Number of bidders, level of competition, and bid pricing in public procurement

This article examines the factors that influence competition and how competition affects prices in public contracts in Burkina Faso. It is based on a data set comprising 1,604 contracts awarded by various contracting authorities between 2016 and 2018. Two models are used: a negative binomial model to identify the determinants of competition, and an instrumental variable model based on heteroskedasticity to analyze the impact of competition on the winning bid price. The results show that an optimal number of seven to nine bidders is crucial to maximize competition, whereas the current average is only five. Achieving this range could lead to average savings per contract of between 0.5 percent and 3.15 percent, or approximately 3.7 million CFA francs. These savings highlight the need to reform public procurement policies to promote greater competition and improve efficiency.