Procurement design in conflict zones

This paper studies procurement design in conflict zones when project implementation depends on both contractor performance and protection by a security actor. A government procures from privately informed contractors while relying on an army whose effort cannot be directly contracted upon. When the government faces budget constraints and/or funding frictions, the army can be rewarded only when the project is successfully completed. This creates an efficiency–security trade-off: larger rewards strengthen protection incentives, but reduce the government’s net procurement value and make implementation less likely. The model shows that contractor competition supports security by increasing the probability that rewards are paid. It also shows that project selection depends on the interaction between resilience and incentives: resilient projects perform better under tolerated insecurity, whereas fragile but high-value projects may generate stronger incentives for defense. External military support has a non-monotone effect, since limited support can weaken domestic protection incentives, while sufficiently strong support can substitute for them. More broadly, the paper shows that procurement in conflict zones is a joint problem of market design and implementation security.