Transaction Costs, Outsourcing, and the Public Procurement Review Process in the Czech Republic and Slovakia

Public procurement is a crucial activity undertaken by the public sector. However, public procurement entails a wide range of transaction costs. While many papers focus on the ex-ante transaction costs, it is equally important to evaluate the types of ex-post transaction costs. The disputes stemming from conflicts between procuring authorities and proposers often bring additional costs to both parties. One of the ways to ensure that the procuring authority wins the dispute is using the services of an external law firm to represent the procuring authority in the review process. The aim of the paper is to examine the extent of the use of external law services in the public-procurement review process by procuring authorities and proposers in Slovakia and in the Czech Republic. The focus is also on the impact the use of external law firms in the review process may have on the length of the review process and the outcome of the dispute. Our results suggest that while the use of the external law firm may lead to a higher success rate of the review process on the side of a procuring authority, the same does not apply to proposers. There were no conclusive findings regarding the impact of the outsourcing on the length of the review process.