 Rules Versus Discretion in Public ProcurementNo 1232, Working Papers from Barcelona School of Economics Abstract: I study the trade-off between rules and discretion in the context of US federal procurement. Belowan arbitrary threshold amount, contracts can be awarded using procedures that are subject to significantly fewer rules and less oversight. Leveraging a change in the threshold value, I document three key empirical findings. First, there is substantial bunching of contracts at the threshold. Second, the added scrutiny introduced by rules distorts the award amount of some contracts, while discouraging other purchases altogether. Third, contracts subject to more scrutiny perform worse ex post. I propose and estimate a stylized model of public procurement that is consistent with these findings. I find that, at current levels, the benefits from waste prevention are modest relative to the size of the compliance costs introduced by regulation. I find that the optimal threshold is substantially higher than the current one, and that a proposed increase in the threshold will leave the government better off. The model highlights the key role of incentive misalignment in bureaucracies, and shows quantitatively how increased discretion can be optimal as misalignment is reduced. Keywords: Regulation; Bureaucracy; public procurement; discretion; compliance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bge:wpaper:1232 Access Statistics for this paper More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.