What Determines The Outcomes Of Public Procurement Arbitration?

Abstract

ABSTRACT The strengths and weaknesses of arbitration compared to litigation, as a system for solving procurement disputes between governments and their private counterparts has been a subject of debate among scholars. A particularly sensitive topic relates to the impartiality standards of each system and the determinants of its outcomes. Using a unique database of national arbitration resolutions we analyze the determinants of awards in procurement disputes related to public works. Estimating a cross-section model, we find evidence in favor of party capability theory and the influence of institutional factors in arbitration outcomes, like amendments to procurement law or the characteristics of the organization in charge of administering these processes. As well, we find indirect evidence that suggests that adverse outcomes for government entities are related with the lack of individual incentives of officials to settle with private contractors, and the presence of presumably undue influence among private contractors and arbitrators.