Open contracting: impact and evidence
Over 50 governments have an open contracting program in place, and major global institutions like the G7, UN, OECD, World Bank, IMF and more have endorsed the importance of open contracting. That’s because the evidence from case studies, surveys and academic research is clear: open contracting works.
Public procurement is a US $13 trillion dollar market globally, with 1 in 3 dollars spent by governments going to a contract with a company. This market is an incredible source of power to drive social and economic benefits to society. Open contracting helps tap into that power by ‘thinking different’ about procurement, harnessing intelligence and insights from open data and multi-stakeholder collaboration around reform.
With better procurement through open contracting we can:
- promote competition and economic inclusion
- prevent and combat corruption and
- improve government service delivery and efficiency.
Country evidence snapshots
Evidence from countries that are implementing open contracting shows that openness combined with monitoring helps build systemic change. Where open contracting reforms have taken root, we see continuous results.
Open contracting helps promote competition and economic inclusion
- In Ukraine from 2015, standardized open data was put at the heart of the country’s Prozorro eGP reforms so that “everyone sees everything”. The result was a huge increase in both trust and competition. Perceptions of corruption halved and the number of unique suppliers to the government increased by 45%. 75% of SMEs bidding on Prozorro won at least one public tender in 2017.
- A World Bank survey of 34,000 companies in 88 countries found that competition was higher and kickbacks were fewer and smaller in places where transparent procurement, independent complaint procedures and external auditing are in place.
- In the EU, the number of bids received per call for tender increases by approximately 12% for contracts above EU publication thresholds, relative to contracts below these thresholds. This effect is higher for countries that do not have the institutions to effectively monitor public officials. Prices for contracts above TED publication thresholds decrease by approximately 8%, relative to contracts below these thresholds.
- A study of more than 3.5 million government contracts across Europe determined that every additional item of information shared about a tender decreases the risk of a single bid contract. This matters because single bid contracts are both a governance risk and over 7% more expensive.
- Open contracting can increase economic value for historically marginalized groups of society. In the Dominican Republic, an initiative using open data to increase the proportion of women-owned businesses receiving public contracts increased their participation, with 1 in 4 contracts now awarded to women-led businesses.
- The Kyrgyz Republic used a new e-catalogue platform driven by the Open Contracting Data Standard to increase transparency and build economic benefit more equitably by encouraging more SME participation in the public procurement market, after research showed a worrying increase in direct awards. Now in 2021, 8,890 companies submitted at least one bid for a competitive procedure. Competitive tenders are the main procedure in Kyrgyzstan, with only 4% of contracts awarded through direct procedures.
- A study from Columbia University in Peru looked at the impact of transparency and monitoring of contracts on the procurement process of infrastructure projects, finding that monitoring decreased spending by 50%.
- In 2015, Ukraine passed its medicines procurement to international organizations, reducing prices by 40%. The price for Imanitib, a blood cancer drug, was 67 times lower than before. The number of people receiving treatment for conditions like HIV grew from 50,000 to 113,000 without the need for increased budget. In 2020, the agency saved an additional 21.5% of the budget on top of savings achieved by international organizations, resulting in some of the lowest cost for critical medicines in the region.
- In the state of Nuevo Leon, Mexico, a multistakeholder coalition implemented the Open Contracting for Infrastructure Data Standard to make public infrastructure procurement more transparent and efficient, increasing competition by 25% since 2017 with 93% of tenders having multiple bidders.
- In Colombia, open contracting measures, vendor engagement and increased civil society monitoring led to a reduction in direct awards between 2019 and 2020. Among procuring entities that use the system, SECOP II, there was a decrease of 6% in direct contracts in favor of competitive awards and a 17% increase in the average number of bidders, exceeding the government’s target of 5%. Particularly successful are open tenders, with purchases made using this procurement method seeing a 21% increase in the average number of bidders over the previous year.
- Public procurement is a powerful driver of the economy. Open contracting helps governments understand what they’re buying, who they’re doing business with and how their spending shapes the economic and social landscape. This increased transparency stimulates competition, supporting new entrants to the market and reducing the use of direct awards and single-bid tenders. In Paris, negotiated housing contracts combined with greater transparency reduced bid prices by 26 percent and also reduced the probability of bid renegotiation. In Ukraine, the government’s central e-procurement system, ProZorro, helped more than 2000 healthcare organizations that use it save an average of 15% on all their procurements. Where three companies or more bid for contracts, healthcare organizations saved an average of 35%.
Preventing and combating corruption
Public procurement is the government’s number one corruption risk. It’s where public money leaks into the illicit financial system. Open contracting provides better linked data to track red flags and follow the money.
- Data on prosecutions tracked by the OECD Anti-Bribery Convention shows that 57% of bribes were paid to win public contracts.
- In the EU, the European Commission calculated that Member States lose around €120 billion (around US$163 billion) each year to corruption – only marginally less than the European Union’s total annual budget. More than four out of ten companies say that a range of illegal practices in public procurement procedures are widespread, particularly specifications tailor-made for specific companies (57%), conflict of interest in bid evaluation (54%), collusive bidding (52%), and unclear selection or evaluation criteria (51%).
- In the Slovak Republic, a law implementing open contracting enabled civil society to monitor and identify cases of corruption exposing hospital scanners bought at double the normal price from a shell company connected to a high-ranking politician and cancelling contracts for expensive seafood, cognac and luxury cars. Almost 8% of the public now checks at least one contract or receipt online every year. The initiative cost less than US$1m in total to implement.
- In Bogota, Colombia, open contracting data was used by Bogotá’s education department and the national public procurement agency to help provide more than 800,000 high-quality meals for school children each day and break up a US$22 million price-fixing scheme. The number of suppliers for meals increased from 12 to 55.
- In Ukraine, in just three years the DoZorro community of civil society and citizen procurement monitors flagged 21,000 tenders, 30% of which were resolved. More than 1,200 tenders were revised, 59 criminal charges pressed, and 198 sanctions issued.
- In Kazakhstan, emergency COVID-19 procurement in Kazakhstan amounted to nearly US$1 billion between the start of the pandemic to September 2020. Contracts worth over US$2 million were cancelled or terminated following investigations by data monitors. Four investigations by procurement watchdog Zertteu Research Institute that revealed red flags led to the cancellation of US$400,000 worth of emergency procurement contracts.
- Nigerian civil society has created an open contracting data platform, Budeshi, to publish and review details of more than 10,000 MDA contracts worth a total of more than 226 billion Naira (approximately US$591 million) since 2014. Their efforts flagging irregularities during the pandemic have led to the Bureau of Public Procurement committing to a new e-procurement system to improve contract data and improve anti corruption enforcement.
- In Indonesia, civil society created a platform using open contracting data to monitor Covid-19 procurement. They identified deals that were awarded to companies without previous experience, found 14% of contracts awarded through direct procurement exceeded the maximum amount allowed, and that the central government had only distributed a fraction of the personal protective equipment needed by health workers treating COVID-19 patients.
- In Kosovo, 46 civil society organizations monitor public contracting using the government data platform and self-developed tools that connect to the government database. About 20 cases of suspected corruption in public procurement have been submitted to the public prosecutor’s office as of December 2021.
Improving government service delivery and efficiency
Traditional paper-based procurement is slow, outdated and bureaucratic. Open contracting reimagines procurement as a digital, data-driven service providing timely insights and information that empowers governments to improve public services.
- In Paraguay, consistent community pressure led to a dramatic improvement in how funds for school facilities are allocated in Ciudad del Este over three years. More than 80% of the most needy schools now receive funding, compared to fewer than 20% in 2015.
- For years, families in Chile planned trips to buy cheaper medicines from other countries. Healthcare at home was too expensive: taking up to 30% of the average household’s income. Using open contracting data and civil society monitoring, the country’s largest purchaser of medicines was able to buy 60% of medicines at a lower price in 2020, saving the government an estimated US$9 million.
- Moldova has some of the highest rates of HIV and Hepatitis in Europe. Thanks to a collaboration between patients and the government on open contracting reforms, the country improved and increased treatment by saving 14.5% on medical procurement overall – including 19% saving on HIV medicines – and enabled real-time monitoring of $40 million worth of medical contracts and medicine supply and delivery to hospitals.
- In Ecuador, the country decided to fast track its open contracting reforms when the pandemic started, to improve the government’s ability to respond to the crisis by buying fast and openly. The government decided to publish information on all emergency contracts publicly as timely open data, expanding oversight of procurement through a public procurement observatory, and increasing the capacity of civil society and public officials. During the first year, about 10,000 emergency procedures worth a total of $250 million were made available as open data, over 50 legal cases have been raised, and approximately 24,000 officials have been trained in how to do emergency procurement more efficiently and openly.
- A randomized control study of road works projects in Afghanistan found that new roads were of significantly higher quality and more durable in neighborhoods where the community were involved to monitor the implementation of the project.
- In Costa Rica, three months after the release of the MapaInversiones open contracting data platform, financial progress of public investment projects uploaded onto the platform increased by 18%, and physical progress increased by 8 percentage points compared to unpublished projects. A year after the intervention, financial progress of treated projects was approximately 15% points higher relative to control projects.
- In 2016, Ukraine’s transparent electronic state asset sale system called ProZorro.Sale was developed to allow anyone to bid on auctions that are tamper-proof and visible to everyone. Sellers on ProZorro.Sale generate more revenue (especially from small-scale privatization) and trade items faster, while buyers have more confidence in the system. Repurposing existing technology that used the OCDS allowed the asset sales team to build the e-auction system within four months and for a cost of US$100,000.
- Buenos Aires’ ambitious US$3.5 billion public works program faced challenges, with public requests for information taking over two weeks. After creating BA Obras, an interactive open contracting data platform, information on infrastructure projects was available in seconds.
- In Dhangadhi, Nepal, officials used open contracting to track physical and financial progress on more than 300 infrastructure projects. Project amendments decreased from 13% to 2%, staff efficiency on generating and monitoring contracts increased 75% and citizen monitors lauded how much easier it was to track projects.
- In Paraguay, adjustments and amendments to the contracting process have dropped from 19% to 3% after implementing open contracting reforms.
Global open contracting commitments
International bodies and institutions have endorsed open contracting and its related principles. Below we’ve listed some of the most important global commitments that advance the cultural and normative change towards open contracting.
- UN General Assembly Special Session on Corruption political declaration
- G7 Statement Against Corruption and Kleptocracies 2021
- G7 Biarritz declaration Transparency in Public Procurement and the Common Fight Against Corruption
- G20 Principles of Public Procurement
- G20 Open Data Principles
- G20 Anti-Corruption Ministers Declaration on COVID-19 response
- Open Data Charter Anti-Corruption Toolkit
- UK Anti-Corruption Summit Communique
- OGP 2016 Paris Declaration
- Conference of Information Commissioners statement on open contracting
- OECD MAPS
- OECD Guidance on Infrastructure Governance
- EITI Contract Disclosure Requirement