Corruption in delegated public procurement auctions

- Corruption in public procurement is a major problem.
- Scoring auction is often used to award contracts in public procurement.
- A corrupt political representative chooses the rules of the scoring auction.
- Such corruption always leads to lower quality and lower price.
- Higher bargaining power of the politician leads to higher price.

In this paper we theoretically analyse effects of corruption in public procurements within a scoring-auction framework. A corrupt politician, who acts on behalf of the public sector, receives a kickback from the winning bidder. The politician selects the scoring rule. The paper shows that such corruption always leads to lower quality and lower price. Given a level of corruption, a higher bargaining power of the politician in extracting bribes does not affect the quality but leads to higher price.