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Using Public Procurement to Implement Environmental Policy: An Empirical Analysis
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Centre for Regional Science (CERUM).
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0003-1312-8073
2015 (English)In: Environmental Economics and Policy Studies, ISSN 1432-847X, E-ISSN 1867-383X, Vol. 17, no 4, 487-520 p.Article in journal (Refereed) Published
Abstract [en]

Politicians expect Green public procurement (GPP) to serve as an environmental policy instrument. However, in order for GPP to work as an effective policy instrument it is important to take into consideration potential suppliers’ decisions to participate in the procurement process, the total number of bidders, and the screening of bidders with respect to mandatory green criteria. The aim of this paper is to empirically study GPP in this respect. The analysis presented here is based on data from Swedish cleaning services procurements that are unique in that they contain very detailed information on various environmental standards set by the contracting authorities. We find at best only a weak effect on supplier behavior, and this suggests that the use of GPP in this situation does not live up to its political expectations. 

Place, publisher, year, edition, pages
2015. Vol. 17, no 4, 487-520 p.
Keyword [en]
Public Procurement, Auctions, Environmental Policy, Green Public Procurement, Sustainability, Purchasing
National Category
Economics and Business Economics
Research subject
biology, Environmental Science
Identifiers
URN: urn:nbn:se:umu:diva-98079DOI: 10.1007/s10018-015-0102-9Scopus ID: 2-s2.0-84942817185OAI: oai:DiVA.org:umu-98079DiVA: diva2:781099
Projects
Green Public Procurement
Funder
Swedish Research Council
Available from: 2015-01-15 Created: 2015-01-15 Last updated: 2017-12-05Bibliographically approved
In thesis
1. Policy by Public Procurement: Opportunities and Pitfalls
Open this publication in new window or tab >>Policy by Public Procurement: Opportunities and Pitfalls
2015 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

In Paper [I], we theoretically assess green public procurement (GPP) as an environmental policy instrument and its ability to lead to the achievement of environmental objectives. Central to our analysis is the extent to which polluting firms choose to adapt to the public sector's environmental requirements and to invest in greener technologies. Our main finding is that the potential of GPP to function as an objective-effective instrument of environmental policy is limited and can actually be counterproductive. From an environmental policy point of view, it is crucial that GPP aims for environmental standards beyond just the technology of the polluting firms and that it is designed with reference to defined environmental objectives.

In Paper [II], we use data on Swedish public procurement auctions for internal regular cleaning service contracts to provide novel empirical evidence regarding GPP and its effect on the potential suppliers' decision to submit a bid and their probability of being qualified for supplier selection. We find only a weak effect on supplier behavior, and this suggests that GPP, as used in practice, does not live up to its political expectations. However, several environmental criteria appear to be associated with increased complexity, as indicated by the reduced probability of a bid being qualified in the post-qualification process. As such, GPP appears to have limited or no potential to function as an environmental policy instrument.

In Paper [III], I examine how GPP is organized in Sweden and how the potential suppliers respond to varying buyer market shares using data on Swedish public procurement auctions for internal regular cleaning service contracts. The level of GPP stringency is found to vary systematically across authority types, buyer market share, and political coalition in the relevant council or in Parliament. The results also indicate quite a substantial dispersion in GPP stringency, suggesting a low degree of coordination among contracting authorities when implementing the policy. After controlling for GPP stringency and other covariates, increased buyer market share is associated with a significant increase in the probability of potential suppliers submitting a bid.

The European Commission encourages public authorities to split procurement contracts into multiple contracts in order to increase the competiveness of small and medium sized enterprises (SMEs). In Paper [IV], I use data from Swedish public procurement auctions for internal regular cleaning service contracts to study the effect of contract size and number of contracts on SME participation and probability of winning. The results indicate that SME participation is negatively related to both contract size and the number of contracts in the procurement. A possible interpretation is that reduced contract size in order to stimulate SME participation is counteracted by reduced incentives for them to enter into procurements with multiple contracts. Medium-sized firms are also more successful when bidding for smaller contracts relative to large firms. Nevertheless, the results indicate that the award rate for SMEs is positively correlated with the number of contracts in the procurement.

Place, publisher, year, edition, pages
Umeå: Umeå Universitet, 2015. 25 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 915
Keyword
Public Procurement Auction, Environmental Policy, Regulation, Sustainability, Competition, Compliance Cost, Endogenous Entry, Supplier Incentives, Buyer Market Share, Split Award, Small and Medium Sized Enterprises
National Category
Economics
Research subject
Economics
Identifiers
urn:nbn:se:umu:diva-107988 (URN)978-91-7601-281-9 (ISBN)
Public defence
2015-09-25, Hörsal C, Samhällsvetarhuset, Umeå universitet, Umeå, 13:00 (English)
Opponent
Supervisors
Projects
Green Public Procurement: An Efficient Environmental Policy Tool?
Funder
Swedish Research Council
Available from: 2015-09-04 Created: 2015-08-31 Last updated: 2015-09-04Bibliographically approved
2. On specification and inference in the econometrics of public procurement
Open this publication in new window or tab >>On specification and inference in the econometrics of public procurement
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

In Paper [I] we use data on Swedish public procurement auctions for internal regularcleaning service contracts to provide novel empirical evidence regarding green publicprocurement (GPP) and its effect on the potential suppliers’ decision to submit a bid andtheir probability of being qualified for supplier selection. We find only a weak effect onsupplier behavior which suggests that GPP does not live up to its political expectations.However, several environmental criteria appear to be associated with increased complexity,as indicated by the reduced probability of a bid being qualified in the postqualificationprocess. As such, GPP appears to have limited or no potential to function as an environmentalpolicy instrument. In Paper [II] the observation is made that empirical evaluations of the effect of policiestransmitted through public procurements on bid sizes are made using linear regressionsor by more involved non-linear structural models. The aspiration is typically to determinea marginal effect. Here, I compare marginal effects generated under both types ofspecifications. I study how a political initiative to make firms less environmentally damagingimplemented through public procurement influences Swedish firms’ behavior. Thecollected evidence brings about a statistically as well as economically significant effect onfirms’ bids and costs. Paper [III] embarks by noting that auction theory suggests that as the number of bidders(competition) increases, the sizes of the participants’ bids decrease. An issue in theempirical literature on auctions is which measurement(s) of competition to use. Utilizinga dataset on public procurements containing measurements on both the actual and potentialnumber of bidders I find that a workhorse model of public procurements is bestfitted to data using only actual bidders as measurement for competition. Acknowledgingthat all measurements of competition may be erroneous, I propose an instrumental variableestimator that (given my data) brings about a competition effect bounded by thosegenerated by specifications using the actual and potential number of bidders, respectively.Also, some asymptotic results are provided for non-linear least squares estimatorsobtained from a dependent variable transformation model. Paper [VI] introduces a novel method to measure bidders’ costs (valuations) in descending(ascending) auctions. Based on two bounded rationality constraints bidders’costs (valuations) are given an imperfect measurements interpretation robust to behavioraldeviations from traditional rationality assumptions. Theory provides no guidanceas to the shape of the cost (valuation) distributions while empirical evidence suggeststhem to be positively skew. Consequently, a flexible distribution is employed in an imperfectmeasurements framework. An illustration of the proposed method on Swedishpublic procurement data is provided along with a comparison to a traditional BayesianNash Equilibrium approach.

Place, publisher, year, edition, pages
Umeå: Umeå universitet, 2016. 15 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 931
Keyword
auctions, dependent variable transformation model, green public procurement, indirect inference, instrumental variable, latent variable, log-generalized gamma distribution, maximum likelihood, measurement error, non-linear least squares, objective effectiveness, orthogonal polynomial regression, prediction, simulation estimation, structural estimation
National Category
Economics
Research subject
Economics; Econometrics
Identifiers
urn:nbn:se:umu:diva-121681 (URN)978-91-7601-507-0 (ISBN)
Public defence
2016-09-02, Hörsal D, Samhällsvetarhuset, Biblioteksgränd 6, Umeå, 13:15 (English)
Opponent
Supervisors
Available from: 2016-06-08 Created: 2016-06-07 Last updated: 2016-08-10Bibliographically approved

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Lundberg, SofiaMarklund, Per-OlovStrömbäck, ElonSundström, David

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