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Daniel G. Bauer*

ABSTRACT. Amidst real capacity constraints, both human capital and

financial resources, the expertise and skill sets required by public

procurement will be critically tested more than at any time in the evolution of the profession. Simultaneously, increasing demands for funding both capital projects and ongoing operations ranging from infrastructure and community services to education and emergency response will force practitioners to emerge as newly integrated transformational-transactional leaders. Facing headwinds of competing political interests and influences, this paper proffers a matched funding methodology and incorporation of opportunity as leading financial considerations for public procurement professionals to consider when calculating benefits/(costs) for their public organizations.

Universally applicable social, political, economic, environmental, and financial factors are examined, providing an effective program evaluation for public procurement professionals. Matched funding provides additional insight into the true opportunity cost of funding, thereby, serving as a pragmatic mechanism for procurement management.

*Daniel G. Bauer, EMBA, is a Ph.D. Student, School of Public Administration, Florida Atlantic University. His research and teaching interests are in Procurement, Public and Behavioral Finance, Program Evaluation, PublicPrivate Partnerships in Infrastructure and Green, Energy Environmental and ICT Policy, as well as Corporate Social Responsibility. Daniel G. Bauer is currently a PhD Student, Graduate Research/Teaching Assistant with 25+ years Professional experience including Treasury Management of a US$25 Billion Capital Structure, Transaction, and Procurement (Supplier Financing), Marketing, and Business Development at U.S. Fortune 500 companies, including Macmillan, CBS, and AT&T as well as establishing Public-Private Partnerships in Infrastructure and Sustainability abroad as Managing Director – Quantum Group.



The purpose of this paper is to provide a better understanding of the importance, functions, and benefits attached to leveraging financing through matched funding while simultaneously lowering the all-in cost of financing. The paper adds originality and value to the literature on the matched funding process but is significant because of its focus on incorporating costs/benefits of opportunity financing.

From a practical perspective, application of the discipline of incorporating matched funding and opportunity into the decision making process undertaken by procurement professionals within municipalities, states, provinces, and other public sector entities, can lead to better informed decisions, stakeholder engagement, intergovernmental and taxpayer satisfaction. Notwithstanding the foregoing, achieving efficiency and performance measurements are set against a political backdrop whereby, achieving transparency through information asymmetry often impedes or tempers implementation. However, through incorporation of the matched funding and opportunity framework into the procurement and finance decision making process, presented herein, outcomes and implications can, over time, lead to a greater degree of certainty in the policy process.

Definitions abound regarding opportunity and matched funding.

However, for the purposes of applied procurement research, I have used the following definition of both matched funding and opportunity because of its universal appeal. Matched funding can be defined as money promised as well as funds that will be supplied in an amount matching the funds available from other sources. Cash-in-hand, finances, borrowed funds, discretionary funds, as well as other funding sources are garnered from and provided by nonprofit, nongovernmental organizations (“NGOs”), private, and public sectors.

All of these funding sources lead to the stipulation set by a grantproviding body or a financial intermediary that the recipients of a grant or loan or financing raise a certain percentage of the money they require, generally a sum more or less equal to that of the sum of money being granted. In other words, multiple participants, in a Bauer collaborative process, provide sources of funding, involving risk-return relationships, for certain initiatives.

A point of critical thinking needs to be interjected. Absent the potential for matched funding, a double impact of opportunity costs can be forgone.

Upon considering the increasing financial and human resource capacity constraints befalling municipalities worldwide, procurement officers and finance and operations executives are particularly compelled to seek innovative methods for underwriting projects and public works, securing supplies and providing services to their respective communities (Aschhoff & Sofka, 2009). Extant literature indicates that procurement executives are seeking to ‘do more with less’ especially within the public works and infrastructure sectors both domestically (United States) and globally as the financial resources available are limited, thus compelling managers to find creative ways of securing such financing.

One of the primary challenges faced by both public and private sector organizations is the often unused and overlooked discipline of incorporating the cost of opportunities foregone into a decision making process. Opportunity costs are the costs forgone alternative in order to pursue a certain action. Additionally, opportunity costs represent the next highest value for money alternative. Furthermore, opportunity costs are one component and represent the most elusive costs comprising economic costs. Economic costs include total costs (fixed costs plus variable costs) plus average costs (average fixed rate plus average variable costs) plus marginal cost, transaction costs, sunk costs, accounting costs and finally, opportunity costs.

Deriving an ‘all-in’ true cost of conducting financial operations, generally, and procurement functions, specifically, are often rift with politically charged minefields. Although, a review of the literature confirms that regarding rulemaking, certain scholars, notably Lowi, have expressed preference for legislation that focuses less on generalities and more on specifics (Kerwin & Furlong, 2011).

Granted, in the world of the practitioner, the omnipresence of often


competing political agendas does exert influence on the ultimate procurement decision. [As the author, I believe I would be remiss in not pointing this out to practitioners and thus would be presenting an exercise that can be stigmatized as purely academic]. However, by incorporating matched funding and opportunity into a public finance calculation of net social benefits/(costs) than a true, all-in value for money discipline may provide greater transparency.

–  –  –

The design and methodological approach that the paper draws upon includes an analysis both of the costs and funds required by listing benefits and drawbacks associated with five factors including social, political, economic, environmental, and financial.

finally, opportunity costs. Classic economic theory of opportunity costs posits that opportunity can be calculated representing four distinct categories – mutually exclusive economic alternatives

- selected/desired alternative

- next best alternative

- eventual decision Several questions highlight the criticality of factoring in the opportunity costs associated with matched funding in public procurement activities and undertakings. Moreover, I argue that the criticality of matched funding and opportunity is becoming

increasingly acute, due to several factors:

increasing directives and treaty conditions emanating from multigovernance bodies.

For example, recent European Union directives pertaining to public procurement activities and implications on the awarding of public sector service contracts.

–  –  –

Some of these questions include the following:

- Does the calculation of a net present value (“NPV”) on the isolated opportunity costs of matched funding in public procurement produce a positive externality?

- Can we incorporate matched funding into lean thinking?

(Lean Thinking being an expression generally used in project management)

- Does matched funding meet the seven goals of public procurement?

–  –  –

Generally, matched funding provides three sources for public entities to secure including private equity in the public private partnerships and privatization efforts; nonprofits and NGOs in triangular relationships and collaborative governance, and intergovernmental including state, local – municipal and county, and federal governments. Additionally, the availability of international and global institutions such as the World Bank, development banks, and other trade and financial institutions increasingly assuming a significant role in advancing policy emanating through public procurement.

Ironically, as a commitment to more transparency evoleves in the fiels of public procurement tradeoffs often arise regarding pursuit of community based economic development and foreign access to the procurement officer’s jurisdiction.


The methodology raises a number of questions pertaining to the use of matched funding and opportunity within public procurement,

including the following:

- Should the principles of matched funding include opportunity costs?

- Does matched funding meet the goals of public procurement?

–  –  –

- What are the practical implications of matched funding and opportunity within public procurement?

Upon considering the overall lack of matched funding and opportunity within the procurement extant literature, researchers may want to originate application of the methodology to specific areas such as public works and infrastructure.

The Council of Development Finance Agencies (“CDFA”) recently formed an active partnership with the Clean Energy Group in order to accelerate investment in and provide financing to clean energy initiatives. Underwritten by municipal bond financing, similar types of undertakings which may be policy-oriented in municipalities worldwide, are representative of the types of forward thinking opportunities for matched funding and opportunity available to public sector generally, and public procurement professionals specifically as instruments of policy.

Future research should focus on the qualitative methods of case study assessment and cross-jurisdictional comparative analyses. The cross jurisdictional analyses are particularly important in discovering new and innovative ways of financing public programs such as infrastructure, public works, utilities, and other policy-enabling procurement programs oriented towards universal application.

Bauer Thai (2007) indicates the seven goals for public procurement include the following: 1. Maximize competition 2. Maintain integrity and transparency 3. Cost 4. Quality 5. Timeliness 6. Risk management 7.

Accomplish social and economic objectives.

Applying the methodology and juxtaposing matched fundings’ opportunity costs onto the seven goals leads to the potential that matched funding and opportunity when applied by public sector can lead to better decision making regarding true net social benefits and costs. Especially considering focused applications such as infrastructure, public works, public private partnerships, privatizations, and other procurement initiatives involving long-term horizons, and substantial capital outlay, the application of a framework for matched funding and opportunity leads to better decision making, true all-in cost portrayal, and more robust transaction costs. The resultant outcomes are better informed public investment decisions. The primary premise of this research paper is to incorporate matched funding and opportunity into procurement decisions regardless of the political implications. It leads to more informed decision making of taxpayer dollars, particularly acute considering contextuality.


The idea that a public entity can readily obtain access to an ‘unlimited’ pool of available funds in the money and credit markets is an illusion. All public entities compete for the most attractive financing terms as well as access to credit markets. Recent disturbing trends pertaining to bankruptcy proceedings, such as various American public jurisdictions including but not limited to Jefferson County, Alabama; Harrisburg, Pennsylvania, Stockton, California and others, is leading to unappetizing choices. Amongst the choices, foregoing paying one creditor versus another creditor is but one of several factors compelling forward looking financial managers and procurement executives to reassess business as usual.


How to obtain easier access to credit markets; more effective alignment in asset-liability management, implementing the matching principle of future debt obligations to current operations; lowering opportunity costs of financing, and deriving an ‘all-in’ net social benefit/net social cost are all indicative of the phrase ‘Wearers of Many Hats’ applicable to public procurement professionals.

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