The role of firms' qualification in public contracts execution: An empirical assessment
| DOI | https://doi.org/10.1108/JOPP-16-04-2016-B006 |
| Published date | 01 April 2017 |
| Pages | 554-582 |
| Date | 01 April 2017 |
| Author | Alessandro Ancarani,Calogero Guccio,Ilde Rizzo |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 16, ISSUE 4, 554-582 WINTER 2016
THE ROLE OF FIRMS’ QUALIFICATION IN PUBLIC CONTRACTS
EXECUTION: AN EMPIRICAL ASSESSMENT
Alessandro Ancarani, Calogero Guccio and Ilde Rizzo*
ABSTRACT. According t o the Italian regulation firms must qualify to bid in
auctions for public work contracts worth more than 150,000 euros. In this
paper, we investigate the link between the efficiency of infrastructure
provision, and the Italian regulation concerning the firm’ s entry and
qualification system, employing a large dataset on Italian public works
contracts for roads and highways. First, firm’s efficiency in public contracts’
execution is estimated using a smoothed data envelopment analysis (DEA)
bootstrap procedure. Then, the effects of the qualification system on firm’s
efficiency is evaluated using a semi-parametric technique that produces a
robust inference for an unknown serial correlation between efficiency scores.
Our analysis shows that fully qualified firms perform better than pa rtially
qualified firms.
INTRODUCTION
Public procurement is a wide economic area, including contracts for
public works, supplies and services, with marked economic differences
across them. As Guccio, Pignataro, and Rizzo (2012a) have pointed
out, the most important difference is that in the case of public works,
the outcome of the contracts crucially depends on the implementation
stage. This is a relevant issue to take into account in designing the
rules to mitigate the effects of information asymmetries, such as
adverse selection and moral hazard. In this paper attention is focused
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* Alessandro Ancarani, Ph.D., is Associate Profes sor, Department of Civil
Engineering and Architecture, University of Catania, Italy. His research
interests are in public procurement, behavioural operations, and analysis of
intangibles in public organizations. Calogero Guccio, Ph.D., is Associate
Professor, Department of Economics and Business, University of Catania,
Italy. His research interests are in health economics, public economics, and
applied econometrics. Ilde Rizzo, Ph.D., is Professor, Department of
Economics and Business, University of Catania, I taly. Her research interests
are in cultural economics, public procurement and economics of corruptio n.
Copyright © 2016 by PrAcademics Press
THE ROLE OF FIRMS’ QUALIFICATION IN PUBLIC CONTRACTS EXECUTION 555
on the former, namely to the schemes for supplier qualification that, at
the selection stage, aim at ascertaining the supplier’s ability to comply
with contract specifications. Italy, as most other countries, regulates
the qualification process. The Italian system for qualifying firms is
operated by a third party (Società Organismo di Attestazione - SOA)
accredited and monitored by an independent Authority (Autorità
Nazionale Anticorruzione - ANAC) to ensure that only prequalified firms
can bid in public procurement procedures. At the same time, the
regulation imposes market restriction and leaves room for
opportunistic behaviours.
In this paper, we investigate the relationship between the execution
of public works contracts and the Italian regulation on firms’
qualification. We employ a large dataset on Italian public works
contracts for roads and highways. First, firm’s efficiency in public
contracts’ execution is estimated using a smoothed data envelopment
analysis (DEA) bootstrap procedure that ensures consistency of our
estimates. Then, the effects of the qualification system on firm’s
efficiency are evaluated, using as indicators of full or partial
qualification, respectively, optional or mandatory subcontracting
(Moretti & Valbonesi, 2015). Finally, different levels of efficiency of
these two groups of firms are assessed using both non-parametric
tests and a semi-parametric trouncated regression (Simar-Wilson,
2007). We obtain new and robust evidence of positive effects of fully
qualification on the execution of public works contracts.
The remainder of the paper is organized as follows. Next section
briefly reviews the economic rationale for a qualification system in
public procurement. Then, two sections focus on the qualification
systems: firstly, a comparative overview, with special attention to the
European systems is offered, and, successively, the institutional
features of the Italian system are analysed. Further, there are two
sections focusing, respectively, on the presentation of the data set and
the methodology, and on the empirical analysis and its results.
Concluding remarks are offered in the last section.
THE RATIONALE FOR A QUALIFICATION SYSTEM IN PROCUREMENT
The economic analysis of public contracts deeply relies on the so-
called New Regulatory Economics1 which offers a well-established
theoretical framework to define optimal incentives schemes.2 Public
procurement is a wide and important economic sector, including
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