Skip to main content Accessibility help

We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.

Close cookie message
×
Hostname: page-component-76c49bb84f-229nc Total loading time: 0 Render date: 2025-07-09T13:32:40.823Z Has data issue: false hasContentIssue false

3 - When should procurement be centralized?

Published online by Cambridge University Press:  04 November 2009

By
Nicola Dimitri ,
Federico Dini  and
Gustavo Piga
Edited by
Nicola Dimitri ,
Gustavo Piga  and
Giancarlo Spagnolo
Nicola Dimitri
Affiliation:
Professor of Economics University of Siena
Federico Dini
Affiliation:
Junior Economist at the CONSIP Research Unit Rome, Italy
Gustavo Piga
Affiliation:
Professor of Economics University of Rome Tor Vergata
Nicola Dimitri
Affiliation:
Università degli Studi, Siena
Gustavo Piga
Affiliation:
Università degli Studi di Roma 'Tor Vergata'
Giancarlo Spagnolo
Affiliation:
Stockholm School of Economics
Get access

Summary

Introduction

Technological and organizational innovations can make it possible to have more cooperation and more initiative simultaneously. Information technology is an obvious source of such movements. By allowing finer performance measurement and better communications, it facilitates getting more initiative (through lowering the cost of providing incentives) and more cooperation (by making coordination easier and increasing contacts among units).

(Roberts 2004, p. 112)

Motivated by the need to control costs and streamline processes, the issue of centralization versus decentralization has captured the interest of researchers, practitioners and public administrators from a variety of perspectives and is becoming increasingly important for many organizations. An efficient procurement policy is arguably one of the key activities in private companies, international institutions and governments. In this chapter we discuss purchasing systems from the specific point of view of their degree of centralization.

Given the considerable volume of resources involved, firms and governments always seek to optimize procurement so as to deliver value for money to business units and taxpayers. In pursuing such a goal often the first important choice is to choose between centralized and decentralized purchasing; profitability, performance and budget control within a private company or a public institution can vary considerably according to how purchases are organized and managed.

Information

Type
Chapter
Information
Handbook of Procurement , pp. 47 - 81
Publisher: Cambridge University Press
Print publication year: 2006

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Book purchase

Temporarily unavailable

References

Aghion, P. and Tirole, J. (1997). Formal and Real Authority in Organizations, Journal of Political Economy, 105, 1–29.CrossRefGoogle Scholar
Andersen, K. V., N. C. Juul, S. Korzen-Bohr and J. K. Pedersen (2003). Fractional Institutional Endeavors and e-procurement in Local Government. Proceedings of the 16th Bled Electronic Commerce Conference, Bled, Slovenia 961–973.
Bernauer T. and L. Caduff (2004). European Food Safety: Multilevel Governance, Re-Nationalization, or Centralization? Working Paper No 3 CIS ETH Zurich.
Bernheim, D. B. and Whinston, M. D. (1990). Multimarket Contact and Collusive Behavior, RAND Journal of Economics, 21 (1), 1–26.CrossRefGoogle Scholar
Besley, T. and Jewitt, L. (1991). Decentralizing Public Goods. Econometrica, 56 (6), 1769–1778.CrossRefGoogle Scholar
Bolton, P. and Dewatripont, M. (1994). The Firm as a Communication Network, Quarterly Journal of Economics, 4, 809–839.CrossRefGoogle Scholar
Bolton, P. and Farrell, J.. (1990). Decentralization, Duplication and Delay. Journal of Political Economy, 98, 803–826.CrossRefGoogle Scholar
Brickley, J., Smith, C. and Zimmerman, J. (2004). Managerial Economics and Organizational Architecture, McGraw Hill-Irwin.Google Scholar
Cabral, L. and Greenstein, S. (1990). Switching Costs and Bidding Parity in Government Procurement of Computer Systems. Journal of Law, Economics and Organization, 6, 453–469.Google Scholar
Celentani, M. and J. Ganuza, (2002). Organized vs. Competitive Corruption, Annals of Operations Research, 109, 293–315.CrossRefGoogle Scholar
Chang, H. L. and M. J. Shaw (2005). A Roadmap to Adopting Emerging Technology in E–Business An Empirical Study. College Business Working paper, University of Illinois.
Committee on the Economics of Antimalarial Drugs, Board on Global Health (2004). Saving Lives, Buying Time (Economics of Malaria Drugs in an Age of Resistance). Arrow, K. J., Panosian, C. B. and Gelband, H., Eds., The National Academic Press.Google Scholar
Dessein, W. (2002). Authority and Communication in Organizations, Review of Economic Studies, 69, 811–838.CrossRefGoogle Scholar
Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts. Official Journal L. 134, 30/04/2004 p. 0114 – 0240.
Fumagalli C. and M. Motta (2001). Buyers Coordination and Entry, CEPR Discussion Paper No. 2908, Mimeo.
Gurbaxani, V. and Whang, S. (1991). The Impact of Information Systems on Organizations and Markets. Communications of the ACM, 34 (10), 23.CrossRefGoogle Scholar
Government Accountability Office, United Nations Preliminary Observations on Internal Oversight and Procurement Practices, Statement of Thomas Melito, Director International Affairs and Trade, Testimony Before the Permanent Subcommittee on Investigations, Committee on Homeland Security and Governmental Affairs, U. S. Senate, United States, GAO-06–226T, 10/31/2005.
Hart, O. and Moore, J. (2005). On the Design of Hierarchies: Coordination versus Specialization, Journal of Political Economy, 113, 675–702.CrossRefGoogle Scholar
Jones, D. S. (2002). Procurement Practices in the Singapore Civil Service: Balancing Control and Delegation. Journal of Public Procurement, 2 (1): 29–53.Google Scholar
McCue, C. P. and Pitzer, J. T. (2000). Centralized vs. Decentralized Purchasing: Current Trends in Governmental Procurement Practices. Journal of Public Budgeting, Accounting & Financial Management, 12 (2), 400–420.CrossRefGoogle Scholar
Macho-Stadler, I. and Pérez-Castrillo,, J. D. (1998). Centralized and Decentralized Contracts in a Moral Hazard Environment, Journal of Industrial Economics, 46 (4), 489–510.CrossRefGoogle Scholar
Melumad, N. D. and Reichelstein, S. (1987). Centralization versus delegation and the value of communication. Journal of Accounting Research 25, supplement, 1–18.CrossRefGoogle Scholar
Melumad, N. and Shibano, T. (1991). Communication in Settings with No Transfers, Rand Journal of Economics, 22, 173–198.CrossRefGoogle Scholar
Melumad, N., D.Mookherjee and S. Reichelstein (1995). Hierarchical Decentralization of Incentive Contracts, The Rand Journal of Economics, 26, (4), 654–672.CrossRefGoogle Scholar
Meyer, N. D. (1998). Decentralization: Fantasies, Failings and Fundamentals, NMDA Publishing.Google Scholar
Moon, M. J. (2005). E-procurement Management in State Governments: Diffusion of E-procurement Practices and its Determinants, Journal of Public Procurement, 5, (1), 54–72.Google Scholar
Neef, D. (2001). E-procurement: From Strategy to Implementation, Prentice Hall.Google Scholar
Piga, G. and M. Zanza (2004). An Exploratory Analysis of Public Procurement Practices in Europe, ch. 10 in K. V. Thai, A. Aranjo, R. Y. Carter, G. Cullender, D. Prabkin, R. Grimm, K. R. E. Jense, R. E. Lloyd, C. P. Mecue and J. Telgen (Eds.), Challenges in Public Procurement: an International Perspective, PrAcademic Press, 227–247.
Pool, C. and B. Welch (2005). Responding to Katrina: Contracting in an Emergency Situation – Version 2.0. Acquisition Direction Advisory http://summitinsight.com/femakatrina.pdf.
Roberts, J. (2004). The Modern Firm, Oxford University Press.Google Scholar
Somasundaram, R. (2004). Diffusion of e-Procurement in the Public Sector: Revisiting Centralized vs. Decentralized Debates As a Twist in the Tale, Proceedings of the 13th European Conference on Information Systems.Google Scholar
Subramaniam, C. and Shaw, M. J. (2003). A Study on the Value and Impact of B2B E-commerce: The Case of Web-Based Procurement, International Journal of Commerce, 6 (4), 19.Google Scholar
Subramaniam, C., Qualls W. and M. J. Shaw (2002). Impact of B2B E-Procurement Systems; A Summary Report-College of Business.
Thai, K. V. and Grimm, R. (2000). Government Procurement: Past and Current Developments. Journal of Public Budgeting, Accounting & Financial Management, 12(2): 231–247.CrossRefGoogle Scholar
Vagstad, S. (2000). Centralized vs. Decentralized Procurement: Does Dispersed Information Call for Decentralized Decision-Making?International Journal of Industrial Organization, 18, 949–963.CrossRefGoogle Scholar

Accessibility standard: Unknown

Accessibility compliance for the PDF of this book is currently unknown and may be updated in the future.

Save book to Kindle

To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×