Importance Bidding and auction have become the most popular forms of procurement in global practices recently. As compared with bidding, the auction creates a more competitive environment among suppliers, being more effective in terms of the ultimate contract value. Furthermore, if suppliers offer products of very different quality, the auction mechanism still allows the company offering lower quality of products to win by asking the extremely low price. Objectives The research looks for and proposes methods how to improve the existing auction procedures for procurement and services that magnify benefits and positive externalities. Methods I applied an abstraction and logic method, and systems analysis. The article compares the efficiency of various procurement mechanisms in cases when at least two companies can ensure the quality of their products the customer needs. Results In modeling the optimal auction, the systemic compromise is proved to increase the customer's benefits as much as possible, since it deprives suppliers from high information rent in the bid, where the quality of products may significantly differ. The article suggests using an open list of quality indicators of goods, work, services in procurement for public and municipal needs. Conclusions and Relevance As for the novelty of the findings, I created auction models to procure products and services, which would help the customer reach the maximum quality of products at the lowest possible cost. The proposed approach can be used to improve procurement procedures and satisfy public and municipal needs in order to make procurement processes more effective and efficient.
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