This post is written by Oleksandr Akulenko, Chief Product Officer at Prozorro.Sale.

  • The problem: One of the challenges confronting governance around the world is low public trust in public institutions and policies. The lack of trust between key players in the ecosystem is the reason for the short life cycle of many of them.
  • Why it matters: Any single industry, sector or public entity can't overcome significant challenges on its own. Dealing with distrust requires partnerships and an ecosystemic approach. An ecosystem thrives on the cumulative trust of its actors.
  • The solution: Ukrainian state-owned IT company Prozorro.Sale implements systematic and transparent approaches that help develop and maintain trust within the public asset management ecosystem, which includes tens of thousands of players/actors.

More than $1.8 billion generated to the budgets of state and municipal levels, of which almost $136 million was generated during the war, 87,000 successful deals, and hundreds of enterprises, assets and real estate that found new effective owners; this is a small part of what the state electronic trading system Prozorro.Sale, which conducts online auctions for the sale and lease of assets, has brought to Ukraine in its six and a half years of operation. Such results would never have happened without the ecosystem that was built during this time.

The Prozorro.Sale ecosystem includes more than 55,000 online auction participants: almost 5,000 auction organisers, more than 40 partners — marketplaces (brokers) connected to the system that works directly with the organisers and participants of the auctions – and also the government, the Ministry of Economy of Ukraine, to which Prozorro.Sale is subordinate, and various stakeholders. In addition, there are different integrations between large auction organisers and the system, independent services working based on open data, journalists and scientists who can conduct research based on the results of the system. In general, there are tens of thousands of actors with their own interests who need to be united in one ecosystem with strong trust maintained between them.

Without trust, we would not succeed, or everything would work much slower and less efficiently.

The main difficulty is that, for the most part, all members of this ecosystem want different things: thousands of organisers wish to rent or sell their assets as expensive as possible with the high competition at auctions, and auction participants want to get them as cheaply as possible. Dozens of electronic platforms that develop their businesses and compete with services for customers on the market also have their interests. And then there is the government: during the system's operation in Ukraine, three Cabinets of Ministers have already been replaced, each of which implemented its own political programme. At the same time, there are still players in the markets who seek to push them back into the shadows. At the centre of these processes is Prozorro.Sale, which administers online auctions and maintains trust within a large ecosystem. With so many actors involved, trust is critical. An ecosystem thrives on the cumulative trust its actors place in it. In the prisoner's dilemma, if both players betray each other because they do not trust each other, they will get less than if they cooperate. And some studies demonstrate a link between trust and economic prosperity.

Without trust, we would not succeed, or everything would work much slower and less efficiently. The Prozorro.Sale project started in 2016 from a position of trust. In 2015 - 2016 there was a clean-up of the banking sphere in Ukraine. Those banks which became bankrupt had thousands of assets as collateral, and the cost of such assets decreases over time. There were more than 90 banks and many involved parties. We needed to launch auctions for the assets while ensuring participants in the first auctions and representatives of civil society could trust the results of the auctions and that there were no manipulations.

To ensure trust, we used the following approaches:

  1. Regular meetings with all stakeholders. With online broadcasting and saving of records for public access and the opportunity to join the meeting open to everyone. In addition to regular general meetings, we conduct periodic ‘one-to-ones’ with partners, where they can raise questions and dive deeper into issues.
  2. Weekly public updates on social networks after the launch of the Prozorro.Sale project. We discussed what was happening in each work area (legal, organisational, technical, public or government relations and financial). Even today, we continue to communicate regularly about the main tasks.
  3. Open communication in public chats via online messenger. We have several hundred group chats dedicated to various markets, work areas and issues. As well as the obvious advantages, the entire history of the discussion is available, so it is possible to find details on any project we have worked on since the beginning.
  4. Open documentation. All our legal documents, technical tasks, and requirements for developing the system core and marketplace systems, meeting note, and presentations are open to scrutiny, including the discussion process. This is just one of the principles of the system: "Everybody sees everything".
  5. The two-level architecture of the system. Separation of responsibilities and partnership between the public and private sectors. Without this, all the rest would be impossible. In the "Central Database", which is the responsibility of SOE "Prozorro.Sale", the general auction rules are determined, and information about auctions is stored. But organisers and auction participants cannot interact with the central database directly. For this, they work with our partner platforms (marketplaces). And the marketplaces can monitor compliance with the rules and the immutability of information about auctions, their participants, and winners.
  6. Open-source. The auction code and the system's core are published and are open for anyone to view, analyse and use. It is possible not only to trust the system's operation, but also to check the quality of the code and ensure that there are no vulnerabilities and hidden functions.
  7. Open data. All information about auctions is open and available not only to partners and participants, but also to everyone in the public API. For analysis and audit by civil society, conducting research by journalists and scientists, and creating additional products and services based on this data. The exception is information about auction participants before the end of the auction, so that it does not affect the results of auctions. After the auction, the system reveals information about the participants, the history of all bids, and documents. In addition, contracts with participants are published for successful auctions. We are guided by OCDS (Open Contracting Data Standard) approaches when publishing open data.
  8. Public analytics module. To quickly study the results of auctions, everyone can use the analytics module, in which all relevant information about each auction, participants and organisers for the entire system operation is presented.
  9. Pilot projects. We often transform markets incrementally to demonstrate the effectiveness of the approaches we offer and to back up credibility with numbers and results. And we work with various types of pilot projects: a. initially, a certain percentage of assets on the market; b. transformation of only a separate stage (auction) without changes in the general process; c. work only with a few companies that are ready to be early adopters; d. or a regional pilot project, when we work with assets in a specific city/region, and then scale up and spread to the entire country.

Each approach can be applied separately in both the public and private sectors. And using all of them simultaneously, you can get a synergistic effect.

A survey of companies found that almost 75% trust it, about 70% said it improved their business, and more than 30% used information from the system for other purposes beyond identifying opportunities, such as analysing market composition and prices.

And as an indirect indicator of trust, we can cite NPS (Net Promoter Score), which we measure after each auction immediately after its completion. The NPS of Prozorro.Sale auctions is currently 77. A score above 50 is considered good, and above 70 is excellent. Even bidders who did not win (because in the vast majority of auctions there can be only one winner) give high marks. If we look only at the responses of those whose bids did not win the auction, we get an NPS of 69 because they trust the results of transparent bidding.

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