An empirical analysis of the impacts of competition on procurement costs

This paper empirically analyses the effect of a competitive environment on the cost of procurement. We exploit a dataset based on the Spanish procurement award notices for the years 2012–2017. After controlling for possible endogeneity, we show that a more competitive environment significantly reduces the cost of Spanish procurement. In particular, the use of the open procedure, the most competitive one, would reduce the procurement price by 9.9%, while the increase by one unit of the number of participants would on average lead to a 2.1% decrease in the procurement price. Consequently, a more extensive use of the open procedure would generate savings of €354 millions per year. These findings can have an important effect on the public deficit of a country.