Analysis of Oligopsony Market Structure and Budget Allocation Efficiency for Educational Infrastructure Procurement at the Education Office of Bukittinggi City
Keywords:
Market Structure, Oligopsony, Budget Allocation Efficiency, Educational Infrastructure ProcurementAbstract
This study aims to analyze the oligopsony market structure in the educational infrastructure procurement process within the Bukittinggi City Education Office and assess the level of budget allocation efficiency resulting from this market structure. Oligopsony occurs when a large number of buyers (in this case the local government as the sole institutional buyer) are faced with a small number of construction service providers and educational material suppliers who dominate the tender process. This condition has the potential to cause price distortion, low competition, and allocative inefficiency in the use of the Regional Revenue and Expenditure Budget (APBD). The study uses a descriptive qualitative approach supported by secondary data analysis in the form of the General Procurement Plan (RUP) document, the Budget Realization Report (LRA), and the results of interviews with procurement officials and service providers. The results indicate an indication of high service provider concentration in several educational infrastructure procurement packages, characterized by a low number of active tender participants and a tendency for bid prices to approach the budget ceiling (Own Estimated Price/HPS). This oligopsony condition contributes to the suboptimal efficiency of budget allocation, reflected in the relatively small difference in savings (efficiency gain) compared to the established budget ceiling. The study recommends strengthening auction transparency, expanding the provider base through an electronic catalog system, and strengthening independent oversight to encourage better efficiency in allocating the education infrastructure procurement budget.
Downloads
References
Bosio, E., Djankov, S., Glaeser, E., & Shleifer, A. (2022). Public procurement in law and practice. American Economic Review, 112(4), 1091–1117.https://doi.org/10.1257/aer.20200738
Conley, T.G., & Decarolis, F. (2016). Detecting bidders groups in collusive auctions. American Economic Journal: Microeconomics, 8(2), 1–38.https://doi.org/10.1257/mic.20130254
Coviello, D., & Mariniello, M. (2014). Publicity requirements in public procurement: Evidence from a regression discontinuity design. Journal of Public Economics, 109, 76–100. https://doi.org/10.1016/j.jpubeco.2013.10.008
Coviello, D., Guglielmo, A., & Spagnolo, G. (2018). The effect of discretion on procurement performance. Management Science, 64(2), 715–738.https://doi.org/10.1287/mnsc.2016.2628
Decarolis, F. (2014). Awarding price, contract performance, and bids screening: Evidence from procurement auctions. American Economic Journal: Applied Economics, 6(1), 108–132.https://doi.org/10.1257/app.6.1.108
Lewis-Faupel, S., Neggers, Y., Olken, B. A., & Pande, R. (2016). Can electronic procurement improve infrastructure provision? Evidence from public works in India and Indonesia. American Economic Journal: Economic Policy, 8(3), 258–283.https://doi.org/10.1257/pol.20140258
McAfee, R. P., & McMillan, J. (1987). Auctions and bidding. Journal of Economic Literature, 25(2), 699–738.
Palguta, J., & Pertold, F. (2017). Manipulation of procurement contracts: Evidence from the introduction of discretionary thresholds. American Economic Journal: Economic Policy, 9(2), 293–315. https://doi.org/10.1257/pol.20150511
Porter, R. H., & Zona, J. D. (1993). Detection of bid rigging in procurement auctions. Journal of Political Economy, 101(3), 518–538.https://doi.org/10.1086/261885
Spagnolo, G. (2012). Reputation, competition, and entry in procurement. International Journal of Industrial Organization, 30(3), 291–296.https://doi.org/10.1016/j.ijindorg.2012.01.001
