Determinants of adaptation costs in procurement: an empirical estimation on Italian public works contracts

Guccio, Calogero; Pignataro, Giacomo; Rizzo, Ilde

doi:10.1080/00036846.2011.556589

Cited by 40 publications

(45 citation statements)

References 26 publications

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“…3 2 Relative to other studies that have looked at renegotiations in the same market, this paper uses a more complete version of the data. For instance, Guccio et al (2012) …”

Section: Introductionmentioning

confidence: 99%

Renegotiation of public contracts: An empirical analysis

Decarolis

Palumbo

2015

Economics Letters

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“…3 2 Relative to other studies that have looked at renegotiations in the same market, this paper uses a more complete version of the data. For instance, Guccio et al (2012) …”

Section: Introductionmentioning

confidence: 99%

Renegotiation of public contracts: An empirical analysis

Decarolis

Palumbo

2015

Economics Letters

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“…Bajari et al, 2009;Guccio et al, 2012) and their influence on contract choice (Bajari and Tadelis, 2001). We reason that clients protect themselves from supplier opportunism related to adaptation costs when specification changes are common.…”

Section: Introductionmentioning

confidence: 99%

Ex postadaptations and hybrid contracts in software development services

2013

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This is the accepted version of the paper.This version of the publication may differ from the final published version. This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. Permanent repository linkThe publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae, and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand, or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material. We follow the recent literature on ex post adaptations in procurement and argue that highly volatile specifications result in multiple variations of fixed price (FP) and time and materials (T&M) contracts. Specifically, placing a cap on specification change in FP contracts prevents specification volatility, similar to the way that placing a cap on the price in T&M contracts prevents price escalation. We argue that these hybrid mechanisms are particularly important in software development contracting, a new critical business capability involving frequent and costly ex post adaptations to specification change. The level of completeness in these contractual archetypes is hypothesized to be determined by contracting costs and benefits, where costs are related to project uncertainty and benefits are related to the likelihood of vendor opportunism. We test this hypothesis with a unique data set of 270 software development contracts entered into by a leading international bank. The analysis confirms the existence of multiple hybrid contracts that mitigate both price escalation and specification volatility. It also shows that contracting costs and benefits explain more variance in contract choice when these hybrids are included, uncovering the detailed mechanisms used to curb opportunism when the vendor is less familiar to the client.

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“…In their analysis they regard inefficiency and corruption as exogenous, while we aim at investigating the determinants of performance differentials across institutional categories. number of contracts, show higher cost-overruns than the average of the dataset; Decarolis (2014), investigating the impact of different auction formats on contract execution, shows that municipalities are typically associated with higher cost-overruns (with respect to provinces); Guccio, Pignataro, and Rizzo (2012) in a study about determinants of cost-overruns in public works, find that all institutional levels of purchasers tend to have lower adaptation costs than the central government, while the evidence about local governments is not significant. 7 A few other related papers focus on the quality of public buyers from the side of competences and effectiveness of the bureaucracy.…”

Section: Introductionmentioning

confidence: 98%

“…5 Previous works focusing on the relationship between the degree of centralization and procurement performance are limited and find mixed empirical evidence. The papers most closely related are Bandiera, Prat, and Valletti (2009) and Guccio, Pignataro, and Rizzo (2014). Bandiera, Prat, and Valletti (2009) consider purchases of standardized goods by different classes of public purchasers in Italy and adopt unit price as measure of procurement performance.…”

Section: Introductionmentioning

confidence: 99%

Decentralization and Public Procurement Performance: New Evidence From Italy

Chiappinelli

2019

Economic Inquiry

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We exploit a new dataset based on European Union (EU) procurement award notices to investigate the relationship between the degree of centralization of public procurement and its performance. We focus on the case of Italy, where all levels of government, along with a number of other public institutions, are involved in procurement and are subject to the same EU regulation. We find that (a) municipalities and utilities, which currently award among the largest shares of contracts, achieve lower rebates than other institutional categories; and (b) decentralization implies lower rebates only when it comes with weak competences of procurement officials. The evidence seems to suggest that a reorganization of the procurement system, both in terms of partial centralization and increased professionalization of procurement officials, would help improve award‐stage procurement performance. (JEL H11, H57, H71, H77)

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Determinants of adaptation costs in procurement: an empirical estimation on Italian public works contracts

Cited by 40 publications

References 26 publications

Renegotiation of public contracts: An empirical analysis

Renegotiation of public contracts: An empirical analysis

Ex postadaptations and hybrid contracts in software development services

Decentralization and Public Procurement Performance: New Evidence From Italy

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