Cost Efficiency of Public Procurement at Local Level: Chances for Improvement of Local Self-government and Public Enterprises in Serbia

Abstract

This paper analyses cost efficiency of the public procurement process at local level. Data is gathered in the Serbian environment, and our main hypothesis is that efficiency of public procurement can be improved significantly by the practices of organizational design and external benchmarking, measured by transaction costs. In order to prove this hypothesis, we have described case of major inefficiencies during public procurement process, and then analyzed efficiency of public procurement process, measured in hours per public procurement on a basis of 185.305 directly invested hours, during 18 months period in eight public enterprises. We have shown by statistical analysis that very wide, statistically significant (p LT 0,001) differences exist in efficiency of three best organizations, compared to five less efficient. All organizations perform public procurements under same environmental conditions. Thus, we have proposed organizational solutions in order to suggest means for performance improvement, and analyzed transactional costs theory in order to suggest measurement of the improvement.