Ex-ante and ex-post outsourcing in public procurement: Temporary Partnership vs subcontracting

In this paper, we empirically study ex-ante and ex-post outsourcing in Italian procurement for public works. Investigating a dataset on auctions for the awarding of public works, and exploiting the regulation on firms’ qualification which allow firms to bid individually or in partnership with other firms, we disentangle three types of outsourcing in the completion of public works. We empirically find that Temporary Partnerships (ex-ante outsourcing) offer similar prices to fully qualified firms in a position to choose whether ex-post subcontracting, and lower prices than partially qualified firms which should proceed with ex-post mandatory subcontracts. This result indicates that voluntary ex-ante Temporary Partnerships tend to improve market performance in public procurement supply-chain, representing a better alternative than ex-post mandatory subcontracting.