Illicit practices within PPP sponsor networks

Developing countries and emerging economies often rely on public-private partnerships (PPPs) to procure infrastructure projects. PPPs in these markets are prone to illicit practices that may emerge through networks of participants in these projects. Law enforcement agencies struggle to recognize signs of illicit practices, especially in PPP sponsor networks. This study explores how illicit practices are associated with the way sponsors form their networks in PPP markets in a way that may be observable to national and international agencies monitoring the transparency of PPP programs. We evaluate PPP sponsor networks in countries with different degrees of reported illicit practices (Peru, Colombia, Brazil, Portugal, and Chile). Using Bipartite Exponential Random Graph Models, we identify recurring patterns in how sponsors form their networks and interpret the results through the lens of transaction cost theory. The findings demonstrate that sponsors collaborate with the same partners across multiple projects and avoid delivering projects outside this group in contexts with reported high levels of corruption. In such contexts, PPP sponsors follow patterns that are consistent with social mechanisms associated with illicit schemes. Finally, we discuss how applying social network analysis methods can aid control agencies in combating corruption and collusion.