To what extent does a more competent public bureaucracy contribute to better economic outcomes? We address this question in the context of the US federal procurement of services and works, by combining contract-level data on procurement performance and bureau-level data on competence and workforce characteristics. We use the death occurrences of specific types of employees as instruments and find that an increase in bureau competence causes a significant and economically important reduction in: i) time delays, ii) cost overruns, and iii) number of renegotiations. Cooperation within the office appears to be a key driver of the findings.
JEL Classification: D73; H11, H57; L26.
“Buyer’s Role in Innovation Procurement: Evidence from U.S. Military R&D Contracts“
with F. Decarolis, G. de Rassenfosse, E. Iossa, V. Mollisi, E. Raiteri, G. Spagnolo
Accepted for publication at the Journal of Economics & Management Strategy
This study provides the first quantification of buyers’ role in the outcome of R&D procurement contracts. We combine together four data sources on US federal R&D contracts, follow-on patented inventions, federal public workforce characteristics, and perception of their work environment. By exploiting the observability of deaths of federal employees, we find that managers’ death events negatively affect innovation outcomes: a 1 percent increase in the share of relevant public officer deaths causes a decline of 32.3 percent of patents per contract, 20.5 percent patent citations per contract and 34.3 percent patent claims per contract. These effects are driven by the deaths occurring in the six months before the contract is awarded, thereby indicating the relevance of the design and award stage relative to ex-post contract monitoring. Lower levels of self-reported within-office cooperation also negatively impact R&D outcomes.
Keywords: Innovation, R&D, public procurement, patents, bureaucracy, competence, cooperation, state capacity. JEL Classification: H11, H57; O31, O32, O38.
“Supplier Selection and Contract Enforcement: Evidence from Performance Bonding”
with G. Rovigatti
R&R, Journal of Economics & Management Strategy
We analyze a key but understudied institution that is designed to balance the supply risk in the management of procurement operations: the performance bonding. By adding a third party that guarantees the contract fulfillment between the supplier and the buyer, the performance bonding streamlines the purchasing process and impacts both contractor selection at the tender stage and contract enforcement during project execution. Using data on the US federal procurement 2005-2015, we find that these channels enhance contract outcomes by 9 and 4.2 percent in terms of delays and extra costs, respectively. Net of costs, the latter amount to roughly 4% savings on the federal budget for infrastructures, or 16% for midsize contracts. These effects are amplified for inexperienced contractors and low-competition tenders since third parties act as middlemen in reducing compliance costs and opportunism during project operations.
Keywords: supplier selection; contract enforcement; public procurement; performance bond; constructions. JEL Classification: D21, D44, D82; H57; L74
“What are the Priorities of Bureaucrats? Evidence from Conjoint Experiments with Procurement Officials”
with J. Tukiainen, S. Blesse, A. Bohne, J. Jääskeläinen, A. Luukinen, A. Sieppi
A well-functioning bureaucracy is a precondition for efficient public goods provision. However, bureaucratic decision-making is still largely seen as a black box. We provide novel insights into the preferences of bureaucrats regarding their work outcomes. We focus on a major public sector activity and survey more than 900 real-life procurement officials in Finland and Germany. The questionnaire includes hypothetical choice experiments to study the relative importance of multiple features in tender outcomes. First, bureaucrats state to have substantial discretion at work but no important incentives. Second, our experimental results show that procurers are particularly worried about avoiding negative risks concerning prices and supplier reputation. Third, an avoidance of bidders with prior bad performance appears to be an extremely important factor. Fourth, procurers value a certain degree of competition, while litigation concerns and regional favoritism play only a small role. The striking lack of heterogeneous effects points towards the role of intrinsic motivation among public buyers in countries with high public sector capacity.
Keywords: Bureaucrats, Public Procurement, Preferences, Intrinsic Motivation, Conjoint Experiment. JEL Classification: D73, D90; H11, H57, H83; K41; M54.
WORK IN PROGRESS
Buyers’ Workload and R&D Procurement Outcomes: Evidence from the U.S. Air Force Research Lab. RQ: does R&D-contracting bureaucrats’ workload affect the innovativeness of their purchases? (with Raiteri E.) WORKING PAPER COMING SOON
Procuring Survival. RQ: does public demand impact a firm’s survival odds? (with Cappelletti M., Rovigatti, G.)
The Impact of Set-Asides on Government Procurement. RQ: does restricting ex-ante competition affect pre-award and post-award procurement outcomes? (with Cappelletti M.)
WORK IN LIMBO
The Economic Implications for Biased Perceived Survival Curves
(with Mellace, G., Menon, S., Peracchi, F.)