Curbing Agency Problems in the Procurement Process by Protest Oversight

Document Type

Article

Publication Date

Summer 1994

ISSN

17562171

Publisher

Wiley on behalf of RAND Corporation

Language

en-US

Abstract

We study a model in which a potential bidder in a government procurement may challenge its exclusion from the procurement before a quasi-judicial board. In the case of a sole-source procurement, the excluded vendor does not know whether the decision was justified in terms of expected surplus or, alternatively, was due to an agency problem. We explain the occurrence of (i) equilibrium protests, (ii) deterrence of inefficient sole sourcing, (iii) overdeterrence (the choice of a competitive procurement when sole source would be appropriate), (iv) "buyoff" settlements (which preserve inappropriate sole-source procurement), and (v) "fedmail" settlements (which accompany appropriate sole-source procurements). Our normative analysis addresses recent legislative initiatives to reform the protest process.

Comments

Copyright Investigation still needed.

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