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Collusion in public procurement: the role of subcontracting

  • B. CesiEmail author
  • M. Lorusso
Original Paper
  • 3 Downloads

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.

Keywords

Repeated procurement Collusion Subcontracting 

JEL classification

H57 L41 C73 

Notes

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Copyright information

© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Department of Economics and Finance and CEISUniversity of Roma Tor VergataRomeItaly
  2. 2.University of Rome Tor VergataRomeItaly

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