Procurement Regulation Shocks and Firms’ Network Resilience

• In Event: Business, Labor, and the State

Abstract

Competition-enhancing legislation is pivotal in correcting public procurement market shortcomings. However, in the context of Public-Private Partnerships (PPPs) regulatory bodies have failed to acknowledge the emergence of stable communities within the marketplace for private partners, both globally and domestically. Such communities - networked groups of private firms that form the consortia that enter into long-term contractual arrangements with governments - operate in a market for partners that functions according to norms of collaboration and insider status rather than value for money. This imperfect market undermines both the neoliberal aspirations at the root of PPPs' proliferation and the effectiveness of naive regulatory attempts.
In this paper, we discuss how a European Union directive specifically regulating the procedures for the award of public works, supply, and service contracts came short of its own objectives by failing to acknowledge the existence of partnership communities.
Our research design reconstructs the network composition and dynamics of such partnership communities in the United Kingdom using the Refinitiv SDC Platinum database alongside Bureau Van Dijk's FAME and OSIRIS databases. It exploits the discontinuity generated by the directive 2004/18/EC across sector and communities characterised by directly affected versus non-directly affected partners. A well-identified Difference-in-Differences estimation of the impact of the directive is at the core of the analysis.
Given that the United Kingdom is a forerunner in terms of new public management practices, it represents an important theoretical case to understand how neoliberal governance affects public service delivery.
Our results show how despite large partners having been penalised by the regulatory intervention at face value, the communities of which they are part are pivotal nodes that maintained a key position in the market. They simply reorganised themselves to formally comply with the regulation, whilst maintaining access to government contracts and with only marginal costs in terms of network strategic repositioning.
As markets for partners fail to be made more competitive, the interests of partners appear to have taken precedence over those of the public. Better integrating how the contracting environment affects procurement is fundamental to assess past regulation and to define future ones.

Authors

• Michele Castiglioni, European University Institute

• Eleanor Florence Woodhouse, University College London