Discretion and Efficiency in Public Procurement: Evidence from France

Numéro: 2012-9

Lisa Chever et John Moore (Chaire EPPP)

Abstract : The new European legislative proposals on public procurement suggest widening the possibility for public buyers to use negotiated procedures with publication. Such procedures have been available in France for work contracts up to 5 million euros since 2004. Yet, their impact on public procurement efficiency is still to be assessed.

We use an original and comprehensive database from Paris Habitat-OPH, the largest social housing constructor in Europe, to empirically assess the impact of negotiated procedures on price. After satisfactorily dealing with the endogeneity issue associated with the use of negotiated procedures, we find that such procedures significantly decrease the amounts of the received bids by close to 26% and reduce the probability of renegotiating the contract. If anything, similar decreases in price are found when analysing the total cost of the contract (i.e. the winning bid plus the amounts renegotiated). Some drivers of the positive effects we observe are highlighted, enabling us to derive practical implications of these results for public policies.

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