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Why open contracting is the most important commitment in your National Action Plan

21 Oct 2015

By Gavin Hayman

Look at the person to the left and the right of you. If you aren’t already committed to opening up public contracting and procurement in your OGP National Action Plan, the chances are that they have. In total two thirds of all 66 countries in the Open Government Partnership have made commitments to transparent and participatory public procurement. It seems to be one of the most popular and promising areas of open government.

Why is open contracting so important?

Every year, trillions of dollars are spent worldwide on deals between governments and businesses. These deals are where government promises to citizens either materialize, or fail. We are talking about building vital roads or more schools or better hospitals: the kind of tangible assets that citizens really care about.

When government and business meet, rules need to be clear and deals made public. This, alas, is often not the case. Public contracts are the world’s number one risk for corruption and fraud: the OECD, the European Commission, the WEF and UNODC all agree. Some 57% of foreign bribery cases prosecuted under the OECD Anti-Bribery Convention involve bribes to obtain public contracts.

The cost of corruption is huge: some 10-20% of procurement budgets may be wasted. The same road costs almost half as much in a corrupt country than a better governed one. This corruption affects the poor the most. It hurts those who do not have a choice over which road to travel, where to be treated when sick or in which school to enroll their children. Politicians need to show how they spend taxpayers’ money, who gets paid, and what for: both the dollars and the deals covering the entire cycle of a public contract.

Governments are starting to see efficiency, better value for money and the possibility to improve the business environment, especially for small and medium-sized businesses, as the main reasons to get a grip on their public procurement. And the evidence is pointing this way as well.

If you care about open government, you care about open contracting.

We think that open contracting provides a winning application on all four of the founding principles of the Open Government Partnership. Here’s how:

  • Transparency and increasing availability of information about government activities: Public contracting is one of the most valuable datasets within government. This is where most the money gets spent and goods and services are paid for. There have been promising innovations in laws and policies to disclose this information. The Czech Republic has just approved a procurement law, modelled after Slovakia’s law, enshrining open as the default: a government contract will not be official until is published.
  • Supporting civic participation. Supporting civic participation in the procurement process is a fundamental element of open contracting and crucial to its success. Engaging with contractors, CSOs and citizens can provide governments with much needed feedback about the performance of contracts, as well as instill confidence in potential bidders that irregularities will be addressed. Georgia’s complaint mechanism is exemplary. In Slovakia, publishing contracts allowed journalists, teachers and civil society to uncover corrupt deals with shell companies and a whole host of wasteful spending on cognac, expensive cars, foreign seafood and florists bills. However, substantial commitments on public participation or complaint mechanisms in National Action Plan commitments are still hard to find and are probably the biggest gap currently in how OGP governments are reforming their contracting processes.
  • Improving accountability and professional integrity in government. Probably the heaviest user of open contracting data will be the government itself. Having more and better quality contracting data will improve governments’ systems and save money. Mexico and Paraguay have made substantial progress in implementing their open contracting commitments and have also focused on analyzing this new data (have a look at some of the great visualizations on contracting data in Paraguay). Governments are beginning to understand – and act on – the fact that they themselves will hugely benefit from using this information.
  • Increase access to new technologies for openness and accountability. Most countries are looking at improving and refining their e-procurement systems. Adopting the Open Contracting Data Standard, an open source standard for governments to release their procurement information in accessible and user-friendly ways, will help them reap the full benefits of transparency, accountability and participation. It would also stimulate data-driven innovation, as was the case in Georgia which developed a new auctioning process and Paraguay, where tech entrepreneurs created an app for businesses and facilitating access to the bidding process. 

We have seen some encouraging steps and champions moving forward. But while implementation of procurement related commitments fares better than others in the National Action Plans, there is still a lot of progress needed when it comes to transparency, open data and engagement. Commitments to reform tend to fail to close the loop and take advantage of the real power and promise of open data to transform public procurement for citizens.

This is why we are suggesting three transformative action points for OGP governments:

1) Open by default: Governments should publish contracts and make deals open by default, as is the case in Slovakia, where a government contract is not legal until it is published. This includes putting an unambiguous public transparency and disclosure clause in all government contracts. Governments should also publish data on contract milestones and performance, and any redactions should be publicly explained. Too many countries still see procurement as an internal measure and do not allow companies, CSOs or citizens to use the data.

2) Implement the Open Contracting Data Standard: Governments should provide machine-readable, reusable open data on public procurement and how deals are reached with unique identifiers for contracts and companies and their beneficial owners. The Open Contracting Data Standard provides a handy schema to help civic administrations do this (our global helpdesk is happy to assist).

Governments can then perform smarter analysis of data, helping them detect red flags or assess value for money. Businesses can better check previous contracts and identify new opportunities. The more governments automate the publication of information on planning, procurement and implementation of contracts, the easier it is for the market to consume, analyze and innovate around these.

3) Provide feedback and engagement channels: Engaging citizens, businesses, tech experts and journalists in contracting is crucial. Public participation can help define better contracting terms, manage expectations of everyone engaged, and provide oversight and feedback for better delivery of good and services. It is engagement and use of the data that produces the real results.

So, let’s add up the benefits of open contracting: delivering better goods and services, deterring fraud and corruption, saving governments time and money, helping create a fairer business environment, and encouraging smaller businesses. If not quite the killer app for open government, it must be pretty close. Don’t take our word for it. Speak to the early adopters who we will be celebrating at the OGP. Ukraine’s new ProZorro platform is saving 10-20% per tender and is seeing improving trust with its small business community for probably the first time since independence.

We think open contracting is something that everybody should be demanding. At the Open Contracting Partnership, we are ready to help deliver on the promise of open government for companies, government and citizens.

Make sure to join us in Mexico for our sessions and panels on open contracting. We will be providing a chance to do a technical deep-dive into the Open Contracting Data Standard on Monday, a learning session on the Civil Society Day(link is external) and a high-level panel during the Summit.

Photo credit: Renata Santoniero. Pastillas (CC BY-NC-SA 2.0): Contracts to purchase pharmaceuticals are at high risk of corruption (all resolutions here: https://flic.kr/p/8VMi6u