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Transaction costs analysis is concerned with ways of aligning appropriate governance modes with the attributes of economic transactions. Nowadays transaction costs are universally accep-ted, despite the difficulty in measuring and quantifying them. Starting from the customary definition of transaction costs, this paper proposes a model for the buye...
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Context 1
... steps of a generic purchasing process are depicted in Figure 1 the design of the product or the choice of the service, the buyer checks the potential suppliers and contacts them. Next, the suppliers make a feasibility study in order to decide whether starting the production of the required goods/service is advantageous. ...
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Transaction costs analysis was first addressed by Coase in 1937 and is concerned with ways of aligning appropriate governance modes with the attributes of economic transactions. Nowadays transaction costs are universally accepted, but researchers in the field agree on the difficulty in measuring and quantifying them. Starting from the universally a...
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Citations
... Additionally, Turkulainen et al. (2017) and Barrat and Barrat (2011) found that information integration combines standardized internal and external information-based linkages to create visibility, consistency in priorities that allow managers to understand interdependencies across the internal supply chain. TCE theory posits that procurement transaction costs for researching suppliers, negotiation costs, the costs for approving and drafting the contract, quality control costs and enforcement costs should be standardized or benchmarked for efficiency (Costantino et al., 2006). The approaches currently taken to public procurement transaction cost evaluation are mainly applicable at the microlevel to individual firms or projects. ...
Purpose
Procuring relief products and services is a challenging process for humanitarian organizations (HOs), yet it accounts for approximately 65% of relief operations’ costs (Moshtari et al. , 2021). This paper aims to examine how procurement internal controls, materials and purchasing procedure standardization influence information integration and procurement performance.
Design/methodology/approach
In this study, partial least square structural equation models and multigroup analysis were used to analyze data collected from 170 HOs.
Findings
Procurement internal controls and material and purchasing procedure standardization fully mediate between information integration and procurement performance.
Research limitations/implications
The study focuses only on HOs. Since humanitarian procurement projects take place over a period of several years, it is difficult to capture the long-term effects of information integration, procurement internal controls, material and purchasing procedure standardization and procurement performance. In this regard, a longitudinal study could be undertaken, provided that the required resources are available.
Practical implications
Procurement managers should implement information integration practices within acceptable procurement internal controls and standardize material and purchasing procedures to boost procurement performance.
Originality/value
By integrating information through procurement internal controls and standardizing material and purchasing procedures, procurement performance in a humanitarian setting can be systematically optimized.
... Public procurement transaction cost refers to additional costs of purchasing-the costs for researching suppliers, negotiation costs, the costs for approving and drafting the contract, quality control costs, and enforcement costs (Costantino et al., 2006). The approaches currently taken to public procurement transaction cost evaluation are mainly applicable at the micro level-to individual firms or projects. ...
... An accurate estimation of transaction costs can be produced by their direct measurement, but this approach is excessively labour-intensive (see, for example, International working group on Administrative Burdens, 2004). Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012, summed the labour intensity estimates of individual stages of the procurement process obtained from interviews. Balaeva and Yakovlev (2017) presented an approach to evaluating public customers' costs based on expert evaluations of the differences in the labour intensity of various types of procedure. ...
This paper presents a public procurement transaction cost evaluation using a large-scale survey of procurers and suppliers. The study was conducted in Russia in 2017. The results of the survey confirmed that the lower the contract value, the more expensive the procurement procedure. An empirical analysis of factors impacting public procurement cost evaluation also revealed considerable differences between respondents with and without experience in complex procurement procedures. The paper makes an important contribution to the academic literature by elaborating a new approach to public procurement cost evaluation, as well as providing an empirical evaluation of direct transaction costs of public procurement.
... Применительно к госзакупочной деятельности к трансакционным издержкам относят, например, затраты на поиск поставщика (или госзаказчика), другой необходимой информации, затраты на переговоры, мониторинг и правовое урегулирование (Groth, 2008) или затраты на поиск и анализ поставщиков, на переговоры, подготовку и заключение контракта, контроль качества и мониторинг исполнения контракта (Costantino et al., 2006). ...
... Среди зарубежных исследований следует также отметить работы исследователей из итальянского Университета Бари ( Costantino et al., (2006Costantino et al., ( , 2009Costantino et al., ( , 2012). Их подход к оценке трансакционных издержек заказчиков и поставщиков в целом близок к подходу PwC. ...
Cost accounting in public procurement is an essential element in optimizing the procurement process for an individual enterprise as well as in evaluating the procurement regulation system at the state level. Today, however, insufficient attention is paid to this issue in Russian and foreign studies. There is limited literature devoted to assessment of costs at the level of individual enterprises or projects. Only several foreign studies estimated the costs of public procurement at the macro level (country or regional). No such macro level assessment has been carried out in Russia so far. This paper, based on a mass-scale online survey of customers and suppliers conducted in 2017, is the first attempt to estimate the average costs of public procurement in Russia, including the average costs for each type of procurement procedure. According to our estimates, the total cost of public procurement in Russia was about 64 billion rubles in 2016, or about 1% of the total contracted amount for that year. Using regression analysis, we also investigated the impact of various factors on the cost value of public procurements – the size of the respondent's organization (number of employees), the scope of activity, the number of staff involved in public procurement, the region, the qualifications/work experience of the employee, gender differences. The most significant factor influencing costs assessment of procurement procedures is the respondent's experience with complex competitive procedures.
... The transaction costs incurred by public customers, suppliers and regulators constitute a considerable part of the value of public procurements (PwC, 2011). Transaction costs currently include search costs, information costs, negotiation costs and monitoring and enforcement costs (Groth, 2008) or the costs of researching suppliers, negotiation costs, the costs of approving and drafting the contract, quality control costs and enforcement costs (Costantino et al., 2006). Butter (2012) divides transaction costs into "hard" and "soft" costs: ...
... However, the authors did not describe the methodology used for their quantitative estimates. Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012 have proposed a method for estimating additional costs at different stages of the procurement process. In this method, additional costs include ex ante costs and ex post costs. ...
Purpose
This paper aims to measure the cost of procurement because public procurement procedures prescribed by legislation not only enhance transparency and competition but also entail certain transaction costs for both customers and suppliers.
Design/methodology/approach
These costs are important to the efficiency of the procurement system. However, very few previous studies have focused on estimating procurement costs. This paper proposes a methodology for public procurement cost evaluation.
Findings
This paper shows how procurement costs can be calculated using a formalized survey of public customers. This methodology was tested with a representative group of public customers operating in one region of the Russian Federation.
Originality/value
The authors formulate the policy implications of this paper, as they relate to the improvement of public procurement regulations and argue that this methodological approach can be applied in other developing and transitioning economies.
... For purposes of this paper, the public procurement costs of customers and suppliers shall mean the transaction costs at all stages of the procurement process. Transaction costs include search costs, information costs, negotiation costs and monitoring and enforcement costs (Groth, 2008) or the costs of researching suppliers, negotiation costs, the costs of approving and drafting the contract, quality control costs and enforcement costs (Costantino et al., 2006). There are many approaches to classifying transaction costs (see, e.g., Arrow, 1969;Eggertsson, 1990;Milgrom and Roberts, 1992, etc.). ...
... An approach similar to the PwC approach was used in Costantino et al., (2006Costantino et al., ( , 2009Costantino et al., ( , 2012 based on Italian data. The cost evaluation was also performed by summing the labour intensity estimates of individual stages of the procurement process obtained from interviews. ...
... The majority of approaches to public procurement cost evaluation are mainly applicable at the micro level -to individual firms or projects (see, e.g., (SCM, 2005;Costantino et al., 2006Costantino et al., , 2009Costantino et al., , 2012Gardenal, 2013;Dufek et al., 2013). This is due, above all, to their detailed nature and the need to gather sufficiently fine-grained information on public procurement, which is far from always feasible at the macro level. ...
... These costs were borne by the public entity in all cases, even if competitive procedures did not produce any savings from price reduction. Although Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012 address the problem of measuring additional costs of purchasing, they focus mostly on measuring the costs associated with a larger number of procurement bidders, comparing these costs with possible benefits. Häkkinen and Kettunen (2015) stress the necessity to take the coordination costs between the supplier and the customer into account when calculating the purchase order size. ...
... Ex post costs include performance control, performance verification, adjustment and bargaining (Buvik and Halskau, 2001). Costantino et al. (2006Costantino et al. ( , 2009 view transaction costs connected to the purchase of a new product/service as additional costs of purchasing. The additional costs of purchasing, together with the purchasing price, make up the total cost of purchasing. ...
... However, authors did not describe the methodology for their quantitative estimations. Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012 propose a method of quantifying the additional costs of purchasing. This method estimates time costs at different stages of the procurement process and the relevant monetary costs committed to procurement. ...
The growing attention of governments, international organisations and NGOs to public procurement issues over the last two decades has been accompanied by many studies on the efficiency of public procurement. However, few researchers have considered the costs of procurement regulation for public customers and private suppliers. This problem is especially acute for the public procurement system in Russia. In this paper we propose an approach to measuring public customers' procurement costs. We test this approach with the data on a large Russian public customer: Voronezh State University. We show that the proposed approach is universal and can be applied at a micro level by other public customers to measure the efficiency of their procurement and to optimise the costs. This approach can also be used as a basis for a larger inquiry into the costs and effectiveness of procurement at the level of regional authorities or sectoral ministries.
... These costs were borne by the public entity in all cases, even if competitive procedures did not produce any savings from price reduction. Although Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012 address the problem of measuring additional costs of purchasing, they focus mostly on measuring the costs associated with a larger number of procurement bidders, comparing these costs with possible benefits. Häkkinen and Kettunen (2015) stress the necessity to take the coordination costs between the supplier and the customer into account when calculating the purchase order size. ...
... Ex post costs include performance control, performance verification, adjustment and bargaining (Buvik and Halskau, 2001). Costantino et al. (2006Costantino et al. ( , 2009 view transaction costs connected to the purchase of a new product/service as additional costs of purchasing. The additional costs of purchasing, together with the purchasing price, make up the total cost of purchasing. ...
... However, authors did not describe the methodology for their quantitative estimations. Costantino et al. (2006Costantino et al. ( , 2009Costantino et al. ( , 2012 propose a method of quantifying the additional costs of purchasing. This method estimates time costs at different stages of the procurement process and the relevant monetary costs committed to procurement. ...
The growing attention of governments, international organisations and NGOs to public procurement issues over the last two decades has been accompanied by many studies on the efficiency of public procurement. However, few researchers have considered the costs of procurement regulation for public customers and private suppliers. This problem is especially acute for the public procurement system in Russia. In this paper we propose an approach to measuring public customers' procurement costs. We test this approach with the data on a large Russian public customer: Voronezh State University. We show that the proposed approach is universal and can be applied at a micro level by other public customers to measure the efficiency of their procurement and to optimise the costs. This approach can also be used as a basis for a larger inquiry into the costs and effectiveness of procurement at the level of regional authorities or sectoral ministries.
... The additional cost of purchasing (ACP) (Costantino et al., 2006) resulting from the supplier search, contact, negotiation, drafting, approval and management of the contract, is usually higher for a dual sourcing strategy (ACP DS 4ACP SS ). This higher cost can be considered as the initial cost of the option C 0i . ...
The selection of a given purchasing strategy is a central activity in risky environments. Single sourcing, a powerful approach in a stable environment, can amplify a firm's exposure to risk (e.g., supplier's default) in the presence of uncertainty. Multiple sourcing, however, presents higher costs due to the management of more than one supplier. A correct evaluation from a risk management perspective is needed. This paper proposes the Real Options approach for valuing the probabilistic benefits of multiple sourcing in managing the supplier default risk (to be compared with the related higher costs). A computational model, based on the Monte Carlo simulation, was developed. The results show the (probabilistic) advantages of adopting the multiple sourcing strategy in risky environments for a specific case. The proposed sensitivity analysis is aimed at identifying the impact of the most important transactional parameters on the differential benefits of the two sourcing strategies. Thus, the model and its managerial implications represent a valid support for the decision-making process in the presence of uncertainty.
The paper addresses the reduction of the total cost of purchasing in public procurement, focusing on tenders called for in the European Union and awarded by the Lowest Price (LP) criterion. Taking into account the main characteristic features of governmental purchasing (competition, prescribed procedures, and transparency) and building upon the related contributions in the literature, we present a probabilistic approach for evaluating and limiting the total cost of purchasing in public tenders awarded according to the LP criterion. The presented framework includes the evaluation of the so-called additional costs of purchasing (ACP), a part of the transaction cost that is typically considered in the related literature from a private organization perspective only. The approach can be applied to a generic transaction in any public tender issued according to the European legislation with the LP criterion. Considering the real case study of the public tender for maintenance works on a municipal sport facility in Bari (Italy), we take into account the costs of both transaction counterparts, i.e., the ACP regarding the contracting authority and those related to the firms involved in the tender. Applying the model to the case study, we underline the relevance of ACP for public tenders and show that, by inviting a suitable number of bidders to participate in the call, it is possible to save money both for the contracting authority and the involved competitors.
