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Innovation Fact of the Week: When India and Indonesia Adopted E-Procurement For Infrastructure Projects, Construction Quality Improved 16% on Average

Roads

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Developing countries often invest heavily in infrastructure as part of their economic development strategies. Contractor collusion, poorly qualified contractors, and corruption among public officials are often cited as factors that have hurt the quality of these projects. But India, Indonesia, and others have begun to address this problem by adopting e-procurement platforms, and as a result new roads and bridges are now of higher quality and being built in less time.

That is because e-procurement platforms improve transparency between government and industry while increasing competition between contractors. The platforms allow a government to centrally post requests for proposals on all of the projects it plans. Contractors can then bid on multiple projects and check who has won which ones, how much they bid, and the technical details of their proposal. This creates greater transparency and accountability along the entire contracting process.

In a recent article, a team of economists from University of Wisconsin-Madison, MIT, and Harvard estimate the impact that e-procurement platforms have had on public infrastructure projects in Indonesia and India. The analysis covers Indian projects from 2000 to 2009 and Indonesian projects from 2004 to 2008. They find that the quality of new roads built in the two countries has increased by between 12 percent and 19 percent—an average of 16 percent overall. They attribute a third of the reduction in project delays to more efficient firms winning contracts and two-thirds of the improvement in project delays to greater competition between contractors. They conclude that the increase in transparency has improved productivity by allowing more efficient contractors to more consistently win bids over less efficient contractors.

Read last week’s Innovation Fact of the Week

Photo Credit: Navaneeth KN via Flickr

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About the author

John Wu is an economic research assistant at ITIF His research interests include green technologies, labor economics, and time use. He graduated from the College of Wooster with a bachelor of arts in economics and sociology, with a minor in environmental studies.