How 'one-size-fits-all' public works contract does it better? An assessment of infrastructure provision in Italy

TL;DR

This paper evaluates how 'design and build' contracts improve infrastructure project performance in Italy by reducing costs and duration, highlighting the importance of procurement strategy in public infrastructure.

Contribution

It provides empirical evidence that 'design and build' contracts enhance performance in public works, using advanced non-parametric and matching methods.

Findings

Design and build contracts lead to lower transaction costs.

Procurement strategy significantly impacts project performance.

Empirical analysis confirms benefits of integrated contracting.

Abstract

Public infrastructure procurement is crucial as a prerequisite for public and private investments and for economic and social capital growth. However, low performance in execution severely hinders infrastructure provision and benefits delivery. One of the most sensitive phases in public infrastructure procurement is the design because of the strategic relationship that it potentially creates between procurers and contractors in the execution stage, affecting the costs and the duration of the contract. In this paper, using recent developments in non-parametric frontiers and propensity score matching, we evaluate the performance in the execution of public works in Italy. The analysis provides robust evidence of significant improvement of performance where procurers opt for a design and build contracts, which lead to lower transaction costs, allowing contractors to better accommodate the project in the execution. Our findings bear considerable policy implications.