Public contracting

Governments spend and receive vast sums of money —some US$9.5 trillion, a whopping 15% of global GDP— every year on deals to build infrastructure, deliver goods, and provide services to their citizens or to rent out state assets (Kenny, 2014).

Governments buy these goods and services through contracts. This contracting may not be a topic that immediately gets the heart racing, but it is vital. Contracts are the bricks and mortar of public benefit, where taxpayers’ money gets converted into tangible products that citizens care about: schools, roads and hospitals.

It is critical that public contracts should be fairly awarded and offer good value-for-money. When government and business meet, rules need to be clear and deals open to the public. Governments need to show how they spent money, with whom, and on what. Put simply, they need to show both the dollars and the deals.

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All too often deals happen in secret, are badly executed, or are technically so complicated that no one can understand them. Only 6% of 86 countries surveyed publish open data on government contracts (Open Data Barometer, 2015). This is bad for business, bad for taxpayers, and lethal for public integrity.

The OECD, the European Commission, the World Economic Forum and UN Office of Drugs and Crime all agree that public contracting and procurement is the government activity most vulnerable to wastefulness, mismanagement, inefficiency, and corruption.[1] Some 57% of foreign bribery cases prosecuted under the OECD Anti-Bribery Convention involved bribes to obtain public contracts (OECD, 2014).

Scandals and human tragedy from contracting disasters abound: ‘tofu’ schools, constructed to substandard specifications in an earthquake zone, that fell down on their students;[2]billions of dollars misappropriated through secret deals and asset flips in the oil and mining sectors;[3],provision of fake medicine and medical equipment that kills patients;[5]outrageous overcharging or spectacular service delivery failures, including charging for services to dead people; and huge Olympic construction boondoggles.[8]

Even in more prosaic projects there can be huge differences in costs: a detailed comparative study by the World Bank showed that the same piece of road, built to the same specifications, can cost almost half as much in a corrupt country than a better governed one (Kenny, 2010). These costs are almost always disproportionately borne by the poor.

Openness pays huge returns on investment. South Korea’s transparent e-procurement system KONEPS saved the public sector US$1.4 billion in costs (OECD, 2015). It also saved businesses US$6.6 billion. Time taken to process bids dropped from 30 hours to just two.

Open contracting provides publicly accessible, timely and comparable data on government contracts. This data on infrastructure projects and vital goods and services allows citizens and business to engage with government on the issues they care about. Through integrating feedback, government becomes accountable. This process will unlock innovation once it becomes routine.

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