The Interplay of Discretion and Complexity in Public Contracting and Renegotiations

Abstract

This article investigates how the use of discretion in public-private contracts interplays with transactional complexity in influencing contract renegotiations. Motivations for contract renegotiations may be positive, negative (e.g., opportunistic), or neutral, and we argue that allowing discretion at the award stage may promote a more relational approach to contracting that fosters cooperation and productive adaptation. Using a dataset of 12,189 renegotiated contracts from the Tenders Electronic Daily (TED) eProcurement platform—based on European Union public procurement directives—we apply regression analyses and propensity score matching to examine how contracts are awarded and renegotiated. Our findings suggest that contracts awarded with government discretion are associated with renegotiations that are viewed more positively and less likely to be perceived as opportunistic. However, this beneficial role for discretion appears to be mitigated by contract transactional complexity, making this a critical consideration in efforts to improve the governance of provider relationships and increase public value. By integrating insights from incomplete and relational contracting theories, this study contributes to the public administration and management literature by demonstrating how discretion and complexity jointly shape contract renegotiation dynamics, informing governance strategies that balance flexibility and accountability in public procurement.