• Analysis
  • September 5, 2017
  • 11 minutes
  • 0

Why governments should be open about their shopping habits

Every year, governments spend more than $9.5 trillion USD on goods and services, accounting for 15% of the entire planet’s GDP.

Yet, according to the World Economic Forum, more than $2.5 trillion of that money is lost through a combination of bribes, uncompetitive tenders and reduced economic growth.

Across the developing world, the costs are formidable. In Africa, up to a quarter of the continent’s GDP is lost each year, forcing people to pay for services they should receive by right. For instance, more than 40% of parents surveyed in seven African countries had to pay bribes for their children to attend schools that were supposed to be free. The volume of bribes is thought to reach as much as $1 billion per annum, with the poorest in society disproportionately likely to be forced to pay.

Nor have developed countries escaped the costs of corruption. A 2013 Eurobarometer survey found that nearly one-third of bidders for public contracts in the European Union believed they had missed out due to corruption. The total costs of corruption across the bloc are thought to be close to the EU’s annual budget. In the US, corruption costs between 5% and 10% of the Medicare and Medicaid budgets every year.

To meet these challenges, governments across the world are redefining the way procurement is done. At Apolitical we have picked out five of the best approaches delivering results.

1. Open contracting

Nothing improves the efficiency of procurement like data. The more suppliers know about opportunities and the more citizens are aware of government expenditures, the less room there is for wastage and corruption. Yet this information can all too often be non-machine readable and hard to digest.

The Open Contracting Data Standard is changing this. It is a framework that tells governments how to release and structure contracting data so that information can be traced across all stages of the process – from planning tenders to awarding contracts and paying suppliers.

Nowhere has the framework had more impact than in Ukraine. In 2014, the country saw a fifth of its procurement budget consumed by corruption. Two years later, it won the Public Sector World Procurement Award thanks to its E-Procurement system, Prozorro.

Meaning “transparent” in Ukrainian, Prozorro allows any citizen or business to view any piece of information about any public contract through an online portal, including its budget, anticipated cost, suppliers and completion time. Contract bidding takes place via private online marketplaces which are synchronised with the central government database. Fraud cases can be easily logged through the platform: in one instance, a government centre was exposed for trying to hide payments of nearly $100 USD for mops after describing them as “device[s] with a nozzle and a holder.” As of November 2016, the system was estimated to have delivered $233 million worth of savings.

The open contracting data standard is currently in use in around 25 cities and countries around the world, including Nigeria, Mexico City, Romania, Canada and the United Kingdom.

2. Simplifying contracts

The more bidders a contract receives, the cheaper it will be. Making it easier for small- and medium-sized businesses to participate in procurement can save governments money, boost growth and provide new solutions.

In the UK, the government is slashing the length of contracts and designing them according to the needs of smaller suppliers. Following consultations with business leaders and government agencies, Crown Commercial Services is cutting the length of contracts from between 50-80 pages to around 10, offering significant cost savings to smaller firms. Contracting options are increasingly being offered on G-Cloud, a platform that breaks up the tendering process by allowing smaller firms to fill in standard background information once, reducing the amount of time taken to complete each bid. It’s hoped these reforms will help the UK government meet its target of spending one-third of its procurement budget with SMEs by 2020, up from 27% in 2015.

Alternatively, governments may outline policy challenges and leave it to bidders to propose a solution, rather than telling companies how a service must work. San Francisco’s Start-Up in Residence Program is one of the most successful of these initiatives. The scheme connects city agencies with tech startups, which together develop a workable solution to a department’s policy challenge over 16 weeks. A key part of the program is its RFP (Request for Proposal) Bus, which allows start-ups to bid for as many as 20 departmental contracts through a single document, which takes no more than an hour to fill out. Applicants respond to two challenge statements, describing their expertise and how they can fulfil the department’s policy request. Having helped more than 15 SMEs gain contracts with San Francisco city authorities, it has since been replicated by Amsterdam, The Hague and British Columbia.

3. Getting feedback from citizens

Because no one knows how public sector projects are progressing better than the people who live in the constituency, governments are turning to their citizens for help.

In Colombia, a government-backed app, Elefantos Blancos, is using local knowledge to tackle corruption in the construction sector. The app encourages citizens to notify officials where construction projects have stalled by uploading photos of the derelict sites. Areas that receive the most frequent notifications are logged by the app, helping the government to prioritise investigations. In the four years since Elefantos Blancos was introduced, it has helped Colombia identify $163 million worth of unfinished projects, allowing the Transparency Secretary to put pressure on developers to complete them.

A similar system has also proved effective in Nigeria, implemented by the country’s National Assembly with the help of NGO BudgIT. The organisation mines budget data and visualises spending through accessible charts and graphs, allowing suspicious payments to be easily identified. BudgIT relies on citizens to monitor the progress of infrastructure projects through a Tracka tool, which allows Nigerians to upload pictures of construction sites. These findings are then passed on to the National Assembly, whose representatives can act to ensure projects are not permanently stalled.

4. Partnering with business and civil society

In Honduras, the government is using a network of public-private partnerships to eliminate fraud and uncompetitive tendering for medical equipment.

Under the system, Honduras’ medical procurement budget is held externally, by Occidente Bank, limiting opportunities for bribery and slashing payment times. Before a tender can be issued, all government medical purchase proposals are reviewed by representatives from the bank and an NGO, ensuring they offer value for money and meet regulatory requirements.

Once a contract has been awarded, its implementation is monitored by a transparency committee, comprising the Catholic Church and civil society campaign groups. This body reviews all state purchases of medical equipment, has the power to view government documents and can reject drugs or goods that do not meet contract specifications.

In March 2015, the Transparency Committee found that 700,000 bottles of multivitamins, for which the government had paid $900,000 USD, contained less than half of the nutrients required, leading to the cancellation of the contract. All companies participating in tenders must now sign Integrity Pacts, the violation of which can lead to their suspension from public procurement.

5. Involving end-users in the procurement process

To ensure purchased goods meet the required standard, Italy is directly involving the people who will use the products in the procurement of medical equipment.

Under the country’s user-centric model, CONSIP, Italy’s central purchasing body, works with medical staff to shape tender documents for use across the country. CONSIP agrees the tender specifications in consultations with doctors’ groups and scientific associations, while tenders are frequently drafted by medical professionals themselves.

The user-centric model prioritises product quality. Devices that meet the contract’s financial requirements and specifications are tested by doctors and nurses in their hospitals, which then award the final contract on the basis of the product’s performance. The system has been widely praised by both medical professionals and suppliers, leading to its implementation on a regional as well as national level.

(Picture credit: Pexels)


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