Time Incentives in Public Procurement: Evidence from California and Minnesota

Date

May 22, 2013

Overview

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.

Speakers

Greg Lewis

Greg Lewis is associate professor of economics at Harvard University, and faculty research fellow at the National Bureau of Economic Research. His main research interests lie in industrial organization and market design, with a particular focus on auction theory and estimation. Recently, his time has been spent developing dynamic models of auction markets, suggesting methods for price discrimination in online display advertising, examining learning by firms in the British electricity market and analyzing how contracts terms interact with moral hazard in highway procurement. He received his bachelor’s degree in economics and statistics from the University of the Witwatersrand in South Africa, and his MA and PhD both from the University of Michigan.

People