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Evaluation of suppliers costs and institutional barriers of the public procurement system in Russia

Evaluation of suppliers costs and institutional barriers of the public procurement system in Russia

Journal of Economic Regulation, , Vol. 9 (no. 2),

The article considers the problem of estimating the costs of potential suppliers of goods, works and services for government needs from among representatives of small- and medium-scale business. In order to perform such estimation, the authors studied the experience of debutant companies, which took part in the competitive procedures of the Russian federal contract system in St. Petersburg for the first time. Factor analysis was carried out on the regional contract system of St. Petersburg as an institutional environment. Institutional barriers that restrict the participation of companies in competitive procedures or discriminate them on the basis of signs highlighting the systematic institutional problems and the violation of functional processes in the Russian contract system, as well as the facts of unfair economic behavior of counterparties, were classified. Qualitative analysis of contract experience and in-depth interviews revealed 27 institutional barriers. The mechanism of such barriers was defined, based on the imperfection of the institutional environment. The necessity of changing the economic and bureaucratic role of third parties in the contract system of Russia, mostly electronic trading platforms and banking structures is becoming more obvious. In order to estimate the cost of preparing an application for participation in the contract procedure, the authors propose a model that allows describing the planned and hidden costs for an individual vendor. In order to demonstrate the use of the model, the authors cite one of the research cases that clearly demonstrates the effect of institutional barriers and the cost of overcoming them for a supplier company.

Keywords: public procurement; institutions; institutional barriers; contract system; contractual relations; electronic trading platform; bank guarantee; transaction costs; economic opportunism; bounded rationality

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