Abstract:
This paper estimates the impact of contract design on the enforceability of quality in outsourced public contracts. Using panel data from 102 cleaning contracts, our results suggest that quality enforcement depends highly on the ex ante contracting process. Such findings are consistent with recent theoretical contributions which consider that the verifiability of agents’ actions is endogenously determined by the principals’ investments in drafting an explicit contract pertaining to the quality of the agent’s output. Moreover, since those quality improvements are not accompanied by price increases, our results suggest that public contract managers have significant leeway to reduce opportunistic behavior for standard transactions.
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Jean Beuve and Lisa Chever, Quality of Outsourced Services, Opportunism and Contract Design, Review of Law and Economics. DOI: https://doi.org/10.1515/rle-2014-0053.
First posted 2017-09-06 06:37:30
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