The impact of legal frameworks on bidding mechanisms

BACKGROUND AND OBJECTIVES: The long-term nature and capitalization of projects as well as the risks of the country's economic environment have made the provision of proper infrastructure as a permanent problem for national and local governments. Governments prefer to outsource the development and exploitation of capital assets to the private sector due to several reasons. In this matter, government institutions, due to their weaknesses in both technology and financing, are willing to create some optimal policy frameworks to utilize financial instruments to encourage private sector participation, as well as increase the share of revenues from the urban projects.The aim of this paper is to use the auction theory to improve the current mechanisms of public asset allocation. METHODS: This paper investigated the legal framework to design an allocation mechanism for the public assets using a qualitative approach. This qualitative method is based on the case study. This paper works on a series of library studies in order to analyze and familiarize with the problems, shortcomings, and inadequacies in the allocation of public assets exploitation plans in the Municipality of Tehran. FINDINGS: The obtained results indicate that the current rule can be improved in terms of choosing the process holding model, bidding criteria, and focusing on sharing future revenues in order to strengthen both the optimality and efficiency of outputs CONCLUSION: This paper proposed the bidding mechanisms that can be employed based on the current rules. After determining the qualifications of the contractors, a two-step model can be utilized to provide the set of assets. The mechanism of holding bidding was provided based on the results of previous researches as well as the features of the current rule in the form of two stages of price detection and the First Price Sealed Bid Auction mechanism.

Keywords:

Auctions , Competitive Bidding , First Price Sealed Bid Auction (FPSBA) , Mechanism Design , Optimal Auction Design