WITH PUBLIC SECTOR SPENDING ON INFRASTRUCTURE PROJECTS RISING in many developing countries, there are growing pressures to improve government procurement processes. Can key process improvements enhance competition, reduce costs and boost quality?  A new research study co-authored by Harvard Kennedy School Professor Rohini Pande provides evidence to support claims that replacing manual procurement procedures with electronic procurement (e-procurement), in particular, can improve outcomes for publicly-funded projects.

“Can Electronic Procurement Improve Infrastructure Provision? Evidence from Public Works in India and Indonesia” is published in the August edition of the American Economic Journal.

The study focuses on a range of projects in two large emerging economies – India and Indonesia – where cost overruns and delays in infrastructure provision are commonplace. These delays were an important motivation for these governments to adopt e-procurement technologies but concerns remain that e-procurement may be difficult to implement in settings with low state capacity.  However, contrary to such concerns, Pande and her co-authors find that e-procurement improved infrastructure provision along multiple dimensions in India and Indonesia. 

“All told, the results present a consistent story. E-procurement appears to have led to increased ability of firms from outside the home region to win contracts. These firms, in turn, tended to be higher quality firms in general, as measured by their average delay times (in Indonesia) and average construction quality (in India),” they write.  “This led to improvements in the quality of roads and timeliness but no detectable changes in price.” 

The researchers also found evidence in support of improvements in the quality of the work at a given price, suggesting “that the system prior to e-procurement was not necessarily selecting the most efficient firms, and that e-procurement may have improved efficiency even if it did not necessarily lower prices paid.”

Pande and her co-authors conclude that e-procurement was a “partial reform” that did “improve the provision of public services” by lowering the bar to entry, but further research is necessary to help determine “whether a reform package that changes both the application process and also the process of selecting among bidders could lead to even larger gains in economic efficiency.” 

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