronic auctions reveal that public entities with bad reputations purchase products 18% more expensive than public entities with a better reputation. Moreover, the bad reputation of two of the worst reputable public entities raised government spending on public procurement by BRL 14 million over two years. These results suggest that the public entity rating strategy reduces contractual uncertainties and ex-post transaction costs.

Online publication date: Mon, 15-Jan-2024

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