Green Procurement Rules and Supplier Performance in Public Construction Projects: Insights from Panel Analysis

Abstract

Governments increasingly leverage public procurement to achieve sustainable development goals, transforming public expenditure into a strategic tool for environmental policy. The construction sector, characterized by substantial ecological footprints and massive public investments, is a primary target for green public procurement initiatives. However, the precise empirical relationship between the stringency of green procurement rules and the subsequent longitudinal performance of suppliers remains underexplored in the academic literature. Existing studies predominantly rely on cross-sectional survey data, which limits causal inference and fails to capture the dynamic capability building within supplier organizations over time. This paper addresses this critical gap by employing a comprehensive panel data methodology to investigate how variations in green procurement regulations impact the holistic performance of public construction suppliers. Utilizing a unique dataset comprising over two thousand public works contracts and their executing suppliers across a ten-year observation period, this study analyzes both environmental compliance metrics and traditional operational performance indicators such as cost efficiency, project quality, and schedule adherence. The methodology incorporates fixed-effects panel regression models to control for unobserved heterogeneity, complemented by instrumental variable strategies to mitigate potential endogeneity. The empirical findings reveal a significant, positive relationship between the enforcement of stringent green procurement rules and long-term supplier performance, supporting the theoretical premise that environmental regulatory pressure induces organizational learning and operational innovation. These results provide robust evidence for policymakers designing sustainable public contracting frameworks.