to justify the decisions that are taken upon request.24 This obligation applies both to purchasing entities vis-a-vis unsuccessful tenderers, and to the government of the former vis-a-vis the government of the latter.
The challenge procedures of the GPA make procurement decisions subject to challenge by private bidders before national courts or impartial administrative bodies. Thus Article XX:2 of the GPA stipulates that "each Party shall provide non-discriminatory, timely, transparent and effective procedures enabling suppliers to challenge alleged breaches of the Agreement arising in the context of procurements in which they have, or have had, an interest." Dispersed tax payers are among the beneficiaries of the public service that these private litigants may perform. Such private enforcement of regulatory policy is, of course, not unique to public procurement but also a feature of other areas like anti-trust.
Private litigation serves a public purpose when the state carries out prosecutorial activities at levels that produce less than optimal deterrence.25 While the rationale for private action is usually to obtain compensation, the action may also have a socially desirable corrective and deterrent effect. Profit-maximizing victims of illegal behaviour will take legal action when the amounts they may recover, multiplied by the probability of their success, exceed their litigation costs. The barriers to litigation, which may usually deter private action, include
(Are there reasons why transparency may be socially undesirable? In the negotiations prior to the GPA, the Europeans were opposed to introducing the obligations of ex post transparency and were reluctant to change their practice of not publishing procurement decisions. Their argument was that publication would endanger subsequent competition, result in collusion on the part of suppliers, and invite identical bids in new contracts for the same items. Even though these arguments were not accepted and the GPA does not reflect their concerns, they may not have been entirely without basis.
Oligopolistic bidders must choose between a multiplicity of pricing alternatives, a choice that is made even more difficult by anti-trust laws which prohibit communication. Schelling (1960) has provided an insight into how "focal points" may help such firms resolve their coordination problems and achieve tacit collusion. In a variety of situations, when behaviour must be coordinated tacitly, there is a tendency for choices to converge on some focal point which may owe their prominence to symmetry, precedent or any other consideration. Scherer and Ross (1990) provide an interesting example of a procurement of antibiotics by the U.S Veterans Administration in 1955, when five different companies submitted sealed bids each quoting an effective net price of $19.1884 per bottle. It is possible that the bids were the result, not of collusion, but the influence of two kinds of focal points. First, the price of $19.1884 was arrived at through a series of round number discounts to round number base prices. Second, and more importantly for the present purpose, there was a past history of price quotations that provided a focal point for these particular bids. A price that had no particular uniqueness or compulsion became a focal point simply because it had been quoted repeatedly. Thus, it is possible that revealing the precise terms of a procurement contract may provide bidders for future contracts a focal point on which to converge. The empirical significance of this possibility is unclear.
(The optimal level of deterrence results when the burden to the wrong-doer of the sanctions for a given act equals the net harm which the act causes to other members of society, divided by the probability of the wrong-doer's apprehension and successful prosecution. See Cooter and Rubinfeld (1989) for an economic analysis of legal disputes.