Empowering the End-User as Procurement Agent Through E-Commerce
Public procurement is an example of the principal-agent paradigm, in which a principal employs an agent to make decisions on behalf of the principal. This agency relationship has been scrutinized from countless academic angles because of the intractable problems it creates, referred to generally as the “agency problem.” In this problem, almost invariably, the agent will diverge from the principal’s optimal outcome, out of the agent’s selfish interests. The agency problem inevitably causes residual losses, despite extensive efforts and costs in monitoring the performance of procurement agents and sanctioning aberrant agents. Whereas in the commercial sector, costs and losses due to the agency problem are borne by the principal, and thus efficiently managed, the residual loss in government procurement often falls on the end-user (that is, the individual who actually uses the procured item).