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.
“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
“Buyer’s Role in Innovation Procurement“
with F. Decarolis, G. de Rassenfosse, E. Iossa, V. Mollisi, E. Raiteri, G. Spagnolo
R&R, Journal of Economics & Management Strategy
What is the impact of buyers on the performance of innovation procurement? In which phase of the procurement process are buyers most crucial and why? We address these questions by exploiting a novel dataset that links U.S. federal R&D contracts to their follow-on patents, citations and claims. Using the deaths of managers in the offices close to where contracts are performed as shocks to the functioning of these offices, we measure a positive and sizable effect of public buyers on all three outcome measures. The buyer’s role is stronger in the pre-award, tender-design phase, where cooperation between different specialists is essential, than in the following contract-management phase typically performed by individual officers. Consistently, bureaus where employees perceive high level of cooperation within the office are associated with better R&D outcomes.
Keywords: Buyers, Innovation, Management Practices, Procurement, Patents, R&D Procurement. JEL Classification: H11, H57; O31, O32, O38.
“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.)
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: a Random Forest Approach. 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.)