Contracting Officer Workload and Contractual Terms: Theory and Evidence

Abstract

This paper investigates the relationship between endogenously incomplete contracts and the selection of procurement terms. We take advantage of variation in the workload of contracting officers to estimate the relationship between contractual incompleteness and procurement outcomes such as the use of competitive acquisitions procedures and the risk of renegotiation. In a sample of 150,000 contracts from 85 civilian procurement offices over 11 years, we find that shocks that increase the cost of writing complete contracts, such as increases in contracting officer workload, lead to decreased reliance on competitive acquisition procedures, decreased reliance on firm-fixed-price contracts, increased risk of renegotiation, and higher total costs of procurement. In a sample of 4.6 million contracts from 32 DoD procurement offices over six years, we find that increases in the cost of writing complete contracts lead to decreased reliance on competitive acquisition procedures, increased reliance on firm-fixed-price contracts, increased risk of renegotiation, and increased total costs of procurement. Although the effect of limited acquisitions capacity on contingency contracts in Iraq and Afghanistan has generated a lot of concern recently, we find that, if anything, these contracts are a little less responsive to workload. The DoD's acquisitions manpower has not kept up with the exceptional growth in the level of acquisitions contracting over the past decade. This paper clarifies some of the potential economic consequences of the resulting increase in workload faced by DoD contracting officers.