Contract Form and Procurement Costs: The Impact of Compulsory Multiple Contractor Laws in Construction
Orley Ashenfelter, David Ashmore, Randall Filer
NBER Working Paper No. 5916
It is claimed that many regulatory rules enforce inefficiencies in order to achieve the appearance of cost control. We assess the importance of these claims by measuring the effect of New York state's compulsory multiple contractor law on the cost of public construction in New York City. Multiple contractor laws, which exist in many states, prohibit the use of general contractors in order to promote the appearance of competition. Contrasts of construction costs between buildings with identical blind cost estimates indicate that this law increases public construction costs by 8% and increases construction delays by more than a calendar year.
Published: RAND Journal of Economics, Vol. 28, no. 0 (1997): S5-S16.