Measuring private transaction costs of public procurement: Case of the Czech Republic

Abstract

In the Czech Republic ca. 13% of the GDP, is spent every year on public procurement. More money each year has to be spent by the contracting authorities and private subjects for the public procurement to even work. This paper focuses on measuring private transaction cost of public procurement in the Czech Republic. In the first section of this paper, we present data used for our analysis and methods used for achieving our goals. In the second section, we summarise the results. Average transaction cost of one proposal is CZK 22 489. Weighted average relative transaction cost is 0.25% of the contract value. We estimate the total transaction cost of public procurement in the Czech Republic to be almost six billion CZK, further we estimate possible cost reductions of these cost in the case of increased effectiveness to be between 500 million and CZK 1.84 billion. The market sector, contract prices, size of the firm and different types of contracting authorities have all a significant influence on the transaction cost. A comparison of our results to other empirical studies have been made and some interesting facts found out during research have been explained at the end of the second section.

Keywords

• transaction costs
• public procurement
• Czech Republic