Does Competition Impact Workplace Safety in Public Utilities' Procurement? Insights From Bid-Estimate Ratio and Firm Size

This article investigates the consequences of price competition in public procurement on project-based firms' workplace safety by merging bidding data from the Florida Department of Transportation with the Occupational Safety and Health Administration workplace safety data. Our findings show that accidents decrease as the bid-estimate ratio decreases, implying an improvement in workplace safety. This counter-intuitive result is attributed to two facts. First, smaller firms' winning bids are less aggressive than those of larger firms due to financial constraints and a lack of economies of scale. Second, the marginal impact of a lower profit margin on workplace safety is more substantial for small firms than for larger firms, which reduces their capability to invest in workplace safety. Therefore, the low-bid system most negatively impacts the workplace safety of small firms. Our results have critical implications for State Transportation Agencies to incorporate safety data as one of the prequalification conditions and to provide incentives or other innovative mechanisms that help financially constrained firms maintain high workplace safety.