The research of pricing mechanisms of public procurement system in the Russian Federation

Abstract

This article presents the main results of research on the topic of the research of the pricing mechanisms within the public procurement system in the Russian Federation. The goal of this article is to estimate the effect of the pricing mechanism on the efficiency of public procurement system in the Russian Federation. This research examines the initial maximum contract price (IMCP) mechanism as one possible reason for persistent inefficiency of the public procurement system. The authors discuss composite auctions (in which the winner is selected based on more than just price criteria) in the procurement of the results of research and development (R&D) work in Russia. It is found that unscrupulous customers can collude with suppliers to manipulate (overstate) the IMCP and restrict competition, which results in a higher final contract price and losses to the state budget. Using the metric of interaction frequency, we identified suppliers potentially affiliated with the customers. The results of econometric modeling suggest that potentially affiliated suppliers win the auctions with bids closer to the initial maximum contract price (IMCP) than independent suppliers. This result is observed regardless of specification changes and different evaluation methods. Potentially affiliated bidders have higher quality scores in contests with potentially affiliated organizers. At the same time, independent participants receive lower scores in such auctions. Therefore, a potentially affiliated bidder can set a higher price, winning due to overstated quality criteria.

Full document