Discretion and Supplier Selection in Public Procurement
47 Pages Posted: 12 Jul 2018
Date Written: June 15, 2018
Public procurement outcomes depend on the ability of the procuring agency to select high-performing suppliers. Should public administrations be granted more or less discretion in their decision making? Using Italian data on municipal public works tendered in the period 2009-2013, we study how a reform extending the scope of bureaucrat discretion affects supplier selection. We find that the share of contracts awarded to firms having a local politician among its administrators or shareholders increases, while the (ex-ante) labor productivity of the winning firms decreases, thus suggesting a potential misallocation of public funds. These effects are concentrated among lower quality procurement agencies.
Keywords: discretion, supplier selection, public procurement, transparency, corruption
JEL Classification: D72, D73, H57, P16
Suggested Citation: Suggested Citation