Speaker Greg Lewis
Host Markus Mobius
Date recorded 22 May 2013
Most procurement contracts incentivize timely delivery, either through the auction mechanism or the contract terms. We evaluate both of these approaches in the context of highway procurement, using data from California and Minnesota. We show that firms respond strongly to incentives: for example, in California, when contractors compete for contracts on the basis of both price and delivery date, contracts are completed 30-40% faster. We simulate counterfactual outcomes under different incentive schemes, and discuss the practical implications of our research for the design of procurement contracts.
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