Subcontracting in Public Procurement: An Empirical Investigation

Luigi Moretti and Paola Valbonesi

No 154, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: We have assembled a new dataset and we have empirically investigated the effects of subcontracting on the bidding price in auctions for the awarding of public contracts in Italy. The required qualification for firms aiming to bid for Italian public contracts determines different subcontracting formats: according to this system, bidding firms can be classified as either partially or fully qualified to complete a tendered project. The former are obliged to allocate certain tasks involved in the contract to other qualified firms, giving rise to a ÒmandatoryÓ subcontracting. The latter are free to choose whether or not to subcontract some tasks to similarly qualified firms, adopting an ÒoptionalÓ subcontracting. We find that firms in a position to choose whether to subcontract or not generally offer lower prices than those firms which must proceed with mandatory subcontracts. This result, which holds true after controlling for auction characteristics, firmsÕ fixed effects, and characteristics of the subcontract, indicates that firms apply different prices to different subcontracting strategies in the public procurement supply chain.

Keywords: regulations for subcontracting in procurement; firms supply chain strategy; public procurement; horizontal (and vertical) subcontracting. (search for similar items in EconPapers)
JEL-codes: D44 H57 L23 L24 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2012-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0154

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