Agenzia del Demanio
Institutional Affiliation: Agenzia del Demanio
NBER Working Papers and Publications
|November 2016||Past Performance and Procurement Outcomes|
with Francesco Decarolis, Giancarlo Spagnolo: w22814
Reputational incentives may be a powerful mechanism for improving supplier performance and limiting the perverse effect of price competition on contract execution. We analyze a unique experiment run by a large utility company in Italy which introduced a new vendor rating system scoring its suppliers' past performance and linking it to the award of future contracts. We study responses in both price and performance to the announcement of the switch from price-only to price-and-rating auctions. Average performance improves from 25 percent to 90 percent of the audited parameters. Improvements involve all parameters and suppliers, are long-lasting (for at least 10 years after the initial experiment) and are reflected in higher service quality by the utility. Contract prices do not significantly...