Contractual Choices and Technical Efficiency in Public Procurement: The Case of Regional Railway Transport in France

Miguel Amaral and Jean-Christophe Thiebaud – Contractual Choices and Technical Efficiency in Public Procurement: The Case of Regional Railway Transport in France
Abstract: This paper contributes to the analysis of the impact of contractual design on the performance in public procurement. It focuses on the case of railway regional transport in France, where the regions were given the prerogatives of transport organising authorities in 2002.
One specificity of the sector is that the twenty regional transport authorities have to delegate the operation to the regional branches of a state-owned monopoly. This sector gives an opportunity to public procurement in a non-contestable market and to contribute on the literature on efficiency benchmarking in regulated industries. We rely on a stochastic cost frontier model to examine the technical efficiency of the regional branches of the national incumbent using an original panel dataset on the twenty contracts covering the period between 2009 and 2012. The empirical results highlight that the incentive properties of contracts do not have the expected effects, in particular, the fixed price schemes do not increase the technical efficiency. Also efficiency decreases during the contract execution. We assume that this result is, at least to some extent, due to a ratchet effect at the end of the contract due to the monopolistic nature of the market.