Title: The cost of the public entities’ bad reputation in public procurement

Authors: Matheus Pereira Libório; Patrícia Bernardes; Petr Ekel; Ivo Teixeira Gico Júnior; Sérgio Fernando Loureiro Rezende

Addresses: Pontifical Catholic University of Minas Gerais, 500 Dom José Gaspar Street, Belo Horizonte/MG, 30535-901, Brazil ' Pontifical Catholic University of Minas Gerais, 500 Dom José Gaspar Street, Belo Horizonte/MG, 30535-901, Brazil ' Pontifical Catholic University of Minas Gerais, 500 Dom José Gaspar Street, Belo Horizonte/MG, 30535-901, Brazil ' Centro Universitário de Brasília (UniCEUB), SEPN 707/907, Asa Norte, Brasília, DF, 70790-07, Brazil ' Pontifical Catholic University of Minas Gerais, 500 Dom José Gaspar Street, Belo Horizonte/MG, 30535-901, Brazil

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.

Keywords: public procurement; public entity's reputation; electronic auctions; analytical hierarchical process; transaction costs; law and economics.

DOI: 10.1504/IJPM.2024.136052

International Journal of Procurement Management, 2024 Vol.19 No.2, pp.208 - 225

Received: 26 Sep 2022
Accepted: 16 Oct 2022
Published online: 15 Jan 2024 *

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