Politics and Procurement: Evidence from Cleaning Contracts

We study the effects of politics on public procurement in Swedish municipalities in 199098 using data on cleaning services. No procuring municipality committed to a standard auction format or to an explicit scoring rule. Political identity of the governing party is not correlated with the decision to procure, the decision to restrict entry, or the number of invited firms. However, leftwing municipalities are more likely not to invite " inhouse firms" . In our data, the lowest bidder does not win 58% of the time, and conditional on the lowest bid not winning, the municipalities end up paying a premium of 43%. Our discrete choice analysis shows that while all municipalities are price sensitive, leftwing councils 1.5 as price sensitive as rightwing councils. Conditional on bids, leftwing councils are more likely to choose a local firm. Politics thus matter and affect procurement outcomes.