Rigidity and initiative of renegotiation in public contracts : an empirical study

Abstract

Previous works have found public contracts are more rigid and are more likely to be renegotiated often, because formal renegotiation acts as a subsititute for informal adaptation. Although renegotiation of procurement contracts is often perceived as harmful, third party opportunism argues that renegotiation in public procurement is irremediable because of exogenous constraints that make rigidity necessary. This paper seeks to explore the implications of these rigidity-induced renegotiations, by looking at who benefits from them. One clue for this is to look at which party initiates the renegotiation process. We study the effect of rigidity on renegotiation initiative, using a data base from the French parking lot sector.