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

Riccardo Camboni, Laura Rondi and Paola Valbonesi

European Journal of Political Economy, 2021, vol. 66, issue C

Abstract: We empirically compare bids (i.e. prices) from temporary partnerships (TPs), that outsource part of the contract before the auction, and firms that outsource afterwards. Using a comprehensive dataset on procurement auctions for public works in Valle d’Aosta (Italy), we find that the timing of outsourcing affects the bids and the probability of winning the auction. Specifically, TPs bid closer to the payoff maximizing offer and are more likely to win. Hence, the price paid by the public buyer is lower. These results are supported by a simple theoretical setting showing that, by pre-committing to a TP, suppliers have a lower risk of being “held up” by subcontractors than firms that outsource part of the work after the bidding phase. Our results show the advantage for TPs of freely choosing partners, size and boundaries before the auction, highlighting their potential in fostering the effective participation in public procurement procedures of Small and Medium-sized Enterprises (SMEs).

Keywords: Public procurement; SMEs' participation in public procurement; Temporary partnership; Consortium; Subcontracting; Outsourcing; Qualification rules in procurement (search for similar items in EconPapers)
JEL-codes: D22 H57 H72 L24 L25 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:66:y:2021:i:c:s0176268020300987

DOI: 10.1016/j.ejpoleco.2020.101950

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