PUBLIC PROCUREMENT IN CULTURAL HERITAGE CONSERVATION: AN EXPLORATORY STUDY FOR ITALY

This paper is aimed at investigating a specific area of public procurement, namely the capital expenditure aimed at the conservation of the Cultural Heritage (CH). The procured activities, such as, for instance, CH restoration or maintenance as well as archaeological excavations are crucial for the conservation and the enhancement of CH. The paper tries to investigate whether the peculiar features of CH conservation, e.g. the high degree of specialization of contracting authorities, “make a difference” as far as the costs and the length of interventions are concerned. To address such a question, an empirical analysis on the determinants of the performance (on costs overrun and delays) of public contracts for CH conservation is carried out. The results of the empirical analysis show that CH conservation, when compared with the general public works sector, “makes a difference” as far as the performance of public contracts is concerned, favouring costs overrun and delays; it seems that the search for quality, which is a peculiar feature of the heritage field, as well as the major role of the experts, tend to favour costs overrun and delays relatively to the overall public works contracts. 1.INTRODUCTION This paper is aimed at investigating a specific area of public procurement, namely the capital expenditure aimed at the conservation of the Cultural Heritage (CH). The procured activities, such as, for instance, CH restoration or maintenance as well as archaeological excavations are crucial for the conservation and the enhancement of CH. Though the economic relevance of CH is increasingly recognised in the literature, so far no much attention has been paid to the economic features of the “market” of CH conservation. The paper aims at filling this gap and at analyzing the main features of such a market, looking both at supply and demand. Attention will be focused upon the direct demand for conservation exerted by the public sector through its procurement activity. Italy will be used as a case study: the rich CH endowment of the country, the relevant size of CH in public ownership, the extensive role of the public sector make Italy an interesting example to be analyzed. Employing a detailed data set on Italian public contracts for CH conservation in the period 2000 to 2005, the paper analyzes the features of the market for CH conservation (i.e. dimension of the contracts, length, complexity, specialization, procurement procedures, degree of competition, characteristics of suppliers, etc.). This analysis also takes into account some insights coming from the general Italian public works procurement sector – of which Ch conservation is a sub-sector-, namely the fact that delays and costs overrun occur in the execution stage. Thus, the paper tries to investigate whether the peculiar features of CH conservation, e.g. the high degree of specialization of contracting authorities, “make a difference” as far as the costs and the length of interventions are concerned. To address such a question, an empirical analysis on the determinants of the performance (on costs overrun and delays) of public contracts for CH conservation is carried out, using a parametric approach. We firstly compare CH conservation with the more general public works sector to check whether the specificity of the CH conservation affects the performance of public spending. Secondly, we explore more in depth the CH conservation sector, to analyse the determinants of the performance within such a sector. The results of the empirical analysis show that CH conservation, when compared with the general public works sector, “makes a difference” as far as the performance of public contracts is concerned. It seems that the search for quality, which is a peculiar feature of this field, as well as the major role of the experts, tend to favour cost overruns and delays relatively to the overall public works contracts. When the analysis of the determinants of performance of CH contracts is carried out within the CH conservation sector, results show that, ceteris paribus, the search for quality and the expertise characterizing the CH field affect the performance of CH contracts, with specialized contracting authorities paying more attention to the completion of the contract than to the control of the final cost. This paper is organized as follows: in Section 2, we discuss the main theoretical issues of public intervention in Cultural Heritage, with special attention to the conservation activity. Section 3 describes the main issues in the implementation of CH conservation in Italy, paying attention to its institutional features as well as to the market characteristics. The empirical analysis of the determinants of the performance in CH conservation is developed in Section 4. Section 5 provides some concluding remarks. 2.THE ECONOMICS OF CULTURAL HERITAGE 2.1 Public intervention in Cultural Heritage Almost everywhere public intervention in the CH field is widespread and it is implemented with monetary as well as non monetary means (Rizzo-Throsby, 2006). Leaving aside the well known normative motivations underlying public intervention, in this paper a positive analysis is carried out; more precisely, attention is paid to public expenditure, i.e. to direct monetary intervention, aimed at the conservation of built heritage. No much attention, so far has been devoted to analyse this specific area of public intervention in the CH field, a possible explanation lying in the fact that public spending for CH conservation constitutes a very small share of GDP.However, notwithstanding such a small size, the analysis of the public spending for CH offers a fruitful room for investigation. There is an increasing awareness that CH has relevant economic potentialities. Indeed, CH conservation plays an important role to foster sustainable economic development; urban policies increasingly rely on the rehabilitation of CH to support economic activities and the services related to culture and tourism. However, at the same time, it has been stressed (Peacock and Rizzo, 2008) that to be input of economic development CH has to be the output of conservation policies and, therefore, the ways how these policies are designed and implemented crucially affects the overall economic impact of CH. In the literature, such an issue has been investigated focusing attention mainly upon the role of regulation and of the discretionary power enjoyed by regulators, stressing that the range and intensity of regulation appear to be more the endogenous product of the public decision-making process than just a policy instrument in the heritage field (Rizzo, 2010). To restrain the discretionary scope of the public decision-maker in CH field and to improve public participation in the political decision-making process some institutional means have been envisaged, such as devolution (Rizzo, 2004) and independent agencies operating at arms’ length from government as an alternative to public bureaucracies (Peacock and Rizzo, 2008). It has been outlined that in most western countries there is a tendency toward the extension of the concept of heritage and, therefore, toward the overprovision of CH conservation; a likely consequence is that the increasing pressure on public expenditure is difficult to be met, also because of the fiscal stringency affecting public budgets. Therefore, the objective of conserving CH may not be fulfilled and the related economic and social benefits are at risk. 2.2 CH conservation: some definitions Within the scenario described above, a further threat for CH conservation might arise if public spending is not carried out efficiently and effectively. CH conservation is a very broad concept: different meanings can be assigned to the word ‘conservation’ with different economic implications. According to the definition provided by the World Bank (1994) outlines that conservation ”encompasses all aspects of protecting a site or remains so as to retain its cultural significance. It includes maintenance and may, depending on the importance of the cultural artifact and related circumstances, involve preservation, restoration, reconstruction or adaptation, or any combination of these”. As Lichfield (1988) outlines, the different meanings of conservation can be regarded as different ways of conserving CH to meet different demands for conservation which, in some cases, may generate also conflicts, such as, for instance, the choice between preservation vs/adaptation. The decision-maker enjoys some degrees of freedom when the choice of a specific type of conservation is made; at the same time, the economic benefits stemming from conservation, namely those related to use values, strongly depend on the chosen type of conservation. In principle, the artistic and architectural characteristics of heritage should affect such a choice, suggesting also the ways to put it in practice, e.g. techniques of diagnosis and restoration, methods for the study and conservation of different objects, materials to be used in restoration, etc. In practice, such a choice cannot be considered a ‘neutral’ decision, relying only objective technical grounds but it is influenced by experts knowledge, experience and professional training. Within such a scenario, given the features of CH conservation, the outcome of decision-making process is crucially affected by experts (art historian, architect, archaeologist, urban planner); they enjoy an informative advantage and are entitled to decide which type of conservation, has to be carried out in each specific case and how. In other words, the conventional problems related to the principal-agent paradigm arise. Elsewhere (Finocchiaro -Rizzo, 2009), analysing the public decision-making process underlying CH conservation in Sicily, it has been pointed out that in the utility function of experts managing the heritage authorities (Soprintendenze) reputation plays a relevant role. Restored buildin