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

Author

Listed:
  • Laura Rondi

    () (Politecnico di Torino)

  • Paola Valbonesi

    () (University of Padova)

Abstract

This paper studies the impact of qualification rules for entry into public procurement auctions on firm bids and contract execution, contributing to the debate about which regulations foster the efficient participation of small and medium enterprises (SMEs). Using rich and detailed microdata on all public work contracts awarded by the regional government of Valle d’Aosta from 2000 to 2008, we investigate the differences between pre-award outsourcing by temporary partnerships (TPs) and post-award outsourcing by firms in optional or mandatory subcontracting. We find that both outsourcing status and firm size affect bids and the probability of time and cost overruns. TPs bid lower prices than mandatory and large optional firms and perform well in contract execution, similar to small optional firms. Mandatory firms are more likely to exceed expected cost and are no better in timely delivery. The evidence holds when we disentangle horizontal and vertical subcontracting. Our results highlight the TPs’ advantage of freedom in choosing economic size and technical boundaries before entering the auction.

Suggested Citation

  • Laura Rondi & Paola Valbonesi, 2017. "Pre- and post-award outsourcing: Temporary partnership versus subcontracting in public procurement," "Marco Fanno" Working Papers 0211, Dipartimento di Scienze Economiche "Marco Fanno".
  • Handle: RePEc:pad:wpaper:0211
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    References listed on IDEAS

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    More about this item

    Keywords

    Public procurement; Regulation on entry; Vertical and horizontal subcontracting/outsourcing; SMEs; Temporary consortium; Supply chain.;

    JEL classification:

    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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