To bid or not to bid: That is the question: Public procurement, project complexity and corruption

- We analyze the choice between open and negotiated procedures in public procurement.
- We focus on the role played by project complexity and institutional quality.
- More complex projects are more likely to be procured with negotiated procedures.
- Corrupted environments seem to crowd out the role of project complexity.

The main aim of this study is to improve our comprehension of the role played by project complexity and institutional quality as possible drivers of the choice between open auctions and negotiations in a sample of Italian municipalities. Controlling for project characteristics, for observed and unobserved heterogeneity at municipality level, our main results suggest that projects that are more complex are more likely to be procured with negotiated procedures. On average, a rise in the project complexity index from the 25th to the 75th percentile of its distribution increases the probability of procuring the project with a negotiated procedure by about 6%-8%. However, our results also suggest that the impact of complexity might be more relevant in the case of projects procured by municipalities located in provinces characterized by low levels of corruption. Moreover, we also find that complex projects are associated to longer delays in their execution, larger rebates and to higher probabilities to be awarded to local firms.