Incorporating economic multipliers in a bid adjustment algorithm for public food procurement decision making

Abstract We present an adjusted bid price mechanism that incorporates economic multiplier effects in public food procurement decision making. Under Input–Output model assumptions, the algorithm estimates enhanced tax revenues to state governments through multiplier effects associated with in‐state supplier purchasing. The deduction of tax revenues represents the net cost of food procurement for the state and enables agencies to make well‐informed purchasing decisions. We estimate the extent of cost reductions for food product categories based on detailed purchase data from public agencies in New York and demonstrate how the algorithm can be used as an improvement to geographic preference bid procedures.