The Importance of Non-Price Criteria in Government Contracting with For-Profit Enterprises

EasyChair Preprint 1120

Abstract

Public institutions mostly favor neo-classical contracting in public procurement by choosing the external service provider offering the cheapest option. However, non-price criteria such as environmental, innovative and social criteria are increasingly taken into consideration when contracts are awarded. The objective of this study is to examine local civil servants’ valuation of non-price criteria when awarding contracts to external service providers. For this purpose, we conduct a discrete choice experiment in the field of waste collection at the municipal level. By applying random utility theory, we claim that local civil servants make a trade off between the four criteria. Consequently, local civil servants intend to maximize the utility of the municipality by awarding the contract to the external service provider producing the highest utility. We analyze local civil servants’ valuation of non-price criteria through a conditional logistic regression and a marginal willingness to pay analysis. Although the price criterion still remains at the center of public procurement, the results also show that local civil servants take non-price criteria into consideration when awarding contracts to for-profit enterprises. More specifically, local civil servants are willing to pay more to increase the level of the environmental, innovative and social criteria.

Keyphrases: Discrete Choice Experiment, Random utility theory, contracting out, service delivery

@booklet{EasyChair:1120,
  author    = {Amandine Lerusse and Steven Van de Walle},
  title     = {The Importance of Non-Price Criteria in Government Contracting with For-Profit Enterprises},
  howpublished = {EasyChair Preprint 1120},
  year      = {EasyChair, 2019}}