Organizational Forms and Incentives in Public Procurement: Natural Experiment for One Russian Public Organization

Abstract

This paper analysis the impact of centralized monitoring enlargement in a large public organization on incentives for efficient activity of organization’s departments, which have dif­ferent levels of financial autonomy. We analyze the data of the large public organization during 2008–2013. The efficiency of departments’ activity was measured by competiveness of their procurements and delays in contract executions. All departments of the organization were clas­sified as budget-funded departments and autonomous departments that have more financial autonomy. From the wide spectrum of procured goods we have selected two types of procured services that were often procured by autonomous and budget-funded departments: printing ser­vices and data collection services.

The results show that during the period of standard monitoring, the autonomous departments had more efficient procurements compared to the budget-funded departments. After enlargement of centralized monitoring the differences in performance indicators are insignificant for these types of departments. Our explanation for this result is that enlargement of centralized monitoring increases efficiency in budget-funded departments, but it may produce additional costs and decrease incentives for autonomous departments.