DLT-platforms in public procurement, as a tool for reducing barriers for small and medium-sized enterprises (SMEs) and improving regional economic security

Despite large-scale digitalization of public procurement procedures and legislated preferences for small and medium-size enterprises, the effective participation of SMEs in public procurement is being hampered by institutional barriers post contractual stages, of which systematic delays in payment of executed contracts and associated corruption risks are a key feature. The technology of distributed registers and smart contracts is seen in modern literature as a promising tool to overcome these limitations.

Objective: to empirically assess the impact of the actual payment terms for completed contracts on the level of competition in the SME procurement segment, and to determine the extent to which the automation of payments based on DLT platforms can enhance the economic security of the region

Methods

Statistical analysis of data from the Unified Information System in the field of procurement for the Rostov region for 2022-2024, a sociological survey of SME subjects and an econometric modeling of panel data with evaluation of regression dependencies using fixed effects.

Results

It was found that the actual payment terms were consistently higher than those prescribed, accompanied by a reduction in the number of bidders and an increase in market concentration. The survey confirmed the high importance of post-contract risks and the willingness of entrepreneurs to increase participation in automated settlements. Econometric analysis established a statistically significant relationship between the duration of the payment cycle and the parameters of the competitive environment.

Main conclusions

The implementation of smart contracts can provide for a significant increase in membership and decrease in market concentration, creating the conditions for strengthening the region’s economic security through diversification of suppliers. The need for a pilot implementation of DLT-platforms in regional procurement processes and adjustment of regulatory framework regarding the legitimization of smart contracts has been substantiated.