Renegotiation of Public Contracts : An Empirical Analysis

We exploit a large dataset of contracts for public works awarded in Italy between 2000 and 2007 to document two empirical facts about time and cost renegotiations. First, although both types of renegotiations are systematic, their correlation is nearly zero. Second, several factors typically suggested to explain renegotiations have different, and in certain cases opposite, effects on price and time renegotiations. Moreover, the estimates confirm that, as suggested by the literature, the type of awarding procedures and the complexity of the job are associated with renegotiations, but they also provide evidence in favor of an important role for the linkage between the project design stage and renegotiations during the project execution