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Temporary partnership and subcontracting: Pre- vs. post- award outsourcing in public procurement

Author

Listed:
  • Camboni, Riccardo
  • Rondi, Laura
  • Valbonesi, Paola

Abstract

We empirically compare bids (i.e. prices) from temporary partnerships (TPs), that outsource part of the contract before the auction, and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for public works in Valle d’Aosta (Italy), we find that the timing of outsourcing affects the bids and the probability of winning the auction. Specifically, TPs bid closer to the payoff maximizing offer and are more likely to win. Hence, the price paid by the public buyer is lower. These results are supported by a simple theoretical setting showing that, by pre-committing to a TP, suppliers have a lower risk of being “held up” by subcontractors than firms that outsource part of the work after the bidding phase. Our results show the advantage for TPs of freely choosing partners, size and boundaries before the auction, highlighting their potential in fostering the effective participation in public procurement procedures of Small and Medium-sized Enterprises (SMEs).

Suggested Citation

  • Camboni, Riccardo & Rondi, Laura & Valbonesi, Paola, 2021. "Temporary partnership and subcontracting: Pre- vs. post- award outsourcing in public procurement," European Journal of Political Economy, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:poleco:v:66:y:2021:i:c:s0176268020300987
    DOI: 10.1016/j.ejpoleco.2020.101950
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    More about this item

    Keywords

    Public procurement; SMEs' participation in public procurement; Temporary partnership; Consortium; Subcontracting; Outsourcing; Qualification rules in procurement;
    All these keywords.

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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