Procuring efficiently

On 21 October 2009, TILEC, in cooperation with the Dutch Ministry of Economic Affairs and the Netherlands Bureau of Economic Policy Analysis (CPB), organized a workshop in The Hague about the procurement of public services. The workshop was the most recent one in a series of semi-annual meetings on competition issues that has been running for years. Steven Tadelis from the University of California, Berkeley stressed the importance of the trade-off between achieving productive efficiency and reducing adaptation costs. Neoclassical models neglect the latter and frequently conclude that open procurement is the best option. Once transaction cost and the risk of hold-up are taken into account, such as with custom-made products, alternatives may actually be preferable. The two other presentations focused on some Dutch policy issues. Bjorn Volkering (Ecorys) discussed procurement of high school books, which has become compulsory, now that schools are under the obligation to provide books for free. TILEC director Eric van Damme focused on procurement of home care by local authorities. From the event, the lesson emerged that decision-makers have to pay extreme attention to the procurement rules, whose design is not merely a technical exercise.