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Subcontracting Requirements and the Cost of Government Procurement

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  • Rosa, Benjamin

Abstract

Government procurement auctions can be subject to policies that specify, as a percentage of the total project, a subcontracting requirement for the utilization of historically disadvantaged firms. This paper studies how these subcontracting policies affect auction outcomes using administrative data from New Mexico’s Disadvantaged Business Enterprise (DBE) program. Through the use of a procurement auction model with endogenous subcontracting, I show that subcontracting requirements need not correspond to higher procurement costs – even when disadvantaged firms are more costly. I find small differences in procurement costs as a result of New Mexico’s current policy.

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  • Rosa, Benjamin, 2016. "Subcontracting Requirements and the Cost of Government Procurement," MPRA Paper 77392, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:77392
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    References listed on IDEAS

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    Cited by:

    1. Rosa, Benjamin V., 2020. "Affirmative action subcontracting regulations in dynamic procurement auctions," International Journal of Industrial Organization, Elsevier, vol. 72(C).

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    More about this item

    Keywords

    Procurement; Subcontracting; DBE Goals;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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