The Impact of Using an External Authority on the Quality of Public Procurement
The Impact of Using an External Authority on the Quality of Public Procurement

Author(s): Michal Plaček, Martin Schmidt, František Ochrana, Milan Půček
Subject(s): Public Administration, Economic policy, Public Finances, Corruption - Transparency - Anti-Corruption
Published by: Masarykova univerzita nakladatelství
Keywords: public contracts; outsourcing; Office for Protection of Competition;
Summary/Abstract: The article deals with the empirical verification part of the hypothesis of "bureaucratic safety" applied to the example of public procurement in the years 2010-2014. We presume that the contracting authorities are trying to minimize the risk of conflict and therefore are entrusting the administration of contracts to external authorities, or perhaps it is their view that these external authorities would administer them in a higher quality fashion. For the purposes of this article, we consider quality to be represented as the odds ratio that the Office for Protection of Competition will conclude that a public contract was managed improperly. The aim of this article is to compare in-house and external administration of public contracts in terms of the probability of an appeal, the initiation of an investigation, and the finding of any violations by the Office for Protection of Competition. For the purposes of our analysis, we used data on 69,959 public contracts, which we paired with 1965 first instance decisions of the Office for the Protection of Competition. We then applied logistic regression to this data. The achieved results are very surprising because we were unable to demonstrate a statistically significant difference between in-house and external administration, which should affect the decisions of the Office for the Protection of Competition. The results are very challenging for public policy since the current size of the procurement market is around 577 billion CZK. Additionally, the amount of transaction costs associated with procurement is very important. Each partial streamlining of public procurement can bring significant savings of public funds.

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