Why openness matters
Public contracting practitioners may aspire to improve value for money, deliver services more promptly, or create a level playing field for all suppliers. But let’s face it, entire procurement systems are often ill-designed to track, let alone achieve such goals, despite the huge amounts of money at stake. Frequently, e-procurement reforms simply transfer paper-based, compliance-driven systems online and lock government agencies into rigid proprietary software agreements with a single developer. We advocate for “open-by-design” digitization of procurement because it offers an opportunity to consider not only the end-to-end management of the procurement system, but also how that system supports the wider public financial management and effectiveness of government.
There is good evidence that openness in public contracting works. Our impacts page details a lot of positive empirical results from contracting systems that enable access to user-friendly, machine-readable data and establish effective feedback channels between a range of stakeholders, including government agencies, industry associations, researchers and residents. Open contracting improves competition and public integrity, saves money and time, and delivers better goods and services.
As Nobel Prize winner Milton Friedman quipped:
“There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.”
Transparency is fundamental to rebalancing this asymmetry.
Stakeholder engagement and promoting feedback from the marketplace and other stakeholders may seem challenging and discomforting. But any successful public contracting effort is going to have to share information with the marketplace.
Civic actors will already be looking for this information and drawing conclusions too. Opening up contracting information in an accessible and useful way with a clear schema allows others to understand it, analyze it, and draw additional insights more accurately and easily. This generates much more value and trust.
The sheer size and scale of public procurement markets and the number of transactions involved means that there is a huge efficiency gain from digitization, shifting the focus of information from documents on paper to data. But only when it’s open, will everyone benefit from lower transaction costs. Sharing and understanding public contracting information becomes much easier when data is published according to a common, standardized, and documented schema. The Open Contracting Data Standard is designed to do just that.
The more governments automate publication of information on the full procurement process as standardized open data and a common schema, the easier it is for the market to consume, analyze and innovate around it.
Sharing information across the whole cycle of public contracts. Information on planning will encourage innovation, supporting a dialogue on what the best solution might be to meet a particular government need. Information on tender opportunities can help find the right vendors for the right job. Information about contract awards and implementation helps analyze the overall market opportunity and when contracts are coming up for renewal. The more information is available on the procurement process, the more it will increase opportunities to detect mismanagement and fraud (see our Idiot’s Guide to Looting Public Procurement for more information).
Summary of benefits
These are just some of the many benefits from openly sharing government contracting information (and why you can’t keep it to yourself):
- Improved planning and efficiency: Sharing information on upcoming procurement plans not only gives businesses time to plan ahead themselves, but it can also allow pre-market solicitation of ideas as to what to buy, allowing government to shape procurement to better meet users’ needs. Better cost estimates built on historic data will make the process more efficient for government and potential suppliers.
- Improved competition: Giving suppliers fair and equal access to your data will improve competition and allow for more diversity in suppliers and enable innovation. 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 than the norm.
- Improved accountability: There is hard evidence that collecting information knowing that it will be shared improves government’s own behaviour. Sharing in public allows other actors like CSOs or think tanks to track the money and the results from that spending better themselves, feeding back their insights and advice. This can occasionally be embarrassing for government officials if there is misspending but it’s also necessary for public trust and ultimately improves efficiency.
- Improved integrity: there is strong evidence from a survey of thousands of businesses worldwide by the World Bank that an open and transparent process both deters malfeasance and encourages increased competition which in turn leads to more eyes on each contract award.
- Innovation: Open data and openness to feedback plays an important role in communicating effectively with the marketplace and citizens. It enables more efficient market research and broader consultation with vendors and the community.
- Improved oversight: Openness improves the procurement process. The Ukrainian citizen monitoring platform Dozorro currently unites 22 civil society organizations that are actively monitoring procurement and use the platform to identify suspicious activity. Of over 5,000 cases of suspicious activity reported over a six month period, around half were resolved, including over 1,200 cases where tenders were re-awarded as a result of the feedback – a fix rate of 25% of all cases.
- Sustainability: Openness, participation and cooperation across government, business, and civil society helps sustain reforms and deepen their impact. There are a lot of vested interests and bureaucratic inertia to be overcome; bringing in new allies helps build a wider constituency of support for reforms that last.
- Cheap and fast development: Open contracting systems are quick and cost-effective to build because they rely on open source, non-proprietary software that can be repurposed and adapted with extensions, for different uses and contexts. Tamper- and idiot-proof: The ‘deluxe model’ of open contracting reforms involves building a transactional platform that removes the risk of human error or manipulation. This paper looks at the cost of implementing Ukraine’s Prozorro e-procurement reform.