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The effect of discretion on procurement performance

Author

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  • Coviello, Decio
  • Guglielmo, Andrea
  • Spagnolo, Giancarlo

Abstract

We run a regression discontinuity design analysis to document the causal effect of increasing buyers' discretion on procurement outcomes in a large database for public works in Italy. Works with a value above a given threshold have to be awarded through an open auction. Works below this threshold can be more easily awarded through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. Our main result is that discretion increases the probability that the same firm wins repeatedly, and it does not deteriorate (and may improve) the procurement outcomes we observe. The effects of discretion persist when we repeat the analysis controlling for the geographical location, corruption, social capital and judicial efficiency in the region of the public buyers running the auctions.

Suggested Citation

  • Coviello, Decio & Guglielmo, Andrea & Spagnolo, Giancarlo, 2016. "The effect of discretion on procurement performance," LSE Research Online Documents on Economics 66445, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:66445
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    File URL: https://researchonline.lse.ac.uk/id/eprint/66445/
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    Cited by:

    1. Werner Hölzl & Michael Böheim & Michael Klien & Eva Pichler, 2017. "Das öffentliche Beschaffungswesen im Spannungsfeld zwischen Billigst- und Bestbieterprinzip," WIFO Studies, WIFO, number 59256.
    2. Maria Paula Gerardino & Stephan Litschig & Dina Pomeranz, 2024. "Distortion by Audit: Evidence from Public Procurement," American Economic Journal: Applied Economics, American Economic Association, vol. 16(4), pages 71-108, October.
    3. Leonardo M. Giuffrida & Gabriele Rovigatti, 2017. "Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement," CEIS Research Paper 411, Tor Vergata University, CEIS, revised 20 Jul 2017.
    4. Decio Coviello & Luigi Moretti & Giancarlo Spagnolo & Paola Valbonesi, 2018. "Court Efficiency and Procurement Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 120(3), pages 826-858, July.
    5. Ari Hyytinen & Sofia Lundberg & Otto Toivanen, 2018. "Design of public procurement auctions: evidence from cleaning contracts," RAND Journal of Economics, RAND Corporation, vol. 49(2), pages 398-426, June.
    6. Baldi, Simona & Bottasso, Anna & Conti, Maurizio & Piccardo, Chiara, 2016. "To bid or not to bid: That is the question: Public procurement, project complexity and corruption," European Journal of Political Economy, Elsevier, vol. 43(C), pages 89-106.
    7. Spagnolo, Giancarlo & Decarolis, Francesco & Iossa, Elisabetta & Mollisi, Vincenzo & Giuffrida, Leonardo, 2016. "Buyer Quality and Procurement Outcomes: Explorative Evidence From the US," SITE Working Paper Series 41, Stockholm School of Economics, Stockholm Institute of Transition Economics.

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    JEL classification:

    • N0 - Economic History - - General
    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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