Aggressive bidding and the renegotiation of concession contracts: Empirical evidence from Peru*

Abstract

This paper confirms a positive relationship between the aggressiveness of bids and the probability of renegotiating concession contracts. We use a database of 113 concessions awarded in Peru, finding that a 1% increase in bidding aggressiveness increases the probability of contract renegotiation by 2.4%–3%. This impact is higher for the transportation sector. Our results are robust to several econometric specifications. These results confirm the hypothesis that bidders will submit aggressive bids to renegotiate contract terms once the government and concessionaire are tied, and competition is no longer possible.