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The Impact of Scoring Weights on Price and Quality Outcomes: An Application to the Procurement of Welfare-to-Work Contracts

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  • Koning, Pierre

    ()
    (VU University Amsterdam)

  • van de Meerendonk, Arthur

    ()
    (Maastricht University)

Abstract

This paper assesses the effects of changes in scoring weights in auctions, using a unique sample of biddings of private Welfare-to-Work (WTW) organizations to reintegrate groups of unemployed and disabled workers. WTW-organizations did not only bid on prices, but also received points for three proxies of the quality of their services: their reputation, a description of their intended methodology to reintegrate workers and the fraction of job placements they considered likely to achieve. We exploit the fact that the scoring weights of these items changed in the time period under consideration, while the broad classification of ('gross') worker types remained similar over time. Our estimation results show that increases in the scoring weights of the quality items result in higher price bids, particularly of WTW-firms that are bidding for the first time as entrants. For the WTW-firms that won the procurements, we find a higher weight for both the reputation and the methodology item to contribute to the job placement of workers.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7116.

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Length: 42 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:iza:izadps:dp7116

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Keywords: scoring auctions; welfare-to-work;

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  1. James J. Heckman & Carolyn Heinrich & Jeffrey Smith, 2002. "The Performance of Performance Standards," Journal of Human Resources, University of Wisconsin Press, vol. 37(4), pages 778-811.
  2. Courty, Pascal & Marschke, Gerald, 2002. "An Empirical Investigation of Gaming Responses to Explicit Performance Incentives," CEPR Discussion Papers 3164, C.E.P.R. Discussion Papers.
  3. Koning, Pierre & Heinrich, Carolyn J., 2010. "Cream-Skimming, Parking and Other Intended and Unintended Effects of Performance-Based Contracting in Social Welfare Services," IZA Discussion Papers 4801, Institute for the Study of Labor (IZA).
  4. John Asker & Estelle Cantillon, 2008. "Properties of scoring auctions," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 69-85.
  5. Oecd, 2011. "Centralised Purchasing Systems in the European Union," SIGMA Papers 47, OECD Publishing.
  6. Onderstal, Sander, 2009. "Bidding for the unemployed: An application of mechanism design to welfare-to-work programs," European Economic Review, Elsevier, vol. 53(6), pages 715-722, August.
  7. repec:ulb:ulbeco:2013/8999 is not listed on IDEAS
  8. Behaghel, Luc & Crépon, Bruno & Gurgand, Marc, 2012. "Private and Public Provision of Counseling to Job-Seekers: Evidence from a Large Controlled Experiment," IZA Discussion Papers 6518, Institute for the Study of Labor (IZA).
  9. Bergman, Mats & Lundberg, Sofia, 2011. "Tender Evaluation and Award Methodologies in Public Procurement," UmeÃ¥ Economic Studies 821, Umeå University, Department of Economics.
  10. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
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