Fixed-Price Bidding as a Prospective Anti-Corruption Mechanism for Competitive Order Placement in Public Procurement in the Russian Federation

Abstract

The article is devoted to the in-depth study of corruption in public procurement as a complex phenomenon in Russia. The main aim and goals of this article are to identify and describe a latent model of motivation for bidders to submit applications, to disclose essential prerequisites and (or) procedures in public procurement, to develop and propose a mechanism to improve the operational efficiency of procurement activities through digital technologies, respectively. The authors put forward and test the following hypotheses: (h1) the current mechanism in the public procurement based on the principle of open bidding for a reduction with a fixed initial (maximum) price demotivates its participants to submit applications, since they face double uncertainty: firstly, they cannot calculate the target (acceptable) probability of victory to ensure coverage of direct costs associated with participation, and secondly, the amount of profit, therefore, the current model of competitive public procurement does not allow for the proper and sufficient realization of the advantages of the market mechanism of the developed procurement market as a way to optimize prices and supply conditions; (h2) accompanies h1 and consists in the fact that corruption in procurement on the part of participants is defined by the economic feasibility of increasing the likelihood of receiving an order at the lowest costs. The unacceptably high corruption potential of the public procurement requires adjustment of the placement procedure, firstly, in order to eliminate the factor of the customer’s influence on the choice of the winner, secondly, to optimize the costs of participation in tenders, and thirdly, to increase attractiveness for suppliers, so that filing an application becomes the key to achieving mutually beneficial conditions for obtaining a government order. The authors propose to switch to a new mechanism for placing an order in public procurement, at least for simple standardized products — at a fixed price using Dutch auction method, which is guaranteed to ensure the transition to a «healthy» (target) model of behavior at the market, including the rejection of toxic practices in order to significantly decriminalize and improve its competitive environment.