The “Cost of Administration” in Administrative Contracts: an analysis of the economic repercussion of the exorbitant clauses and the abuse of the position of the public administration as contractor

Abstract

The objective of this article is to analyze the main factors capable of increasing the cost of administrative contracts in relation to similar private contracting. The research examines the premise established by a relevant part of the doctrine that exorbitant clauses which give the Public Administration a privileged position in the contractual relationship result in an increase in the transaction costs of administrative contracts. This approach is put in perspective, since the vast majority of exorbitant clauses, in a situation of normality, would not justify the increase of the costs of the private contractor, especially during the elaboration phase of their proposals in public bidding. In view of this scenario, it is concluded that the abuse of the position of contractor by the Public Administration, which has repeatedly delayed the fulfillment
of its contractual obligations, notably the obligation to pay the due consideration on time, is a more decisive and determinant factor of business risk with the Public Administration. This risk is more palpably priced by the private contractor and transferred to his proposal. It is therefore appropriate to devise mechanisms to enforce punctual compliance with the obligations of the Public Administration, in preference to the mere extinction of exorbitant clauses.