The Effect of Discretion on Procurement Performance
Abstract: We assemble a large database for public works in Italy and use a regression dis- continuity design to document the causal effect of decreasing discretion over auction format choice. Works with a value above the threshold must be allocated through an open auction that leaves little discretion to the buyer in terms of who will bid and win. Works below the threshold can more easily be allocated through a restricted auction, where the buyer has some discretion in terms of who (not) to invite to bid. We find that works with lower discretion have a lower probability that an incum- bent firm wins again.We also find non-conclusive evidence about longer delay and lower number incorporated firm. Number of bidders, winning rebate and probabil- ity that the contract is awarded to non-local firms are not affected. When we try to disentangle the relationship between delay and firm characteristics (using fixed effect, propensity score matching e propensity score reweighting) we find that large, incumbent firms deliver with shorter delay, particularly below the threshold.
