Showing papers on "Procurement published in 1995"

A Theory of Incentives in Procurement and Regulation.

Abstract: More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular, though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities. The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics. Each chapter opens with a discussion of the economic issues, an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory. Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques. There is a large set of review problems at the end of the book.

Optimal procurement mechanisms

Abstract: We analyze optimal mechanisms in environments where sellers are privately informed about quality A methodology is provided for deriving conditions that are necessary and sufficient to determine when two simple trading environments maximize either social or private surplus The commonly used auction mechanism is frequently inefficient in procurement environments Often, the optimal mechanism is simply to order potential suppliers and to tender take-it-or-leave-it offers to each sequentially We completely characterize the environments in which either mechanism is optimal In doing so, we develop a general methodology that determines when and if a given trading institution is optimal

Financing Health Care in Sub-Saharan Africa Through User Fees and Insurance

Abstract: This book was written as part of a broad search for ways to improve the effectiveness of World Bank support for health in Africa. In this volume ideas are presented to stimulate a more informed discussion offer new perspectives and challenge some widely held assumptions about cost recovery. A rethinking of user fee policies is emphasized because this may lead to appropriate ways to improve quality and equity in the delivery of health care. There is in fact growing evidence that well-designed user fees and self-financing insurance schemes offer new opportunities to develop better health care systems in Africa south of the Sahara. The introduction to this book provides an overview on mechanisms for 1) mobilizing resources 2) setting prices and anticipating effects 3) implementation and future performance and 4) partnerships in cost-sharing. The book is then divided into 2 sections. Section 1 covers user fees and discusses 1) their goals (mobilizing resources promoting efficiency fostering equity reinforcing decentralization and sustainability and stimulating private sector development) 2) the ability and willingness of users to pay fees 3) the tradeoff between price and quality 4) exemption policies and 5) their administration and collection. The following recommendations are then made about user fees: 1) an explicit policy on user fees should be formulated; 2) the targeting of subsidies should be reconsidered; 3) the efficient management of facilities should be emphasized; 4) facilities should be permitted to retain a portion of the fees collected; 5) communities should have a voice on the boards of local health facilities; 6) better procurement practices (especially for drugs) should be stressed; 7) the development of private sector providers should be promoted; and 8) an information base should be constructed for future policy analysis. The second part of the book considers issues of self-financing health insurance such as risk sharing insurance basics formal health insurance in Africa prepayment plans for rural populations evaluating the potential for formal risk sharing in Africa and the potential for expanding coverage. The recommendations which arise from this discussion are 1) to focus initially on cities 2) to tap the formal sector 3) to implement user fees as a prerequisite 4) to stress catastrophic care 5) to pay attention to the "uninsurables" 6) to explore alternatives such as prepayment schemes 7) to maintain consumer choice and 8) to build an information base for policy analysis.

Privatized infrastructure : the build operate transfer approach

Abstract: How the concept evolved Granting authority's perspective Concessionaire's perspective Funder's perspective Financial engineering Financing techniques Estimating for major projects Estimating techniques Life cycle costing and financial modelling Risks and their mitigation Risk analysis Legal framework Procurement options for infrastructure projects Case studies Infrastructure economics and the role of government Key success factors for BOT projects Future developments in the private financing of infrastructure

The Role of Information in U.S. Offshore Oil and Gas Lease Auctions

Abstract: This paper describes the U.S. offshore oil and gas lease sales conducted by the Department of the Interior since 1954. Several decisions are discussed, including bidding for leases, the government's decision whether to accept the highest bid, the incidence and timing of exploratory drilling, and the formation of bidding consortia. Equilibrium models of these decisions that emphasize informational and strategic issues and that account for institutional features of the leasing program are analyzed, and their predictions compared to outcomes in the data. AN IMPORTANT ASPECT of any market is the information available to partici- pants. The social and private costs of information imperfections are com- pounded in strategic settings, where participants may exploit informational asymmetries. Information can play a crucial role in an auction. A seller (or a buyer in a procurement auction) often resorts to an auction market because of uncertainty about the market price for the item in question. That is, the seller is uncertain about others' willingness to pay. At the same time, buyers may be uncertain about their rivals' valuations of the item, and they may be uncertain about the value of the item for themselves, such as when there is an unknown common valuation component. If one buyer has access to information superior to that of its rivals, such as a more precise signal of the item's worth on a future resale market, informational rents may be obtained. Even if buyers have symmetric information, in the sense of equally precise signals, they must account for the winner's curse in uncertain environments because the item will be won by the buyer with the most optimistic assessment of the item's worth. Buyers have incentives to pool information or to gain an advantage by learning of a rival's intentions. If ex post signals of the item's worth are available, the seller can increase profits by making payment contingent on the ex post signal, say via a royalty payment that supplements any fixed payment. However, if the buyer can affect the value by ex post actions, a moral hazard problem arises, and excessive reliance on a royalty rate may distort incentives. The game is not zero-sum, so inefficiencies may result.

The Economics of Defense

Abstract: 1. Defense economics: an introduction Part I. Alliances, Defense Demand and Arms Races: 2. The economic theory of alliances 3. The demand for military expenditures 4. Arms races Part II. Defense Inputs, Industrial Base and Growth: 5. Procurement: theories, evidence and policies 6. Military manpower 7. Defense and the industrial base 8. Economic growth, development and military expenditures Part III. Defense Policies, Trade, Disarmament and Conversion: 9. Industrial and alliance policies 10. Arms trade 11. Arms control and disarmament 12. Conversion Part IV. New Developments and Future Directions: 13. Nonconventional conflict: revolutions, guerrilla warfare and terrorism 14. Conclusions and research agenda for the future.

Performance management : a business process benchmarking approach

Abstract: The productivity term. Productivity and competitive advantage. Methods and models for measurement of productivity and performance. Performance evaluation of organizations. Productivity promoting management. Productivity promoting organization. Information flow in manufacturing. Total quality management. Productivity improvement techniques. Balancing management concepts for time, quality and cost. Procurement. Production and operations management. Project management. Materials flow.

Dual sourcing in repeated procurement competitions

Abstract: The issue of maintaining competition over time in a repeated procurement setting is important for both government and private sector buyers. The U.S. Department of Defense has experimented with splitting production quantities between two or more contractors in an effort to make government business more attractive for the private sector. This paper analyzes the effectiveness of this strategy. We find that in a two-period model with production learning and entry costs, dual sourcing, even for the specific mechanism we consider, in some cases, reduces overall expected cost. Moreover, if buyers are unable to commit to long-term contracts or suppliers are unable to bid away anticipated gains, the incentives to dual source are often stronger.

Growth and Defense: Pooled Estimates for the NATO Alliance, 1951-1988

Abstract: In two provocative and influential contributions, Emile Benoit [4; 5] uncovered a net positive association between defense spending and economic growth for 44 less-developed countries (LDCs) during the 1950-65 period. Apparently, a larger defense burden, as measured by the share of national income devoted to defense, may have promoted growth for these countries. This finding was controversial and generated an extensive literature that either found fault with Benoit's methodology,' or else investigated the relationship between growth and defense with alternative methodologies. One such methodology relied on an aggregate production function to derive an equation for the sources of growth owing to technological change, labor growth, investment, productivity differences among sectors, and externalities. This supply-side approach was associated with Feder [13] and Ram [22]. When a Feder-Ram model was used, researchers typically discovered either a small positive effect or else no impact of defense on growth. Except for Alexander [1], the Feder-Ram approach has been applied to large cross-sections of LDCs, to cross-sections of LDCs and developed countries, or to individual countries over time. The purpose of this paper is fivefold. First, we extend the three-sector Feder-Ram model to allow for the influence of defense spillin externalities as the defense expenditures of a nation's allies affect the nation's own defense and civilian sectors in either a positive or negative fashion. Spillin externalities can stem from input complementarity or substitutability, procurement practices, joint ventures, or operational considerations. Second, we check the data for unit roots and, when appropriate, cointegration. These tests help us to avoid a dynamic misspecification. Third, we estimate a three-sector Feder-Ram growth equation for each of ten NATO allies for the 1951-

Chapter 13 The economics of military manpower

Abstract: The USA and other countries spend a significant portion of their defense budgets on personnel. Effective management of military forces requires an understanding of the economics of military manpower. Over the past three decades economists have produced a substantial body of research about the subject. This chapter distills this literature for a general audience. Topics surveyed include the supply of personnel, personnel productivity and the demand for personnel, procurement by conscription versus voluntary means, the structure of pay, the use of women and reservists, and the civilian return to military training and experience. It also points to directions for future research.

Standardization across Non-standard Domains: The Case of Organ Procurement:

Abstract: This article describes the work of negotiating and reinterpreting "standard" protocols and criteria at the level of local practice, using the example of the procurement of human cadaver organs for transplantation. The tension between efforts to starulardize and globalize biomedical science, on the one hand, and fitting these efforts into everyday practices and understandings of practitioners, on the other, results in new constructions of medical knowledge about bodies and persons.

The Effects of Military Spending on Economic Activity: Evidence from State Procurement Spending

Abstract: We use state data from 1963-1994 to estimate the response of employment growth to military procurement spending. The state-year panel provides greater variation in both variables than aggregate data. There are two main findings. First, military procurement spending does explain a statistically significant degree of the variation in employment growth across states, even in the presence of fixed effects for time and state and other controls. Second, we find evidence in support of a non-linear relationship between procurement spending and employment growth. In particular, large adverse state procurement shocks have proportionately larger effects on state employment growth rates.

‘Hollowing out’ the Local State: Compulsory Competitive Tendering and the Restructuring of British Public Sector Services

Abstract: The process of compulsory competitive tendering (CCT) for the provision of local-government services has forced significant changes to the way in which such services have been provided, whether such services have been contracted out or remain in-house, and has spawned a considerable literature on the impact of these changes on the quality, reach, and cost of public services. The primary focus of this literature has been on service users (or ‘consumers’) and the local taxpayer. In this paper, however, we attempt an analysis of these changes in terms of their impact on the nature of work within public sector services. Empirical evidence of geographical and sectoral variations in the degree of success of the private sector in winning contracts is considered, and explanations for these variations are offered. In particular, the discussion focuses on variations in the form of work in different sectors and the treatment of workers in different places and in different types of services, through a study of the labour processes involved and a consideration of the diverse potential for different fractions of capital to benefit from the introduction of CCT. Last, the concept of ‘hollowing out’ is reworked in order to further assist the theorisation of employment and other contemporary changes in the local state.

A framework for improving operational effectiveness and cost efficiency in emergency planning and response

Abstract: Presents a practical framework within which disaster response operational effectiveness can be balanced with cost efficiency. This balancing is accomplished through a systematic proactive planning of response requirements, costs projections, procurement and resource mobilization. The framework is useful in general disaster response planning and in the development of cost‐efficient procedures for supporting disaster response efforts. It is generic and can be adapted to local conditions and requirements.

Global Sourcing Strategies of U.S. Subsidiaries of Foreign Multinationals

Abstract: Global sourcing encompasses the production, purchase, and assembly of parts and finished products worldwide. It involves decisions relating to how components are supplied for production and which production units serve particular markets (Davidson 1982, Kotabe 1992). Global sourcing is generally recognized as a means to enhance a firm's competitiveness in the global market. Therefore, the concern for many firms is not whether to use global sourcing, but how best to use it to achieve business objectives. Although a primary business objective is to maintain or improve market performance, there is limited empirical evidence on the influence of global sourcing strategy on market performance. The few available empirical reports examining the relationship between global sourcing strategy and market performance use data collected in the mid-1980's or before (Kim 1986, Kotabe 1992, Moxon 1974). Literature Firms make sourcing decisions in each of the two phases of production: component sourcing and assembly. In either phase, firms can choose to use domestic or foreign sourcing (the locational aspect), and internal or external sourcing (the ownership aspect). "Domestic sourcing" is when the sourcing firm and its suppliers are located in the same country, while "foreign sourcing" involves sourcing from abroad. A firm uses "internal sourcing" when it procures or assembles parts and components from within the corporate system, either a parent from its subsidiaries, or subsidiaries from their parent or from other subsidiaries. "External sourcing" occurs when sourcing originates from independent suppliers on a contractual basis. These activities often cross national boundaries. Locational Aspects of Global Sourcing Strategy Many studies report dramatic increases in foreign sourcing by U.S. multinational firms.(1) For example, 26 large multinational firms surveyed by Monczka and Giunipero (1984) reported that, during 1977-1981, there was on average a 60 percent increase in foreign purchases. In a more recent survey of 80 large U.S. manufacturing firms by the Machinery and Allied Products Institute (MAPI) (1986), it was found that the larger the firm, the more likely it is to use foreign sourcing. Further, more (81%) firms used foreign sourcing to procure component parts than for the procurement of materials (76%), machinery and equipment (69%), and services (16%). In penetrating the U.S. market, domestic (i.e., U.S.) sourcing is often employed by foreign multinational firms as a means to overcome tariff and non-tariff barriers. Recently, because of the high levels of foreign direct investment, foreign multinational firms (Japanese multinationals in particular) have been using more and more local (U.S.) content in their products. Whether a firm uses domestic or foreign sourcing partially depends on the cost advantage derived from the relative prices of goods and labor in various countries, which is influenced by currency exchange rates. From the perspective of U.S.-based firms, if the U.S. dollar depreciates, it is relatively more expensive to source from suppliers outside the U.S. Other important factors influencing the level of domestic and foreign sourcing include trade barriers, transportation costs, availability and delivery time, among others (e.g., Birou and Fawcett 1993, Carter and Narasimhan 1990). Ownership Aspect of Global Sourcing Strategy Leontiades (1971) and Moxon (1974) were among the earlier researchers to recognize the strategic importance of intra-firm imports (internal sourcing) from less-developed countries to developed countries. Later, Helleiner (1979) reported that internal sourcing (intra-firm transactions) by U.S. multinational firms comprised approximately 48 percent of total U.S. imports. A separate survey of 76 U.S. multinational manufacturing firms revealed the significant level of intra-firm imports by U.S. parent companies in the following categories: finished goods (20-25 percent), components (65-70 percent), and raw materials (10 percent) (Business International 1982). …

PVUSA procurement, acceptance, and rating practices for photovoltaic power plants

Abstract: This report is one in a series of PVUSA reports on PVUSA experiences and lessons learned at the demonstration sites in Davis and Kerman, California, and from participating utility host sites. During the course of approximately 7 years (1988--1994), 10 PV systems have been installed ranging from 20 kW to 500 kW. Six 20-kW emerging module technology arrays, five on universal project-provided structures and one turnkey concentrator, and four turnkey utility-scale systems (200 to 500 kW) were installed. PVUSA took a very proactive approach in the procurement of these systems. In the absence of established procurement documents, the project team developed a comprehensive set of technical and commercial documents. These have been updated with each successive procurement. Working closely with vendors after the award in a two-way exchange provided designs better suited for utility applications. This report discusses the PVUSA procurement process through testing and acceptance, and rating of PV turnkey systems. Special emphasis is placed on the acceptance testing and rating methodology which completes the procurement process by verifying that PV systems meet contract requirements. Lessons learned and recommendations are provided based on PVUSA experience.

The economics of military manpower

Abstract: The USA and other countries spend a significant portion of their defense budgets on personnel. Effective management of military forces requires an understanding of the economics of military manpower. Over the past three decades economists have produced a substantial body of research about the subject. This chapter distills this literature for a general audience. Topics surveyed include the supply of personnel, personnel productivity and the demand for personnel, procurement by conscription versus voluntary means, the structure of pay, the use of women and reservists, and the civilian return to military training and experience. It also points to directions for future research.

Risk Assessment of Competitive Procurement

Abstract: A method is proposed to evaluate the risk of cost growth in competitively procured construction projects. It uses computer records of past bid data and an inferential statistical technique to simultaneously assign projects into two risk categories. One category is based on the observed disagreement between the winning bid and the other submitted bids. The other is based upon the observed bias in the bidding pattern of the winning bidder. Results verify differences in cost growth for both risk categories. Projects awarded to the most extreme bids are seven times more likely to experience excessive cost growth than a project awarded to a more reasonable bid. Similarly, projects awarded to extreme bidders have average cost growths 3.5–4 times higher than if awarded to more reasonable bidders. This risk-assessment method would prove useful in the bid-evaluation procedures of public agencies. It appears from these results that agencies that make bargains based upon competitive procurement, often do not receive...

Trends in Information Systems Outsourcing

Abstract: INTRODUCTION Today, the outsourcing of selected organizational activities is an integral part of corporate strategy. Historically, third party participation in a company's business has generally focused on the manufacture of parts and components and the provision of auxiliary services such as legal and travel services. A more recent phenomenon, however, involves third party participation in the management of the information systems (I/S) function. An increasingly competitive and cost conscious environment has caused organizations to reevaluate their approach to the management of many staff functions, including information systems. The outsourcing of information systems is a growing trend that has piqued the interest of companies such as IBM, EDS, and Anderson Consulting, among others.[1] Estimated revenues for the outsourcing industry vary from $7 to $12 billion for 1992, growing to as much as $38 to $50 billion in 1995.[2] In the United States alone, the industry is predicted to grow at an annual rate of 20 percent.[3] The outsourcing of information systems is also gaining momentum globally. In a 1992 survey of European information system executives, 71 percent indicated that they were planning to outsource some operations. This represented a doubling of interest from the previous year.[4] The evolving global economy dearly has helped stimulate this trend. Organizations typically have unique I/S needs when clients are located in a variety of foreign countries. At the same time, the systems that tie these organizations together often face an array of political, cultural, language, and logistics challenges unique to different host countries.[5] Consequently, the use of outsourcing may offer an effective strategic alternative to system development in situations that tend to inhibit satisfactory development and operation of such systems. Nevertheless, the effects on organizations implementing an outsourcing strategy are important, if not critical, and are still being evaluated. Since information is a principal resource in most businesses today, the consequences of external control of a firm's information system must be considered carefully. The formulation and management of the service contracts with information services suppliers are critical issues. This article reviews the trends in information systems outsourcing. A framework for evaluating the outsourcing decision is analyzed, and the implications for organizations making such decisions are discussed. I/S OUTSOURCING Outsourcing is defined as the procurement of products or services from sources that are external to the organization. For services, this usually involves the transfer of operational control to the suppliers. In the current environment of right-sizing, with a renewed focus on core business activities, companies can no longer assume that all organizational services must be provided and managed internally. Competitive advantage may be gained when I/S products or services are produced more effectively and efficiently by outside suppliers. The advantages in outsourcing information services can be operational or strategic, or both. Operational advantages usually provide for short-term trouble avoidance, while strategic advantages offer long-term contributions in maximizing opportunities.[6] The decision to outsource a part or all of an organization's I/S function is a complex issue facing managers in the 1990s. Outsourcing certain aspects of the more general information technology (IT) services has been a reality for the past four decades. These traditionally included on-site facilities management, remote data processing, maintenance functions, time sharing, and contract programming.[7] Such activities either supplemented or replaced in-house services and were under the control of I/S managers. The criteria for outsourcing decisions were also simple. Smaller organizations outsourced when they could not afford the required systems. …

The single period procurement problem where dedicated supplier capacity can be reserved

Abstract: In this article we consider the single period procurement strategy for an item with uncertainty in its demand and uncertainty in the capacity of the supplier. Dedicated capacity can be ensured by paying a premium charge to the supplier. The other decision variable is the replenishment quantity to request. It turns out to be very easy to select the best value of this latter quantity. On the other hand, we are only able to characterize the general behavior of the expected profit as a function of the level of dedicated capacity. In general, there can be multiple local maxima as a function of the dedicated capacity. However, for the special, but important, case of normally distributed demand, normally distributed capacity and a linear cost for reserving capacity, an algorithm is developed for finding the best level of dedicated capacity. Some preliminary insights regarding the extension to multiple periods are presented. © 1995 John Wiley & Sons, Inc.

Design and build: a survey of architects' views

Abstract: Design and build has increased in its use for construction procurement in recent times. However, its performance as a procurement method has been widely criticized by professionals in the construction industry. This paper reports a survey of 40 architects, using a structured questionnaire to investigate the performance of contractor‐led design and build in project procurement. Although 20% of architects' private sector workload (and 8% of public sector) is derived from D&B, they perceive this procurement type to involve sacrificing product quality and design innovation. Where clients insist on a choice of D&B, architects generally prefer the use of either novation D&B or develop and construct, rather than ‘traditional’ D&B.

Chapter 15 Economics of defense R&D

Abstract: This chapter examines a number of aspects of defense RD theory and evidence concerning both the private and social benefits of, or returns to, RD the effect of defense RD the response of government decision-makers to cost information yielded by defense RD and the dynamic optimality of R&D projects.

Chapter 12 Incentive models of the defense procurement process

Abstract: Economic theorists have devoted considerable attention to analyzing models of closely related incentive contracting problems that arise in the study of public procurement, private procurement, regulation, the theory of the firm, the theory of organizations, and managerial compensation. The purpose of this chapter is to provide an introduction to the incentive models literature as it applies to defense procurement.

Alternative tendering systems and deregulation in britain.

Abstract: This paper concentrates on one specific aspect of bus deregulation in Britain: the use of competitive tendering systems. Under the framework for deregulation specified in the Transport Act of 1985, operators register those services which they are willing to run commercially (that is, without route-specific subsidy payments). Where local authorities wish to see the resultant gaps in provision filled, they may support services to do so, on the basis that a competitive tendering procedure is followed. It is therefore not necessarily the incumbent area operator who will run the tendered service. The 'Buses' White Paper of 1984 which set out the thinking behind the 1985 Act (Department of Transport, 1984) appeared to envisage such tendered services as largely separate from the main commercial network (low-density routes in rural areas are the obvious example). However, in practice, much commercial registration has been based on time of day and week, rather than entire routes. Even in low-density rural areas, commercial operation is often found for daytime (0800-1800) services on Mondays to Saturdays, while early morning, evening and Sunday services are not run commercially, and if the local authority wishes to fill these gaps, tendered services are required. Operators are also aware of the cost of peak-only operation, and in many cases are unwilling to register additional peak-only journeys catering largely for school travel. These likewise form part of tendered provision: a typical situation is illustrated in Figure 1. Overall, a high level of commercial registration was experienced at deregulation ? about 84 per cent of total bus-kms in local services, a proportion which has varied very