Evaluating the Economic Effects of Canada's New Government Procurement Integrity Framework

Abstract

This note provides a preliminary evaluation of the economic effects of the Public Works and Government Services Canada Integrity Framework. It is preliminary in that the study draws on a limited range of data and does not benefit from a sufficient passage of time to evaluate the Government of Canada’s practice in applying the measures or the behavioral responses of firms or Canada’s trading partners. Based on first principles analysis, the option of debarment imposes a cost not only on the firms that are debarred, but also on many innocent parties, including society at large. The costs are greater the less substitutable the products of the debarred firm are for their competitors’ products. The reshuffling of markets triggered by debarment would generate additional “dead weight” costs equivalent to red tape (the nuisance administrative expenditures associated with re-contracting). As well, there would as a further set of knock-on impacts that cannot be quantified to compound the direct costs.

Keywords: government procurement, anti-corruption measures

JEL Classification: K42