The cost of late payments in public procurement
Abstract
The objective of this paper is to show how detailed open data on public procurement payment processes can be used to enable cost savings for the public administration. We do this by using the duration of public procurement payments to estimate the cost that delays in the payment process have on suppliers and to identify variables that can affect these delays. Our analysis is based on detailed open data from the National Treasury Department from Paraguay to analyse payments of public institutions from 2011 to 2017. We use a descriptive analysis and a financial cost estimation to calculate the cost of late payments on suppliers. In addition, we model the duration of payments using survival analysis to identify which variables have a role in delaying payments. The preliminary findings show that the duration from the moment an invoice is issued to when the payment occurs can be of approximately 55 days on average, for each payment. In comparison, international practice considers 30 days an acceptable payment period. Our analysis on the historical data shows that late payments have an accumulated cost of USD 81.07 million in the analysed time frame, which could be cut down in Paraguay if some of the steps in the payment process are analysed and an appropriate corrective normative framework is created. This analysis shows the impact that open data can have in cost saving when properly implemented and analysed.
This paper was published in the book “Situating Open Data: Global Trends in Local Contexts”
Keywords: open data, public procurement, open contracting, late payments, financial cost, public payment delays