Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement

60 Pages Posted: 21 Jul 2017

See all articles by Leonardo M. Giuffrida

Leonardo M. Giuffrida

Centre for European Economic Research (ZEW)

Gabriele Rovigatti

Bank of Italy

Date Written: July 17, 2017

Abstract

We empirically investigate the effect of oversight on contract outcomes in public procurement. In particular, we stress a distinction between public and private oversight: the former is a set of bureaucratic checks enacted by contracting offices, while the latter is carried out by private insurance companies whose money is at stake through so-called surety bonding. We analyze the universe of U.S. federal contracts in the period 2005-2015 and exploit an exogenous variation in the threshold for both sources of oversight, estimating their causal effects on costs and execution time. We find that: (i) public oversight negatively affects outcomes, in particular for less competent buyers; (ii) private oversight has a positive effect on outcomes by affecting both the ex-ante screening of bidders - altering the pool of winning firms - and the ex-post behavior of contractors.

Keywords: oversight, procurement, screening, red tape, moral hazard

JEL Classification: D21, D44, D82, H57, L74

Suggested Citation

Giuffrida, Leonardo Maria and Rovigatti, Gabriele, Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement (July 17, 2017). CEIS Working Paper No. 411, Available at SSRN: https://ssrn.com/abstract=3003965 or http://dx.doi.org/10.2139/ssrn.3003965

Leonardo Maria Giuffrida (Contact Author)

Centre for European Economic Research (ZEW) ( email )

L 7, 1
Mannheim, 68161
Germany

Gabriele Rovigatti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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