The impact of scoring weights on price and quality outcomes: An application to the procurement of Welfare-to-Work contracts

- We assess the effects of scoring weights in the procurement of public services.
- Welfare-to-Work firms received points for price bids and quality proxies.
- We find higher weights of the quality proxies to result in higher price bids.
- Also, higher weights on the reputation of firms contribute to job placement.

This paper assesses the effects of changes in scoring weights in auctions, using a unique sample of bids from private Welfare-to-Work (WTW) service providers to reintegrate groups of unemployed and disabled workers. These providers received points for their price bids and for three proxies of the ex-ante quality of their services: their reputation, a description of the intended plans ('methodology') to reintegrate workers, and the number of job placements they expected to achieve. We exploit the fact that the scoring weights of these award criteria changed in the time period under consideration, while the classification of worker types remained similar. Our estimation results show that increases in the scoring weights of the quality components (vis-à-vis the price weight) result in higher price bids. We also find that a higher weight for both the reputation component and the methodology component contributes to the job-placement of workers.