Year-End Spending Spikes and Single Bid Procedures: An Analysis of Public Procurement in the European Economic Area

Abstract

There is limited research examining the presence of government year-end spending spikes (YESS) and their association with full and open competition in government contracting. Using procurement data from 31 countries in the European Economic Area from 2009 to 2018, this research assesses the relationship between YESS and non-competitive procurement procedures – operationalized as single bid procurements. Panel regression models with country and year fixed effects are used to find that, relative to earlier periods, total award values increased in the final quarter (116.6%) and month (72.6%) of the fiscal year. While significantly associated with YESS (1.82% increase in proportion of single bids in the final quarter and 0.9% increase in the final month), single bid contracting practices did not drive such spikes.

Keywords

Public procurement public financial management year-end spending spike single bids agency theory

Get full access to this article

View all access options for this article.

References

Alexandersson

(2009). Rail privatization and competitive tendering in Europe. Built Environment, 35(1), 43–58. https://doi.org/10.2148/benv.35.1.43.

Allison

Paul D.

(2009). Fixed Effects Regression Models. Vol. 160 Quantitative Applications in the Social Sciences. Thousand Oaks: SAGE publications.

Arrowsmith

(2012). The purpose of the EU procurement directives: ends, means and the implications for national regulatory space for commercial and horizontal procurement policies. Cambridge Yearbook of European Legal Studies, 14, 1–47. https://doi.org/10.5235/152888712805580390.

Atkinson

C. L.

(2020). Full and open competition in public procurement: values and ethics in contracting opportunity. International Journal of Public Administration, 43(13), 1169–1182. https://doi.org/10.1080/01900692.2019.1666408.

Baily

, Farmer

, Crocker

, Jessop

, & Jones

(2008). Procurement principles and management. Pearson Education.

Balakrishnan

, Soderstrom

N. S.

, & West

T. D.

(2007). Spending patterns with lapsing budgets: Evidence from US army hospitals. Journal of Management Accounting Research, 19(1), 1–23. https://doi.org/10.2308/jmar.2007.19.1.1.

Baumann

(2019). Putting it off for later: Procrastination and end of fiscal year spending spikes. The Scandinavian Journal of Economics, 121(2), 706–735.

Berrios

(2006). Government contracts and contractor behavior. Journal of Business Ethics, 63(2), 119–130. https://doi.org/10.1007/s10551-005-3969–8.

Brimberg

, & Hurley

W. J.

(2015). Allocating operating funding in the public sector and the newsvendor problem. Journal of the Operational Research Society, 66(6), 1035–1043. https://doi.org/10.1057/jors.2014.69.

10.

Caldwell

, Walker

, Harland

, Knight

, Zheng

, & Wakeley

(2005). Promoting competitive markets: The role of public procurement. Journal of Purchasing and supply management, 11(5–6), 242–251. https://doi.org/10.1016/j.pursup.2005.12.002.

11.

Charron

, Dahlström

, Fazekas

, & Lapuente

(2017). Careers, connections, and corruption risks: Investigating the impact of bureaucratic meritocracy on public procurement processes. The Journal of Politics, 79(1), 89–104. https://doi.org/10.1086/687209.

12.

Crawford

, Emmerson

, and Tetlow

(2009). A Survey of Public Spending in The U.K. IFS Briefing Note BN43, Institute for Fiscal Studies, London, United Kingdom. Accessed February 4, 2023 from https://www.ifs.org.uk/bns/bn43.pdf.

13.

Csáki

, & Prier

(2018). Quality issues of public procurement open data. In Electronic Government and the Information Systems Perspective: 7th International Conference, EGOVIS 2018, Regensburg, Germany, September 3–5, 2018, Proceedings 7 (pp. 177–191). Springer International Publishing.

14.

Csáki

, McCue

C. P.

, & Prier

(2019). Utilizing open data: a primer for public procurement research. European journal of public procurement markets, 2, 19–35. https://doi.org/10.1007/978-3-319-98349-3_14.

15.

Dahan

, & Strawczynski

(2020). Budget institutions and government effectiveness. Journal of public budgeting, accounting & financial management, 32 (2), 217–246. https://doi.org/10.1108/JPBAFM-03-2019-0055.

16.

DeHoog

R. H.

(1990). Competition, negotiation, or cooperation: Three models for service contracting. Administration & society, 22(3), 317–340. https://doi.org/10.1177/009539979002200303.

17.

Didier

K. A.

(1998). Construction Contracting and the New Two-Phase Design-Build Selection Procedures: Balancing Efficiency with Full and Open Competition. Public Contract Law Journal, 27(3): 589–615. https://www-jstor-org-443.web.bisu.edu.cn/stable/25754327.

18.

Douglas

J. W.

, & Franklin

A. L

(2006). Putting the brakes on the rush to spend down end-of-year balances: Carryover money in Oklahoma state agencies. Public Budgeting & Finance, 26(3), 46–64. https://doi.org/10.1111/j.1540-5850.2006.00854.x.

19.

Eichenauer

(2020). December fever in public finance (No. 470). KOF Working Papers.

20.

Ellul

, & Hodges

(2019). Reforming the government budgeting system in Malta: Pressures promoting or hindering the reform. Journal of Public Budgeting, Accounting & Financial Management, 31(4): 518–538. https://doi.org/10.1108/JPBAFM-10-2018–0108.

21.

European Commission. (2011). Evaluation Report Impact and Effectiveness of EU Public Procurement Legislation. Brussels, 27.6.2011 SEC(2011) 853 final. Accessed February 4, 2023 from https://ec.europa.eu/transparency/regdoc/rep/2/2011/EN/SEC-2011-853-F1-EN-MAIN-PART-1.PDF.

22.

European Commission. (2020). Single Market Scoreboard. Accessed February 4, 2023 from https://ec.europa.eu/internal_market/scoreboard/_docs/2020/07/performance_per_policy_area/public_procurement_en.pdf.

23.

Fazekas

, & Kocsis

(2020). Uncovering high-level corruption: cross-national objective corruption risk indicators using public procurement data. British Journal of Political Science, 50(1), 155–164. https://doi.org/10.1017/S0007123417000461.

24.

Fazekas

, Tóth

I. J.

, & King

L. P.

(2016). An objective corruption risk index using public procurement data. European Journal on Criminal Policy and Research, 22, 369–397. https://doi.org/10.1007/s10610-016-9308-z.

25.

Fichtner

J. J.

, & Greene

(2014). Curbing the Surge in Year-End Federal Government Spending: Reforming” Use It or Lose It” Rules. Mercatus Working Paper. Accessed February 4, 2023 from https://www.mercatus.org/system/files/Fichtner-Year-End-Spending.pdf.

26.

Fitzenberger

, Furdas

M. D.

, & Sajons

(2016). End-of-year spending and the long-run employment effects of training programs for the unemployed. IZA Discussion Paper No. 10441. Available at SSRN 2885837. Accessed February 4, 2023 from https://ssrn.com/abstract=2895289.

27.

Flynn

(2018). Measuring procurement performance in Europe. Journal of Public Procurement, 18(1), 2–13. https://doi.org/10.1108/JOPP-03-2018-001.

28.

Hanák

, & Muchová

(2015). Impact of competition on prices in public sector procurement. Procedia Computer Science, 64, 729–735. https://doi.org/10.1016/j.procs.2015.08.601.

29.

Hurley

W. J.

, Brimberg

, & Fisher

(2014). Use it or lose it: On the incentives to spend annual defence operating budgets. Defence and Peace Economics, 25(4), 401–413. https://doi.org/10.1080/10242694.2013.780758.

30.

Hyndman

, Jones

, & Pendlebury

(2007). An Exploratory Study of Annuality in the U.K. Public Sector: Plus Ca Change, Plus C'est La Meme Chose? Financial Accountability & Management 23 (2): 215–237. https://doi/10.1111/j.1468-0408.2007.00426.x.

31.

Jones

L. R.

(2005). Outyear budgetary consequences of agency cost savings: International public management network symposium. International Public Management Review, 6(1), 139–168. https://journals.sfu.ca/ipmr/index.php/ipmr/article/view/163/163.

32.

Kamlet

M. S.

, & Mowery

D. C.

(1980). The budgetary base in federal resource allocation. American Journal of Political Science, 804–821. https://doi.org/10.1007/BF00135917.

33.

Klymak

, & Baumann

(2022). Paying over the odds at the end of the fiscal year. Evidence from Ukraine. University of Oxford. Accessed January 23, 2023 from https://ora.ox.ac.uk/objects/uuid:c3b002a1-b0f4-477b-90cd-99d34843c7f4.

34.

Korac

, Moser

, Rondo-Brovetto

, & Saliterer

(2019). Carry-overs or leftovers? Tackling year-end spend-downs at the central government level. Public Money & Management, 39(6), 393–400. https://doi.org/10.1080/09540962.2019.1583909.

35.

La Cour

Lisbeth

, and Ølykke

Grith Skovgaard

. 2016. “Public Procurement in the EU: Another Explorative Study.” In Symposium i Anvendt Statistik, edited by Linde

, 208–219. Danmarks Statistik. https://www.dst.dk/Site/Dst/Udgivelser/GetPubFile.aspx?id=25874&sid=symp2016.

36.

la Cour

Lisbeth

, and Skovgaard Ølykke

Grith

. 2017. “Public Procurement Procedures Which Attract Only One Bid.” Copenhagen Business School Proceedings Paper 47. Accessed February 4, 2023 from http://www.ippa.org/images/PROCEEDINGS/IPPC7/Paper47_laCour.pdf.

37.

Liebman

J. B.

, & Mahoney

(2017). Do expiring budgets lead to wasteful year-end spending? Evidence from federal procurement. American Economic Review, 107(11), 3510–3549. https://doi.org./10.1257/aer.20131296.

38.

McCue

C. P.

, Prier

, & Lofaro

R. J.

(2021). Examining year-end spending spikes in the European Economic Area: a comparative study of procurement contracts. Journal of Public Budgeting, Accounting & Financial Management, 33(5), 513–532. https://doi.org/10.1108/JPBAFM-11-2020–0186.

39.

McPherson

Michael F.

2007. “An Analysis of Year-End Spending and the Feasibility of a Carryover Incentive for Federal Agencies.” Unpublished MBA thesis, Naval postgraduate school, Monterey, California. Accessed February 3, 2023 from https://apps.dtic.mil/sti/citations/ADA475973.

40.

Mogi

, & Tamori

(2015). Purchase Patterns affected by Budget Spending Rules. Journal of Psychology & Psychotherapy, 5(6), 1–5. https://doi.org/10.4172/2161-0487.1000218.

41.

Natchez

P. B.

, & Bupp

I. C.

(1973). Policy and priority in the budgetary process. American Political Science Review, 67(3), 951–963. https://doi.org/10.1177/027507408901900103.

42.

Ngai

S. C.

, Drew

D. S.

, Lo

H. P.

, & Skitmore

(2002). A theoretical framework for determining the minimum number of bidders in construction bidding competitions. Construction Management & Economics, 20(6), 473–482. https://doi.org/10.1080/01446190210151041.

43.

Nowrousian

(2019). Combatting public procurement criminality or simple rules for complex cases. Journal of Financial Crime, 26(1), 203–210. https://doi.org/10.1108/JFC-11-2017-0114.

44.

Prier

, Prysmakova

, & McCue

C. P.

(2018). Analysing the European Union's tenders electronic daily: Possibilities and pitfalls. International Journal of Procurement Management, 11(6), 722–747. https://www.inderscienceonline.com/doi/abs/10.1504/IJPM.2018.095655.

45.

Prier

, McCue

, & Boykin

E. A.

(2021). Assessing European Union standardization: a descriptive analysis of voluntary ex ante transparency notices. Journal of Public Procurement, 21(1), 1–18. https://doi.org/10.1108/JOPP-12-2019–0086.

46.

PwC. 2011. “Public Procurement in Europe: Cost and Effectiveness.” Prepared for the European Commission. Accessed February 3, 2023 from https://op.europa.eu/en/publication-detail/-/publication/0cfa3445-7724-4af5-8c2b-d657cd690c03.

47.

Samuelson

W. F.

(1985). Competitive bidding with entry costs. Economics letters, 17(1–2), 53–57. https://doi.org/10.1016/0165-1765(85)90126-0.

48.

Savas

E. S.

(2002). Competition and choice in New York city. Social services. Public Administration Review, 62(1), 82–91. https://doi.org/10.1111/1540-6210.00157.

49.

Soudry

(2007). A Principal-Agent Analysis of Accountability in Public Procurement. In Advancing Public Procurement: Practices, Innovation and Knowledge-Sharing, edited by Piga

and Thai

K. V.

, 432–451. Academics Press.

50.

Tarschys

(2003). Time horizons in budgeting. OECD Journal on Budgeting, 2(2), 77–103. https://doi.org/10.1787/16812336.

51.

Tenders Electronic Daily. (2020a). TED CSV Dataset (2010–2019) [dataset]. Tenders Electronic Daily, Supplement to the Official Journal of the European Union. DG Internal Market, Industry, Entrepreneurship, and SMEs, European Commission, Brussels. Accessed February 3, 2023 from https://data.europa.eu/euodp/en/data/dataset/ted-csv.

52.

Tenders Electronic Daily. (2020b). TED CSV Open Data: Notes & Codebook. Version 3.3. Accessed February 3, 2023 from https://data.europa.eu/euodp/repository/ec/dg-grow/mapps/TED%202020/TED(csv)_data_information_v3.3.pdf.

53.

Tenders Electronic Daily. (2020c). Advanced Notes on Methodology. Version 0.91. Accessed February 3, 2023 from https://data.europa.eu/euodp/repository/ec/dg-grow/mapps/TED_advanced_notes.pdf.

54.

Thai

K. V.

(Ed.). (2017). International handbook of public procurement. Routledge.

55.

United States Comptroller General. (1980). Federal Year-End Spending: Symptom of a Larger Problem. Publication No. PAD-81-18. Washington D.C.: U.S. Government Printing Office.

56.

United States General Accounting Office. (1985). Federal Year-End Spending Patterns for Fiscal Years 1982, 1983, and 1984. Publication No. GAO/AFMD-85-75. Washington D.C.: U.S. Government Printing Office.

57.

United States General Accounting Office. (1998). Year-end Spending: Reforms Underway but Better Reporting and Oversight Needed. Publication No. GAO/AIMD98-185. Washington D.C.: U.S. Government Printing Office.

58.

United States General Accounting Office. (2004). Principles of Federal Appropriations Law. 3rd ed. Washington D.C.: U.S. Government Printing Office.

59.

United States Senate Subcommittee. (1980). U.S. Senate Subcommittee on Oversight of Government Management of the Committee on Governmental Affairs: Hurry-up Spending. 96th Congress, 2nd Session. Washington D.C.: U.S. Government Printing Office.

60.

Wooldridge

J. M.

(2019). Introductory Econometrics: A Modern Approach. 7th ed. Boston: Cengage Learning.

61.

World Bank. (2021). European Union. Accessed February 3, 2023 from https://data.worldbank.org/region/european-union.

62.

Yoo

(2017). Closing the Black Fiscal Hole: Alternatives to the” Spend It or Lose It” Policy for Agency Discretionary Spending. New York University Journal of Legislation and Public Policy 20 (1): 339–374. Accessed February 3, 2023 from https://heinonline.org/HOL/LandingPage?handle=hein.journals/nyulpp20&div=10&id=&page=.