We present evidence of how policies that create opportunities to avoid open competition in procurement lead to the manipulation of procurement values. We exploit a policy reform in which public bodies were given the autonomy to preselect potential contractors below newly defined discretionary thresholds. Manipulation is revealed through bunching of procurements just below the thresholds in construction works and services, and to a lesser degree, in goods. Among manipulated contracts, we document a threefold increase in the probability that procurements are allocated to anonymous firms, which can hide their owners. This sorting violates assumptions behind regression-discontinuity designs.
Palguta, Ján, and Filip Pertold.
"Manipulation of Procurement Contracts: Evidence from the Introduction of Discretionary Thresholds."
American Economic Journal: Economic Policy,
Bureaucracy; Administrative Processes in Public Organizations; Corruption
Economics of Contract: Theory
National Government Expenditures and Related Policies: Procurement
Regulated Industries and Administrative Law