Public Procurement and the Risk of Severe Weather Events

Abstract

We study how dealing with severe weather events (SWEs) affects the awarding procedure of public procurement contracts. We rely on a large dataset on Italian public procurement tenders for the construction and the maintenance of buildings and roads in the period 2008-2021. We show that where SWEs hit during the execution of procurement works, (i) public buyers later adopt more often negotiated procedures rather than open ones, (ii) firms that have previously worked for a public buyer more often win new works with the same buyer, and (iii) new procured works experience less time overruns. Our findings are coherent with a theoretical framework in which public buyers rely on negotiated procedures to sustain relational contracts with the firms and thus overcome the contractual incompleteness that SWEs cause.