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Political contestability and public contract rigidity: An analysis of procurement contracts

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  • Jean Beuve
  • Marian W. Moszoro
  • Stéphane Saussier

Abstract

Are public contracts less adaptable than private contracts? Using a comprehensive set of contracts for a standard product, we compare procurement contracts in which the procurer is either a public administration or a private corporation. We find that public‐to‐private contracts feature more rigidity clauses than private‐to‐private contracts and that the use of rigidity clauses in public contracts rises when political risks are more salient. We argue that a significant part of the increased rigidity of public contracts is a contractual adaptation to limit political hazards from political opponents and interested third parties.

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  • Jean Beuve & Marian W. Moszoro & Stéphane Saussier, 2019. "Political contestability and public contract rigidity: An analysis of procurement contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 316-335, April.
    • Handle: RePEc:bla:jemstr:v:28:y:2019:i:2:p:316-335
    DOI: 10.1111/jems.12268
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    References listed on IDEAS

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    1. Spiller, Pablo T., 2013. "Transaction cost regulation," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 232-242.
    2. Marian W. Moszoro & Pablo T. Spiller, 2019. "Political contestability and public contracting," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 21(5), pages 945-966, October.
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    Cited by:

    1. Marian W. Moszoro & Pablo T. Spiller, 2018. "Implications of Third Parties for Contract Design," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 45(1), pages 5-16, March.
    2. Francesco Decarolis & Leonardo M Giuffrida & Elisabetta Iossa & Vincenzo Mollisi & Giancarlo Spagnolo, 2020. "Bureaucratic Competence and Procurement Outcomes [“Politics and Economics in Weak and Strong States]," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 36(3), pages 537-597.
    3. Marco Buso & Cesare Dosi & Michele Moretto, 2021. "Do exit options increase the value for money of public–private partnerships?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 30(4), pages 721-742, November.
    4. Marco Buso & Cesare Dosi & Michele Moretto, 2023. "Dynamic Regulation of Public Franchises with Imperfectly Correlated Demand Shocks," Working Papers 2023.03, Fondazione Eni Enrico Mattei.
    5. Leonardo M. Giuffrida & Gabriele Rovigatti, 2022. "Supplier selection and contract enforcement: Evidence from performance bonding," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(4), pages 980-1019, November.
    6. Jean Beuve & Stéphane Saussier, 2021. "Renegotiations and Renewals of Public Contracts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(3), pages 461-482, November.
    7. Jean Beuve & Marian W Moszoro & Pablo T Spiller, 2023. "Doing It by the Book: Political Contestability and Public Contract Renegotiations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 39(1), pages 281-308.
    8. Joanna Piechucka, 2021. "Cost efficiency and endogenous regulatory choices: evidence from the transport industry in France," Journal of Regulatory Economics, Springer, vol. 59(1), pages 25-46, February.
    9. Gabriel Natividad, 2022. "Decentralizing investment: Evidence from municipal organization after close elections," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 734-761, August.
    10. Dejan Makovšek & Adrian Bridge, 2021. "Procurement Choices and Infrastructure Costs," NBER Chapters, in: Economic Analysis and Infrastructure Investment, pages 277-327, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement

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