Oversight and Efficiency in Public Projects: A Regression Discontinuity Analysis

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Published: 10Jul2018

Authors: Eduard Calvo, Ruomeng Cui and Juan Camilo Serpa

Publication: Management Science, Volume 65, Issue 12, December 2019, Pages 5651-5675.

Abstract:

In the U.S., four in ten public infrastructure projects report delays or cost overruns. To tackle this problem, regulators often scrutinize the project contractor’s operations. We investigate the causal effect of government oversight on project efficiency by gleaning 262,857 projects that span seventy-one U.S. federal agencies and 54,739 contractors. Our identification strategy exploits a regulatory bylaw: if a project’s anticipated budget exceeds a threshold value, the contractor’s operations are subject to surveillance from independent procurement officers; otherwise, these operational checks are waived. Using a regression discontinuity design, we find that oversight is obstructive to the project’s operations, especially when the contractor (i) has no prior experience in public projects, (ii) is paid with a fixed-price contract that includes performance-based incentives, and (iii) performs a labor-intensive task. In contrast, oversight is least obstructive — or beneficial — when the contractor (i) is experienced, (ii) is paid with a time-and-materials contract, and (iii) performs a machine-intensive task.


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