Information Is Essential for Competitive and Cost-Effective Public Procurement

Abstract

Public authorities promote transparent public procurement practices to increase competition and reduce public procurement costs. In this article, we focus on public procurement of the European Union (EU). We employ a multidisciplinary approach to analyse economic effects of information in public procurement. We quantify the information content of 2,390,630 EU public procurement notices published in 22 different languages using natural language processing techniques. Subsequently, we examine the impact of the information content on public procurement outcomes. We find that higher information levels have significant positive effects. Competition is considerably higher when notices contain more information. On average, contract prices would be 6%-8% lower if notices were to contain adequate information. EU governments could save up to euro 80 billion if all public procurement notices were to have detailed information. Based on our comprehensive analysis, we believe that authorities should regulate the information content of notices to promote competition and cost-effectiveness in public procurement.