Date of Award

5-1-2017

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Public Administration

Advisor(s)

David M. Van Slyke

Keywords

National Defense, Public Administration, Public Procurement

Subject Categories

Social and Behavioral Sciences

Abstract

Abstract

The following dissertation presents three essays on the theory and empirics of public procurement—the process by which government defines its needs for goods and services and acquires them using contracts. The objective of this dissertation is to address three unresolved questions in the literature regarding how the characteristics of products governments procure, and the environments in which they are bought and sold, shape government and non-governmental actors’ decision making at different points in the procurement process.

The first essay develops an expanded theory of government’s decision to directly deliver public services—social welfare, energy utilities, select forms of security provision, and other services for citizens—or contract out these responsibilities to third parties. The essay takes as its point departure that transaction cost economics—the theory that a product is “made” or “bought” based on the ease or difficulty with which it can be defined, produced, and exchanged via a contract—does not adequately account for the environmental context within which governments select among alternative service delivery modes. The essay rectifies this deficiency by drawing on resource dependence theory, a complementary theory arguing that the make-or-buy decision turns on the nature of the public service marketplace: the number of alternative sellers with which a government can do business, and the amount of revenue sellers derive from this government vis-à-vis their other customers. The argument is that combined, these factors shape the degree of power government can exercise in a contracting relationship, directly influencing the choice to make or buy a service as well as moderating the impact of service-specific characteristics. This argument is specified in a set of hypotheses and a model for testing in future empirical research.

The second essay examines how the characteristics of products government chooses to buy (rather than make) influence competition among sellers vying for its business. Drawing from transaction cost economics, the essay argues product complexity—defined and operationalized in terms of asset specificity, or the degree of relationship-specific physical and human capital investments required to produce and deliver a product—is a key determinant of competition. More specifically, the essay argues (i) at higher levels of complexity, and thus of asset specificity, sellers may deem the risks of doing business with the government as too high to warrant submitting a bid, but (ii) while lower levels of complexity may decrease these risks, they may also discourage competition by creating a collective action dilemma: for a simpler product, individual sellers may not submit a bid because they believe the competition will be too intense, and their probability of winning too low. This reasoning points to two effects—a project risk effect (simpler products invite more bids) and a win probability effect (simpler products invite less bids)—and implies competing hypotheses for how complexity influences competition. The essay presents an econometric test of these hypotheses using a sample of information technology procurements drawn from U.S. procurement federal data, finding that the effects mostly offset one another. The effects likely operate with greater force (in one direction or another) in larger, program-based procurements (e.g., of major weapons or information systems) that can span many years and involve multiple individual contracts for development, production, maintenance, and upgrades. Thus, a more complete theoretical story that links complexity and competition would likely need to make its propositions contingent on the depth and duration of the underlying business relationship, as well as the nature of the product being procured.

The third essay examines the conditions under which government adopts and implements alternative strategies to procure products after it has selected and awarded its business to one from a competing set of sellers. Specifically, the essay examines the conditions under which government implements a knowledge-based procurement strategy predicated on incremental delivery of product capabilities and a sequential approach to product development and production (typically seen as a best practice), or a strategy predicated on delivering product capabilities in a single-step fashion and using a concurrent approach to development and production activities. The essay starts from the observation that procurements executed in accordance with knowledge-based principles consistently feature strong leadership—individuals purported to be pivotal in ensuring procurements adhere to a strategy anchored in knowledge—and posits that leader commitment influences adoption of the knowledge-based approach through a “credible commitment” mechanism. In essence, tenured leaders serve an advocacy role for the procurements they oversee, ensuring the procurements receive sufficient support and protecting them from policymakers wishing to commit resources to other projects (including those for which failure to follow a knowledge-based strategy could invite future problems, but, at least in the short-run, appear that they will take less time and provide more capability). In this way, sustained leadership provides teams tasked with managing procurements incentives to “stay the course,” maintaining adherence to a knowledge-based strategy, pursuing modest capability objectives, and taking the time necessary for sequential development and production. The essay samples and examines a set of four successfully executed United States weapon system procurements to probe the plausibility of the credible commitment mechanism, finding and presenting evidence that leaders do influence employment of knowledge-based strategies in part through this channel.

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