Where or Whom to Contract? A Spatial Analysis of Political Party Connections in the Allocation of Public Contracts at Municipal Level

OECD and other international organizations have been very keen in recommending principles and institutional safeguards to curb corruption and to enhance transparency and integrity in public procurement. Despite the fact that Portugal is being considered a good example of e-procurement policies and practices among European countries, this is a very sensitive issue. Based on the the literature that provides evidence of a politicized administration of public procure- ment contracts, but limited to a specific municipality, this paper extends the analysis of political effects to other municipalities. Specifically, it asks if there is a relation between the political parties in power in a given municipality and the frequency of contracts awarded to a given firm? Our results show that for political reasons private firms are more likely to win a contract in a given municipality if they have already won contracts in other municipalities led by the same political party. We rely on a dataset (’base.gov’) with information on all bids by private firms and all contracts awarded by the 308 Portuguese municipalities in the period between 2008 and 2017. This includes three electoral cycles and more than 250,000. The empirical results - the political proximity - is robust to a number controls, including geographic proximity. This result has political and public governance implications.