Factors Explaining Price Decrease and Problems by Execution of Public Procurement Contracts in Russia

The main goal of the public procurement reform in Russia was to limit corruption. The government prohibited the most part of qualification criteria in the selection process and used open auctions as the main tool of contract placement. However simplification of procurement procedures led to opportunism on the side of suppliers. In this paper using the unique dataset of 2000 contracts executed in 2008—2010 for a large public customer we define the factors explaining the risk of suppliers’ non-performance. Econometric analysis showed that under current procurement regulation in Russia the risks of suppliers’ non-performance are higher for large contracts, contracts executed in October—December and contracts placed at open auctions. However contrary to anecdotal evidences, initial price’ decrease does not influence the performance of contractors.