Repeated selection of supplier, factors and results: the Czech Republic
| Published date | 04 November 2019 |
| DOI | https://doi.org/10.1108/JOPP-12-2018-0049 |
| Date | 04 November 2019 |
| Pages | 322-344 |
| Author | Michal Plaček,Martin Schmidt,František Ochrana,Gabriela Vaceková,Jana Soukopová |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue |
Repeated selection of supplier,
factors and results: the
Czech Republic
Michal Pla
cek,Martin Schmidt and František Ochrana
CESES, Univerzita Karlova v Praze Fakulta socialnich ved,
Praha, Czech Republic, and
Gabriela Vaceková and Jana Soukopová
Masarykova Univerzita, Brno, Czech Republic
Abstract
Purpose –The paper aims to deal with the analysis of the factor leading to the repeatedselection of the
specific supplierand the effect of this recurrent selection on overpricingof public contracts.
Design/methodology/approach –A mix of quantitative and qualitativemethods is used to achieve this
goal. To analyze the chances of obtaining repeated contracts, the logistic regression method is used. To
analyze the factor of overpriced contracts, the classic ordinary least squares regression model is used. The
focus groupmethod is then used to explain the factors acting on the part of the contracting authorities.
Findings –The results show that the prior procurement of a given contracting authority, or work for the
public sector in general, has a statistically significant effecton the conclusion of contracts. The use of less-
transparent forms of input has a strong impact. The non-transparent selection of suppliers rather than
repetitionof contracts generally results in the over-pricingof contracts. The IT sector is an exception.
Social implications –This research is also essential for real public policy. Given the amount of GDP
allocated to thepublic procurement market, it makes sense to continuallyseek room for improvement. Here is
an attemptto find this by examining the contractingauthorities’behavior when awardingrepeated contracts.
Originality/value –This research is original because it looks at the problemof the contracting authority
in the wider context and optics of the path dependencytheory, which has not yet been applied to the public
procurement environment.The focus is also on IT procurement, which accordingto this study has not been
empiricallyinvestigated in this way, is also innovative.
Keyword Czech Republic
Paper type Research paper
1. Introduction
The paper deals with the issue of repeated contracts.With repeated contracts, there is a risk
of possible corruption and overpricing(Spagnolo, 2012). However, repeated contracts do not
always lead to worse results. Coviello et al. (2018)claims that recurring contracts can mean
improved public procurement, as the procurer can take into account the supplier’s
experience and reputation, a consideration that is particularly beneficial for complex
projects. Many factors can have an impact on the final outcome of repeated contracts, such
as the characteristics of the contracting authority, institutional environmental quality and
the influence of politicians(Dastidar and Mukherjee, 2014).
The paper focuses on the issue of repeated contractsin the Czech Republic, where public
procurement takes place in an environment burdened by its communist past (Yakovlev
et al.,2016) and characterized by limited accountability (Nemec and De Vries, 2018)and by
higher levels of corruption than in more developed countries (Transparency International,
JOPP
19,4
322
Received10 December 2018
Revised22 April 2019
18June 2019
Accepted2 July 2019
Journalof Public Procurement
Vol.19 No. 4, 2019
pp. 322-344
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-12-2018-0049
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1535-0118.htm
2018). Tkachenko et al. (2017) reported mainly about the negative effects of repeated
contracts, includingoverpricing.
The present analysis focuses on building and IT contracts in the Czech Republic using
logistic regression to identify the odds ratio in which a supplier who has won a public
contract with a particularprocurer will be awarded it again. Then a regressionmodel is used
to verify instances of repeatedcontracts affecting the winning price of a public contract; this
can identify the occurrence of corrupt behavior. The results of the empirical analysis are
supplemented by structured interviews with the representatives of the contracting
authorities.
Our paper presents an important contribution to the current theory of repetitive
contracts, as the factors that influence re-contractinghave not previously been investigated.
The focus of analysis on construction work and IT procurement also makes it possible to
derive theoretical conclusions for public procurements that differ in complexity. By
interviewing a focus group of representatives of contracting authorities, we cananalyze the
results of the econometric model more deeply and focus on finding the causes, not just the
associations.
In Czech Republic, the volume of public procurement amounted to approximately 11 per
cent of GDP, i.e. approximately CZK 559bn (Ministry for Regional Development, 2017).
Given the amount of GDP allocated to the public procurement market, it makes sense to
continually seek room for improvement. This article represents an attempt to do so by
examining the contractingauthorities’behavior when awarding repeatedcontracts.
2. Theoretical background
The article is based inthe literature dealing with selection procedures,company reputations,
contract renegotiation,contracting authority characteristics and corruption. Theproblem of
repeated supplierselection is a classic public procurement problem. Thereis a dilemma as to
whether leaving the selection of a supplier at the discretion of the contracting authority,
such as through the use of restricted procedures and the repeated selection of contractors,
leads to better resultsthan setting up an auction does (Coviello et al.,2018).
Classical theory assumes that greater competitionand openness can lead to better public
procurement results. There are higher prices and a risk of corruption in restricted
procedures and repeated shortcuts. One empirical study (Coviello et al.,2018) argues that
freedom to choose to repeat theselection of contractors does not worsen the results of public
procurement and it can actually improve them. Freedom of choice makes it possible to use
concepts from the private sector, such as creating long-term relationships and considering
supplier reputations. Contractors who have had better past performances are more likely to
win contracts (Coviello et al.,2018). Experience and reputation are particularly importantin
the awarding of complex contracts, high value purchases and non-contractible goods
(Spagnolo, 2012). For complex contracts, there is a high risk of renegotiation as well as a
prolongation of implementation periods (Bajari et al.,2006). According to Decarolis and
Palumbo (2015) there is an additional price increaseof more than 5 per cent in more than 46
per cent of cases, with an extension of more than5 per cent in 86 per cent of cases. Spagnolo
(2012) suggests usingsupplier ranking as a tool for taking reputation intoaccount.
Repeated contracts often involve the risk of corruption (Spagnolo, 2012). Bandiera et al.
(2009) distinguishbetween active waste and passive waste. Active waste means transferring
benefits towards politicians and officials in the form of bribes and kickback payments.
Passive waste is a large regulatory burden making procurement cumbersome and
increasing the average price that the public body pays (Bandiera et al., 2009). According to
Bandiera et al. (2009), mostinefficiency is caused by passive waste. Authors researchingthis
Supplier,
factors and
results
323
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