Scaling Behavior of Public Procurement Activity

TL;DR

This paper applies urban scaling laws to analyze public procurement activity across Portuguese municipalities, revealing economies of scale and enabling better comparative analysis for policymakers.

Contribution

It introduces a novel application of scaling laws to public procurement data, providing a framework for local expenditure comparison and analysis.

Findings

Procurement expenditure scales sub-linearly with population size.

Municipal Scale-Adjusted Indicators reveal local procurement activity patterns.

Framework enables more accurate comparative analysis of public expenditure.

Abstract

Public procurement refers to the purchase by public sector entities, such as government departments or local authorities, of Services, Goods, or Works. It accounts for a significant share of OECD countries' expenditures. However, while governments are expected to execute them as efficiently as possible, there is a lack of methodologies for an adequate comparison of procurement activity between institutions at different scales, which represents a challenge for policymakers and academics. Here, we propose using methods from urban scaling laws literature to study public procurement activity among 278 Portuguese municipalities between 2011 and 2018. We find that public procurement expenditure scales sub-linearly with population size, indicating an economy of scale for public spending as cities increase their population size. Moreover, when looking at the municipal Scale-Adjusted Indicators (the deviations from the scaling laws) by contract type -- Works, Goods, and Services -- we obtain a new local characterization of municipalities based on the similarity of procurement activity. These results make up a framework for quantitatively studying local public expenditure by enabling policymakers a more appropriate ground for comparative analysis.