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Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement

Leonardo M. Giuffrida () and Gabriele Rovigatti ()
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Leonardo M. Giuffrida: Department of Economics and Finance, University of Rome "Tor Vergata", http://www.ceistorvergata.it

Authors registered in the RePEc Author Service: Leonardo M. Giuffrida () and Leonardo Maria Giuffrida ()

No 411, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: We empirically investigate the effect of oversight on contract outcomes in public procurement. In particular, we stress a distinction between public and private oversight: the former is a set of bureaucratic checks enacted by contracting offices, while the latter is carried out by private insurance companies whose money is at stake through so-called surety bonding. We analyze the universe of U.S. federal contracts in the period 2005-2015 and exploit an exogenous variation in the threshold for both sources of oversight, estimating their causal effects on costs and execution time. We find that: (i) public oversight negatively affects outcomes, in particular for less competent buyers; (ii) private oversight has a positive effect on outcomes by affecting both the ex-ante screening of bidders - altering the pool of winning firms - and the ex-post behavior of contractors.

Keywords: oversight; procurement; screening; red tape; moral hazard. (search for similar items in EconPapers)
JEL-codes: D21 D44 D82 H57 L74 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta
Date: 2017-07-20, Revised 2017-07-20
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Working Paper: Can the private sector ensure the public interest? Evidence from federal procurement (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:rtv:ceisrp:411

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