No.229 What Determines the Time Efficiency of the Purchasing Phase of Public Procurement in Developing Countries: Evidence from Japanese ODA Loans

Many countries spend more than 10% of their GDP on public procurement. It is, therefore, of vital importance to make it the most efficient in terms of both price and time. Nevertheless, empirical research especially on time efficiency is limited. This study fills this gap by investigating the time efficiency of the purchasing phase of public procurement. Time efficiency of the purchasing phase in this study is measured as the negative of numbers of days from a bid announcement to contract signing. Using 1,235 procurement data of Japanese ODA loan projects spanning the period from 2007 to 2017 in 52 developing countries, this study finds different results for the two types of procurement, namely procurement of consulting services and procurement of goods, civil works, and non-consulting services. For the procurement of consulting services, this study finds that the time efficiency is positively associated with the quality of a country’s governance and the level of procurement experience of the executing agency. It also finds that the time efficiency of central governments is higher than local government procurement. To mitigate the influence of a country’s lack of governance and to supplement the lack of experience of the executing agencies, this study recommends that development partners such as JICA consider providing more procurement assistance during the purchasing stage and to promote the use of central procurement agencies. For the procurement of goods, civil works, and non-consulting service, this study finds that the time efficiency is negatively associated with the contract value. This study is cautious to draw the simplistic implication to split the procurement packages into smaller packages because the efficiency gained during the purchasing phase may be well offset by the increased inefficiency during the implementation phase caused by increased coordination complexity. Further analysis of the time efficiency encompassing both the purchasing and execution phases is desired.

Keywords: Public Procurement, Procurement Efficiency, Time Efficiency, Japanese ODA Loans