Economic balance principle and public contracting in Colombia

Abstract

The public contracting in Colombia is conflicting and inefficient. It frequently
leads to the patrimonial damage to the State. Colombian legal system can
not assure the efficient and transparent public contracting. The cause is
the institutional environment characterized by high transaction costs. The
Colombian law makes things worse by recognizing the principle of economic
equilibrium of the public contracts. This principle augments the contract
incompleteness and makes impossible the use of the economic incentives to
control the opportunism of the economic agents. The authors present the
hypothesis that the economic equilibrium principle increases the conflictive
nature of the public contracting. They make the empirical test of the hypothesis.
The first section of the paper presents the summary of the literature
on the transaction costs economics, as well as the legal literature on the
historical origin and the content of the economic equilibrium principle.
The second section describes the methodology of the empirical study. The
third section shows the empirical evidence of the effects that the economic
equilibrium principle exerts over the public contracting. The last section
presents the conclusions.