Too big to be efficient? The role of size in public procurement performance

Developed countries allocate a significant portion of their public spending to goods and services. Especially when it comes to building and restoring the country's infrastructure, the attention of politicians and analysts is very strong, given the impact that these works can have on the national economy, both in the short and long term. The aim of this paper is to investigate how some specific factors of the public procurement process, namely the dimensions of public contracts, contracting authorities, and winning firms, impact public procurement efficiency. We employ a panel dataset of approximately 90,000 public works contracts awarded in Italy from 2007 to 2019, focusing on cost overruns and time delays as measures of inefficiency. The issue is especially topical as the Italian legislation on public procurement was recently reformed in the direction to foster the contracting out of larger contracts albeit making easier to subcontract their implementation. Our results confirm that dimensions matter. Specifically, larger contracts and subcontracting practices tend to correlate with higher inefficiency, while both cost overruns and delays decrease when contracts are assigned by bigger (more experienced) contracting authorities or to larger firms. Furthermore, we delve into the interplay among these dimensions and institutional quality, highlighting that the latter is a critical factor mediating the impact of some procurement-level characteristics on cost inefficiencies. Overall, our findings strongly advocate for the qualification of contracting authorities, underscore the importance of tender dimensions in determining inefficiencies, and emphasize the need to account for institutional quality when designing procurement policies.