Characterization of the Firm-Firm Public Procurement Co-Bidding Network from the State of Cear\'a (Brazil) Municipalities

TL;DR

This study applies network science to analyze co-bidding relationships among firms in public procurement in Ceará, Brazil, identifying communities and potential irregular activity patterns to aid policy and fraud detection.

Contribution

It introduces a network analysis framework to identify firm communities and susceptibility to irregular activities in public procurement data from Ceará, Brazil.

Findings

22 firm communities identified with similar procurement patterns

Certain communities are more prone to market manipulation

Network analysis can reveal complex relationships in scarce data scenarios

Abstract

Fraud in public funding can have deleterious consequences for the economic, social, and political well-being of societies. Fraudulent activity associated with public procurement contracts accounts for losses of billions of euros every year. Thus, it is of utmost relevance to explore analytical frameworks that can help public authorities identify agents that are more susceptible to incur in irregular activities. Here, we use standard network science methods to study the co-biding relationships between firms that participate in public tenders issued by the $184$ municipalities of the State of Cear\'a (Brazil) between 2015 and 2019. We identify $22$ groups/communities of firms with similar patterns of procurement activity, defined by their geographic and activity scopes. The profiling of the communities allows us to highlight groups that are more susceptible to market manipulation and irregular activities. Our work reinforces the potential application of network analysis in policy to unfold the complex nature of relationships between market agents in a scenario of scarce data.