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Collusion in public procurement: the role of subcontracting

Collusion in public procurement: the role of subcontracting This paper investigates how subcontracting affects collusion in public procurement. In a model in which a public buyer runs simultaneous or sequential competitive procedures we show that the stability of collusive agreements depends on the level of subcontracting share and it is not necessarily increasing in this share. In a repeated procurement in which contractors and subcontractors are involved in collusive agreements enforced by slit award and bid rotation strategies we find that simultaneous procedures induce less collusion than sequential procedures, with split award strategies allowing the less stable collusive scheme. We also find that allowing a further increase in the subcontracting share strengthens collusion when the share is low but it mitigates collusion when the share is high. Thus, the competitive format and the allowed subcontracting share must be carefully managed by the public buyer in order to prevent collusion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png "Economia Politica" Springer Journals

Collusion in public procurement: the role of subcontracting

Cesi, B.; Lorusso, M.
"Economia Politica" , Volume 37 (1) – Apr 7, 2020
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References (51)

Publisher
Springer Journals
Copyright
Copyright © Springer Nature Switzerland AG 2019
Subject
Economics; Economic Policy; International Political Economy
ISSN
1120-2890
eISSN
1973-820X
DOI
10.1007/s40888-019-00167-3
Publisher site
See Article on Publisher Site

Abstract

This paper investigates how subcontracting affects collusion in public procurement. In a model in which a public buyer runs simultaneous or sequential competitive procedures we show that the stability of collusive agreements depends on the level of subcontracting share and it is not necessarily increasing in this share. In a repeated procurement in which contractors and subcontractors are involved in collusive agreements enforced by slit award and bid rotation strategies we find that simultaneous procedures induce less collusion than sequential procedures, with split award strategies allowing the less stable collusive scheme. We also find that allowing a further increase in the subcontracting share strengthens collusion when the share is low but it mitigates collusion when the share is high. Thus, the competitive format and the allowed subcontracting share must be carefully managed by the public buyer in order to prevent collusion.

Journal

"Economia Politica" – Springer Journals

Published: Apr 7, 2020

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