Procurement Auctions and Governmental Intervention: Assessment of the Rolling Stock Award Assessment for the Madrid-Barcelona High-Speed Train

Procurement auctions are widely used to award public contracts more efficiently. However, several factors may affect the outcome of such process. One key to analyzing public procurement auctions are the political conditioning factors linked to government intervention policies, which may constitute a significant source of inefficiencies. This paper focuses on government intervention as a key factor to explain the inefficient outcome of the rolling stock procurement auction for the Madrid-Barcelona high-speed railway line. This paper provides a first attempt to develop a theoretical and practical model with network externalities to rationalize the award of the 2001 high-speed train procurement auction in Spain. The theoretical model presented is a static two-player game whereby the government interacts by determining the quality of trains in order to maximize a social welfare function and the Spanish Railway Company (RENFE) determines the quantity of train units to be awarded to bidders in order to maximize a benefit function. After considering several assumptions, the model yields four possible outcomes based on the bidding firms’ ability to generate domestic labour in similar or different amounts. The differences between the outcome of the 2001 procurement auction and the four possible results obtained from the model underscore the magnitude of political conditioning factors and the impact of poor or biased information.

• Supplemental Notes:
  • This paper was sponsored by TRB committee AR020 Passenger Rail Equipment and Systems Integration. Alternate title: Procurement Auctions and Governmental Intervention: Rolling Stock Award Assessment for Madrid-Barcelona High-Speed Train.
• Corporate Authors:

  Transportation Research Board

  500 Fifth Street, NW
  Washington, DC  United States  20001
• Authors:
  • Barreiro-Pereira, Fernando
  • Mochon, Francisco
• Conference:
  • Transportation Research Board 94th Annual Meeting
  • Location: Washington DC, United States
  • Date: 2015-1-11 to 2015-1-15
• Date: 2015

Language

• English

Media Info

• Media Type: Digital/other
• Features: References; Tables;
• Pagination: 14p
• Monograph Title: TRB 94th Annual Meeting Compendium of Papers

Subject/Index Terms

• TRT Terms: Competitive bidding; Contracts; Governments; High speed rail; Procurement; Rolling stock
• Identifier Terms: Red Nacional de los Ferrocarriles Espanoles
• Uncontrolled Terms: Auctions
• Geographic Terms: Barcelona (Spain); Madrid (Spain)
• Subject Areas: Administration and Management; Economics; Railroads; I10: Economics and Administration;

Filing Info

• Accession Number: 01557403
• Record Type: Publication
• Report/Paper Numbers: 15-4832
• Files: TRIS, TRB, ATRI
• Created Date: Mar 20 2015 3:21PM