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... Although we are aware this result does not provide conclusive evidence, it strongly suggests that backlogged COs cannot devote enough time to tender and 3 This work relates to the growing economic analysis of the effects of different designs and institutions on procurement outcomes. Examples include awarding design (Decarolis 2014(Decarolis , 2018, wasteful year-end spending (Liebman and Mahoney 2017), external audits (Gerardino et al. 2017), industry consolidation (Carril and Duggan 2020), performance-based insurance schemes (Giuffrida and Rovigatti 2018), and the impact of centralized purchase agreements (Bandiera et al. 2009). contract specification, with a reduction in the performance of the contracts they award. ...
... In the US, this increasing complexity is going hand in hand with an increasing number and value of procurements. In response, the government has focused on streamlining acquisition rules and giving more discretion to front-line officials (Carril 2021;Calvo et al. 2019;Giuffrida and Rovigatti 2018). However, human resources are lagging behind due to the inability to retain and recruit talent at all levels of the administration. ...
... ,Warren (2014),Kang and Miller (2017),Giuffrida and Rovigatti (2018),Decarolis et al. (2020). Since fiscal year 2000, federal agencies have been required to complete procurement action reports, which in turn feed into the FPDS. ...
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Does workload constitute a bottleneck to a public agency's mission, and if so, to what extent? We ask these questions in the context of the US government's procurement of R&D. We link tender, contract, patent, and office records to the identity of the officer responsible for the procurement process to estimate how workload in the federal acquisition unit affects the execution of R&D contracts. The identification comes from unanticipated retirement shifts among contracting officers, which we use to instrument workload. We find a large increase in patenting at the extensive margin when the same officer is exposed to a declining workload. In our sample, an additional contracting officer in the procurement unit, holding fixed the procurement budget and number of purchases, leads to a two percentage point increase in the probability for an R&D contract to generate patents. We provide suggestive evidence that backlogged contracting officers are unable to devote enough time to tender and contract specifications. JEL codes: D23; H57; O31, O32.
... The Department of Defense may report an award within 90 days to protect its operations. Carril et al. (2022), Decarolis et al. (2020), Decarolis et al. (2021), Giuffrida and Rovigatti (2022), Kang and Miller (2022), and Liebman and Mahoney (2017), among others, source their data from the FPDS. the seller's ID and headquarters' location, and what small business standards it meets, if any. Examples of buyer-level information include the awarding agency and the contracting office. ...
... Indeed, the dataset does not report the reasons of modification for an increase in final duration, it only reports expected end date and actual end date. The construction of these variables is similar to Calvo et al. (2019), Decarolis et al. (2020), Giuffrida and Rovigatti (2022), and Kang and Miller (2022). 49 According to the FPDS data dictionary, this is the case when the reason for the modification is one of the following: "Supplemental Agreement for work within scope," "Change Order," "Terminate for Convenience," "Exercise an option," "Definitize letter order," or "Definitize change order." ...
... The USA practice requires the use of surety bonds. The default rate is below 1%, and exempting the projects from surety bonds reduces the contractors' performance, see Giuffrida and Rovigatti (2019) . These empirical findings are clearly aligned with our theoretical conclusions. ...
... The premium rate for a given contractor is determined by his surety company. According toGiuffrida and Rovigatti (2019) in the U.S. construction industry it varies between 0.5% and 3% p.a.14 We assume that the contractor himself loses his bond in case of a default, even though the bond was posted by the surety company. A surety company is not an insurance company. ...
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We consider procurement auctions for the projects where the cost of production is subject to ex-post shocks—cost overruns. The contractor may default due to these overruns, which affects the buyer’s expected cost. Here the lowest-bid auction emerges as the procurement mechanism that: i) minimizes the expected transfers to the contractors, and ii) requires the lowest surety bond to achieve a given probability of default. Since surety bonds are costly to post, the above makes a combination of the lowest-bid auction with the surety bond the optimal, i.e., the expected cost minimizing procurement mechanism in a wide range of parameters.
... 15. These data have been used to research key features of the US public procurement system in several studies, including Liebman and Mahoney (2017), Warren (2014), Kang and Miller (2017), and Giuffrida and Rovigatti (2017). ...
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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 (a) time delays, (b) cost overruns, and (c) number of renegotiations. Cooperation within the office appears to be a key driver of the findings. (JEL D73, H11, H57, L26).
... The data covers all federal contracting offices' transactions in excess of $3,000. They have been used extensively in previous research, including studies by Liebman and Mahoney (2017), Warren (2014), Kang and Miller (2017), Giuffrida and Rovigatti (2018), Decarolis et al. (2020). 11 The R&D code specified in each contract comes from the variable "Product or Service Code" and is composed of two alphabetic and two numeric digits. ...
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This study provides the first quantification of buyers' role in R&D procurement. We combine together four data sources on US federal R&D contracts, follow-on patented inventions, the federal public workforce characteristics and perception of their work. By exploiting the observability of deaths of federal employees, we find that managers' death events in the six months before the contract is awarded negatively affect innovation outcomes: a 1 percent increase in the number of deaths in the bureau handling the contract causes a decline of 4.3 percent of patents per contract, 3.8 percent patent citations per contract and 8.6 percent patent claims per contract. These effects are stronger for smaller bureaus. Lower levels of self-reported within-office cooperation also negatively impact R&D outcomes.
... These data have been used to research key features of the US public procurement system in several studies, includingLiebman and Mahoney [2017],Warren [2014],Kang and Miller [2017] andGiuffrida and Rovigatti [2017].10 Data are downloadable at https://usaspending.gov. ...
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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. Using an instrumental variable strategy, we find that an increase in bureau competence causes a significant and economically important reduction in: i) delays, ii) cost overruns, and iii) number of renegotiations. Cooperation within the office appears to be a key driver of the findings.
... These data have been used to research key features of the US public procurement system in several studies, includingLiebman and Mahoney [2017],Warren [2014],Kang and Miller [2017] andGiuffrida and Rovigatti [2017].10 Data are downloadable at https://usaspending.gov. ...
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Does a more competent public bureaucracy contribute to better economic out-comes? 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. Using an instrumental variable strategy, we find that an increase in bureau competence causes a significant and economically important reduction in: i) delays, ii) cost overruns, and iii) number of renegotiations. Cooperation within the office appears to be a key driver of the findings. the participants at seminars where preliminary versions of this study were presented.
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In many countries, public sector institutions impose heavy burdens on economic life: heavy and arbitrary taxes retard investment, regulations enrich corrupt bureaucrats, state firms consume national wealth, and the most talented people turn to rent-seeking rather than productive activities. As a consequence of such predatory policies--described in this book as the grabbing hand of the state--entrepreneurship lingers and economies stagnate. The authors of this collection of essays describe many of these pathologies of a grabbing hand government, and examine their consequences for growth. The essays share a common viewpoint that political control of economic life is central to the many government failures that we observe. Fortunately, a correct diagnosis suggests the cures, including the best strategies of fighting corruption, privatization of state firms, and institutional building in the former socialist economies. Depoliticization of economic life emerges as the crucial theme of the appropriate reforms. The book describes the experiences with the grabbing hand government and its reform in medieval Europe, developing countries, transition economies, as well as today's United States. Reviews of this book: [ The Grabbing Hand's ] range of materials is impressive: the chapters deal with the growth of European cities before the industrial revolution, corruption in post-Soviet Russia, privatisation in Eastern Europe, local government in the United States, and more. The authors keep technical apparatus to a minimum. By any standard, let alone the debased standard of most modern economics, the essays are lucid and literate. --The Economist
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A model of the occurrence of accidents is used to examine liability and safety regulation as means of controlling risks. According to the model, regulation does not result in the appropriate reduction of risk--because the regulator lacks perfect information--nor does liability result in that outcome--because the incentives it creates are diluted by the chance that parties would not be sued for harm done or would not be able to pay fully for it. Thus, neither liability nor regulation is necessarily better than the other, and as is stressed, their joint use is generally socially advantageous.
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We study cultural norms and legal enforcement in controlling corruption by analyzing the parking behavior of United Nations officials in Manhattan. Until 2002, diplomatic immunity protected UN diplomats from parking enforcement actions, so diplomats' actions were constrained by cultural norms alone. We find a strong effect of corruption norms: diplomats from high-corruption countries (on the basis of existing survey-based indices) accumulated significantly more unpaid parking violations. In 2002, enforcement authorities acquired the right to confiscate diplomatic license plates of violators. Unpaid violations dropped sharply in response. Cultural norms and (particularly in this context) legal enforcement are both important determinants of corruption. (c) 2007 by The University of Chicago. All rights reserved..
Article
Procurement contracts are often incomplete because the initial plans and specifications are changed and refined after the contract is awarded to the lowest bidder. This results in a final cost to the buyer that differs from the low bid, and may also involve significant adaptation and renegotiation costs. We propose a stylized model of bidding for incomplete contracts and apply it to data from highway paving contracts. Reduced form regressions suggest that bidders respond strategically to contractual incompleteness and that adaptation costs, broadly defined, are an important determinant of the observed bids. We then estimate the costs of adaptation and bidder markups using a structural auction model. The estimates suggest that adaptation costs on average account for about ten percent of the winning bid. The distortions from private information and local market power, which are the focus on much of the literature on optimal procurement mechanisms, are much smaller by comparison.
Article
This paper analyses the problem of abnormally low tenders in the procurement process. Limited liability causes firms in a bad financial situation to bid more aggressively than financially healthy firms in the procurement auction. Therefore, it is likely that the winning firm is a firm in financial difficulties with a high risk of bankruptcy. The paper focuses on the regulatory practice of surety bonds to face this problem. We show that the use of surety bonds reduces and sometimes eliminates the problem of abnormally low tenders. We provide a characterization of the optimal surety bond and show that the U.S. practice of requiring that surety bonds cover over 100% of the contract price can be excessive, implying overinsurance to the problem of abnormally low tenders.
Article
High rates of contract renegotiation have raised serious questions about the viability of the concession model to attract private participation in infrastructure in developing countries. After extending in reduced form a standard regulation model, in which renegotiation occurs due to the imperfect enforcement of concession contracts, we use a unique data set of 307 concessions awarded in Latin America from 1989 to 2000, covering the sectors of transport and water, to analyze the determinants of this high incidence of renegotiations of infrastructure contracts. We look in details at the impact, on the probability of renegotiation of a concession, of regulatory institutions, institutional features, economic shocks and of the characteristics of the concession contracts themselves. We then derive some policy implications of our work.
Article
Standard sufficient conditions for identification in the regression discontinuity design are continuity of the conditional expectation of counterfactual outcomes in the running variable. These continuity assumptions may not be plausible if agents are able to manipulate the running variable. This paper develops a test of manipulation related to continuity of the running variable density function. The methodology is applied to popular elections to the House of Representatives, where sorting is neither expected nor found, and to roll-call voting in the House, where sorting is both expected and found.
Article
This paper investigates auctions where bidders have limited liability. First, we analyze bidding behavior under different auction formats, showing that the second-price auction induces higher prices, higher bankruptcy rates, and lower utilities than the first-price auction. Second, we show that the cost of bankruptcy critically affects the seller's preference over the choice of auction. If bankruptcy is very costly, the seller prefers the first-price auction over the second-price auction. Alternatively, if the bankrupt assets are resold among the losers of the initial auction, the seller prefers the second-price auction. Copyright 2007 by The American Finance Association.
Article
We propose a distinction between active waste and passive waste as determinants of the cost of public services. Active waste entails utility for the public decision maker (as in the case of bribery) whereas passive waste does not (as in the case of inefficiency due to red tape). To assess the empirical relevance of both forms of waste, we analyze purchases of standardized goods by Italian public bodies and exploit a policy experiment associated with a national procurement agency. A revealed preference argument implies that if public bodies with higher costs are more likely to buy from the procurement agency rather than from traditional suppliers, cost differences are more likely to be due to passive waste. We find that: (i) Some public bodies pay systematically more than others for observationally equivalent goods and such price differences are sizeable; (ii) Differences are correlated with governance structure: the central administration pays at least 22% more than semi-autonomous agencies (local government is at an intermediate level); (iii) The variation in prices across public bodies is principally due to variation in passive rather than active waste; (iv) Passive waste accounts for 83% of total estimated waste.
Moral hazard, incentive contracts, and risk: Evidence from procurement, The Review of Economic Studies forthcoming
  • P Bajari
  • G Lewis
Bajari, P. and Lewis, G. (2014). Moral hazard, incentive contracts, and risk: Evidence from procurement, The Review of Economic Studies forthcoming.
Buyer quality and procurement outcomes: Explorative evidence from
  • F Decarolis
  • L Giuffrida
  • E Iossa
  • V Mollisi
  • G Spagnolo
Decarolis, F., Giuffrida, L., Iossa, E., Mollisi, V. and Spagnolo, G. (2017). Buyer quality and procurement outcomes: Explorative evidence from the u.s., Working Paper.
Key performance indicators in public-private partnerships
  • M Garvin
  • K Molenaar
  • D Navarro
  • G Proctor
Garvin, M., Molenaar, K., Navarro, D. and Proctor, G. (2011). Key performance indicators in public-private partnerships, Technical Report FHWA-PL-10-029, US Department of Transportation.
Pre-and Post-reform contract value density
  • A Figure
Figure A.4: Pre-and Post-reform contract value density .02 .04 .06 .08 .1