Adaptation Costs in Public Works Procurement in Italy

It is widely agreed that rules governing public procurement ofgoods and services should be designed to ensure competition among suppliers,so as to achieve value for money. However in the public works sector, “… thegood being procured is usually complex and hard to be exactly specified ex ante,… [and] alterations to the original project might be needed after the contract isawarded. This may result in considerable discrepancies between the lowestwinning bid and the actual costs that are incurred by the buyer” [Bajari,Houghton and Tadelis, 2006]. The paper is aimed at offering an empirical test ofthe existence of a differential impact of procurement procedures onrenegotation, and of its costs. Using a detailed data set on Italian public workscontracts, we run an empirical analysis of the differential impact of procurementprocedures on the final cost, controlling for several factors such as complexityof the work, the execution mode, the market characteristics and otherenvironmental factors to try to assess whether, and under which conditions,competition is the best strategy to adopt in public works procurement.