THE USE OF ECONOMIC PRICING MODELS IN GOVERNMENT PROCUREMENT

ABSTRACT. The price mechanism has long been noted for its usefulness in allocating resource in a free market as market prices serve to signal consumers’ interest and producers are able to use prices as a gauge for profitable investments. Public sector procurement relies mostly on long term contracts and negotiation, with goods and services being secured in non-market transactions. Although these mechanisms can ensure uninterrupted supply of high quality goods at a fair and reasonable price, (not necessarily the best price) they can result in a waste of government’s resources. We review the usual process of securing goods and services in public sector and apply economic pricing models to public sector procurement