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Collusion in public procurement: the role of subcontracting

B. Cesi () and M. Lorusso ()
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B. Cesi: University of Roma Tor Vergata
M. Lorusso: University of Rome Tor Vergata

Economia Politica: Journal of Analytical and Institutional Economics, 2020, vol. 37, issue 1, No 10, 265 pages

Abstract: Abstract This paper investigates how subcontracting affects collusion in public procurement. In a model in which a public buyer runs simultaneous or sequential competitive procedures we show that the stability of collusive agreements depends on the level of subcontracting share and it is not necessarily increasing in this share. In a repeated procurement in which contractors and subcontractors are involved in collusive agreements enforced by slit award and bid rotation strategies we find that simultaneous procedures induce less collusion than sequential procedures, with split award strategies allowing the less stable collusive scheme. We also find that allowing a further increase in the subcontracting share strengthens collusion when the share is low but it mitigates collusion when the share is high. Thus, the competitive format and the allowed subcontracting share must be carefully managed by the public buyer in order to prevent collusion.

Keywords: Repeated procurement; Collusion; Subcontracting (search for similar items in EconPapers)
JEL-codes: H57 L41 C73 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40888-019-00167-3

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Handle: RePEc:spr:epolit:v:37:y:2020:i:1:d:10.1007_s40888-019-00167-3