Analysis of the effectiveness of “small privatization” auctions. ProZorro. Sales

6 March 2019

1454 objects were put up for sale by state authorities during the first 4 months (from August to December 2018) in small privatization auctions through the system of ProZorro. Sales.

Only 423 of them were successful.

Why did it happen so?

In the analytical note “What determines the effectiveness and profitability of small privatization auctions. The Analysis of auctions of ProZorro. Sales.”, we have analysed the factors that affect the performance and profitability of the auctions.

The most important factor is the number of its participants.

The analysis shows the more participants, the greater likelihood that the auction will end effectively, and it will be profitable. However, the infinite growth in the number of participants does not bring any particular changes: the probability of successful privatization is approximately the same for the auctions with three and 25 participants.

In the analytical note, there is also a breakdown by characteristics of participants and auction winners (legal or physical persons, men or women, participants from the same region as the organizer is, or from other regions) in order to understand whether additional efforts should be made to attract additional participants, which then can be more likely to become the winners.

Other important factors are:

who is organizing an auction (which government body);
how many times the object is put up for sale;
what site announces the privatization.
In the analytical note, we have also analysed the “bottlenecks” of the auctions. Among the risk criteria, the following are singled out:

the presence of questions without answers – it shows that the organizer does not fully perform their duties;

disqualification of more than half of the participants – it indicates that the organizer may be in collusion with some participants or uses some formal rules too strictly, sacrificing success and profitability;

competitive auctions where the price of the winner has not changed during the trading – it proves a potential conspiracy between the participants.

As a result, we have found out that more than 25% of successful auctions are potentially risky.

We recommend

to involve more participants. To attract the attention of more participants, more publicity of ads is needed about small privatization. It is also desirable to conduct a survey of potential participants (e.g. those who viewed the announcement of the auction, but decided not to participate in it) about the reasons for the refusal to participate, as well as surveying the participants about the problems faced when using the system of ProZorro. Sales. This can be done by platforms or ProZorro. Sales.

To design some risk analysis tools for ProZorro. Sales. This can be done by ProZorro or non-governmental organizations. To conduct trainings for auction organizers. More productive organizers can conduct trainings for less productive ones. This can be done by platforms, Prozorro.Sales. or other more successful participants.