Transaction costs and competitive tendering in public procurement: Moderating role of integrity

While the current economic crisis clearly puts pressure on governments to cut spending and save money, and whilst the call for a more cohesive interface between the public and private sectors is currently resonating, public procurement has been marred by scandals, mismanagement, and possibly malpractices. According to the literature, corporate integrity drives transactional behaviors by acting as a hidden hand of social factors that are frequently beyond an individual's control. But scantly studied, as behavioral control mechanism in transaction costs. This paper studies the moderating effect of integrity on the relationship between transaction costs’ behavioral dimensions and competitive tendering in public procurement. Following a literature review, the paper takes a conceptual framework towards developing evidence of cascaded transaction costs’ behavioral dimensions, bounded rationality and opportunism. Formal research propositions amplify both concepts and its relationship with independent variable and dependent variables. The results are based on the empirical data collected from a self-administrative survey from public procurement practitioners in Tanzania. Descriptive and Hierarchical regression results reveals that public procurement practitioners’ perceived transaction costs to negatively when related with competitive tendering as moderated by integrity. This means, integrity can moderate the behaviors of public procurement practitioner which, in turn, accelerates efficiency of competitive tendering by reducing transaction costs.