Effect of late payments on the transaction costs of Brazilian public procurement carried out through electronic auctions Online publication date: Fri, 01-Sep-2023
by Matheus Pereira Libório; Patrícia Bernardes; Petr Ekel; Luiz Flavio Autran Monteiro Gomes
International Journal of Procurement Management (IJPM), Vol. 18, No. 2, 2023
Abstract: This research investigates the effects of late payments on the performance of micro and small companies in public procurement. The study uses 214,564 records of electronic auctions performed by public buyers between 2016 and 2018 in Minas Gerais, Brazil. The theoretical framework is supported in the transaction costs literature and the operational framework in agent-based models. Results show that public buyers benefit themselves by paying contracts on time. Firstly, on average, product prices can be 1.06 times lower, as suppliers no longer transfer transaction costs by managing late payments to product prices. Secondly, product prices can be even lower, as product prices are 1.2% cheaper for each additional supplier in the auction, and micro and small companies increase their participation in auctions by 30%. The research contributions are associated with predicting the efficiency of laws in reducing transaction costs to support (or not) changes in the current law.
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