Can lotteries improve procurement outcomes?

What the paper says

Purpose The purpose of this paper is to make the case for the inclusion of lotteries in public procurement toolkits when governance and institutional weaknesses lead to recurring undesirable contract award outcomes. Design/methodology/approach The authors review different strands of the literature on auctions, corruption and experimental economics and build a simple model reviewing the different benefits and tradeoffs, of including lottery toolboxes into existing auction processes. Findings For contracts awarded through auctions, a lottery component can increase quality and reduce risks related to limited liability, renegotiations and bid-rigging. For negotiated contracts, a lottery component can reduce corruption risks related to the selection processes of bidders, decision committee members or auditors. The summary of the still modest empirical evidence shows promising prospects but also some limitations. The paper argues that more experiments would help to refine the opportunities identified by the theoretical literature. Social implications By potentially reducing inefficiencies and corruption, lotteries can increase the quality and cost-effectiveness of public services, directly benefiting communities. Improved procurement practices can lead to better infrastructure, healthcare and education services, particularly in developing countries where inefficiencies are most pronounced. Fairer and more transparent procurement processes can increase public trust in government institutions. Originality/value The main contribution of this paper is to provide the first comprehensive case for the integration of lottery-based tools in all forms of procurement. The authors bring together seemingly disconnected strands of research in a single toolbox that helps understand the different trade-offs at play and the various ways in which the potential benefits of lotteries can be leveraged.