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Can the private sector ensure the public interest? Evidence from federal procurement

Leonardo Maria Giuffrida () and Gabriele Rovigatti ()

No 18-045, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We empirically investigate the effect of procurement oversight on contract outcomes. 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 the so-called performance bonding. By focusing on the U.S. federal service contracts in the period 2005-2015, we exploit an exogenous variation in the threshold for the application of both sources of oversight in order to separately estimate their causal e effects on execution costs and time. We find that: (i) private oversight has a positive effect on outcomes through the screening of bidders that alters the pool of winning firms; (ii) public oversight negatively affects outcomes, due to excessive red tape induced by low-competence buyers.

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: 2018
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Working Paper: Can the Private Sector Ensure the Public Interest? Evidence from Federal Procurement (2017) Downloads
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