Public Contracts for Engineering Services

In order to understand the effects of bidders’ strategy on contractual modification and consequently the performance of the contracts, this study used econometric methods and a unique database containing 5964 engineering service contracts signed by the public administration in Brazil. The results demonstrate the effects arising from the trade-off between low prices presented in the contractor's selection phase and the performance in the execution of the contract. By highlighting the role of competition, the study contrasts previous findings pointing to the positive effect of competition, when analyzed in isolation, on the performance of the contract, but associating the analysis of competition with a possible distortion brought about by the disqualification of competitors at very low prices.