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Discretion and Supplier Selection in Public Procurement
1 : Bank of Italy
* : Corresponding author
Using Italian data on municipal public works tendered in the period 2009-2013, we study how a reform extending the scope of bureaucrat discretion affects supplier selection. We find that the share of contracts awarded to politically connected firms increases while the (ex-ante) labor productivity of the winning firm decreases, thus suggesting a potential misallocation of the public funds. These effects are concentrated among municipalities characterized by less competent politicians and bureaucrats and by higher levels of corruption. We also show that under broader discretion public agencies comply less frequently with transparency requirements.
