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Open Contracting

Published onDec 28, 2019
Open Contracting
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Highlights

  • Given that procurement is embedded within public financial management cycles, opening up contract data allows for government officials and citizens to translate and materialise public expenditure.

  • In addition to national standards and practices advocated for by global bodies, there are specific standards for contracting in certain sectors, namely the extractive industries sector and healthcare.

  • Several open contracting initiatives are specifically targeted towards the broader open data goal of mitigating corruption and suspicious loss or misuse of public funds.

  • In addition to the challenges associated with institutionalising routine contract disclosure, there are several concerns around releasing classified information or losing private interest. If contracts are redacted in the name of public interest, there must be a transparent justification.


Introduction

Under the umbrella of open budget and spending data, open contracting data provides information on public procurement: who is being paid, the goods or services being procured, and the amount of money spent1. Public contracting is an integral part of the financial management cycle because all levels of the government enter into contracts to spend budgetary allocations and meet citizens’ needs2. Through issuing operating licenses, concessions for the use of natural resources, and the sale of public property, public contracts also generate government revenue3. Estimates suggest that governments spend approximately US$9.5 trillion each year through contracts with public companies; although, the way in which this money is spent is rarely made publicly available4. Insufficient information on how contracts are planned, formed, negotiated, what they include, and how and who they are monitored by, exacerbates inefficiencies, potential for corruption, and mismanagement5.

Contextualising the Open Contracting Movement

In 2004, bodies including the UN Special Rapporteur on Freedom of Opinion and Expression, the OSCE Representative on Freedom of Media, the OAS Special Rapporteur on Freedom Expression, and the Inter American Judicial Committee have declared that public institutions should proactively publish contracts routinely6. Many countries have adopted these recommendations into law. In the Philippines, the principle of disclosure is embedded in their Constitution7. In recent years, over 100 countries have enacted access to information disclosure laws or regulations to promote proactive disclosure of contracts and associated documents8. Several Open Government Partnership (OGP) countries have adopted procurement commitments in the national action plans; 38 countries have made 93 procurement commitments9.

In addition to pledges at a constitutional and national policy level, there is also a demand for open contracting in specific industries, namely healthcare. These types of sector driven initiatives form part of the public sector integrity and transparency pledge in the G20 Anti-Corruption Action Plan 2017-201810. In the Anti-Corruption Summit 2016 in the UK, Argentina, Malta, Mexico, and Nigeria pledged to introduce open contracting into the healthcare sector, where pharmaceutical procurements, among other contracts, would be made open as a way to increase transparency11. As is the case with open budget and spending data, open contracting data is most useful when mobilised by civil society actors and governments as an accountability tool. Open contracts have the potential to augment government effectiveness, allow for greater oversight, save costs on projects across all sectors, establish trust, and create opportunities for potential vendors by lowering the barriers to entry12.

Key Initiatives

Despite these challenges, examples of successful initiatives and prominent actors offer a more positive outlook. For a concerted effort towards compiling best practices, government can look towards the Open Contracting Partnership (OCP), launched in 2013. OCP works globally to promote principles and standards of open contracting and supports initiatives at the country level13. By advocating for the implementation of open contracting, they aim to move from transparency to transformation14. Through a step by step design process, OCP has played their hand in many projects including South Korea’s KONEPS, and Ukraine’s Prozorro which has run 26,000 tenders15. In Taiwan, a three month social innovation hackathon lead to the identification of both flood patterns and flood management and procurement. While connecting the dots, participants delineated areas with varying levels of floods and spending in order to examine the effectiveness of water resource management16. In addition to featuring stories that act as a guide and motivator for other initiatives, the OCP has drafted a playbook for open contracting - laying out best practices and guidelines for designing, implementing, and evaluating open contracting initiatives in compliance with OCDS. The steps include reforming public goals, publishing and ameliorating open contracting data, improving engagement and oversight mechanisms, and institutionalising measuring and monitoring reforms17.

Another actor, Open Government Partnership (OGP) helps governments open up contracting policies focused on disclosure, participation, and oversight throughout the entire procurement chain. Combined, these activities helps governments save money, fight corruption and expand the number of participating businesses, particularly small and women-owned business, as well as in piloting sector-specific reforms and open up collaboration opportunities to citizens more broadly18.

When it comes to increasing the competitiveness of small and women-owned businesses, Elgeyo Marakwet, Kenya looks to widen the public procurement market to women-owned businesses who, globally, receive less than 1% of contracts19. By disaggregating contract procurement by gender, this disparity is coming to light and governments are making an effort to transact with women-owned businesses. To open up opportunities for collaboration with a wider community, Honduras and Malawi are implementing the Construction Sector Transparency Initiative (CoST) guidelines. Honduran government bodies have, to date, disclosed data on over 1000 projects, and Malawi has worked to create infrastructure for collecting citizen feedback20.

Transparency International is another major actor targeting instances of corruption. Given that 57% of bribery-cases measured by OECD are related to public contracts, and considering that 30-50% of government expenditure is funneled towards procurement, Transparency International aims to advocate for open contracting to save money and time, rebuild citizen trust, and create a level playing field for businesses21.

Since late 2018, there have been many updates on ongoing initiatives in Asia. South Korea has a G2B (government to business) electronic procurement system called KONEPS which has saved the public sector $1.4 billion and businesses $6.6 billion22. Indonesia, Afghanistan, and Thailand are also building online platforms. Respectively, these platforms exist to increase transparency and reduce corruption in partnership with CSO Indonesia Corruption watch, an e-procurement platform, and an open portal to monitor infrastructure projects and facilitate communication with the public23.

In 2017, Thailand passed a procurement law to allow civil society organizations (CSOs) to monitor high-volume contracts between bidders and issuing authorities that comply with maximum transparency practices, otherwise known as integrity pacts24. This law was passed with the intention of developing an open data portal to be updated with real-time developments in infrastructure projects to which citizens can provide feedback. As a result of the integrity pact, bid prices have fallen lower and Construction Sector Transparency (CoST) is being further implemented with the support of the United Nations Development Programme (UNDP)25.

A central database, DeZorro, has launched in Ukraine to make public procurement searchable and identify any potential acts of corruption26. In Indonesia, a consulting company called Development Gate has streamlined development codes and allowed 40,000 contracts to be procured over three years in Badung alone27. In the Philippines, Malaysia, and Kyrgyz Republic, governments are working in collaboration with civil society organizations such as Sinar and IDEAS to identify problem areas in public procurement, and partnering with European banks for reconstruction and raising awareness for using public contracts for market purposes28. There are also sector specific initiatives that have been implemented because of open procurement policies. Two examples are flood tracking and water management in Taiwan and tracking gender and social inclusion data in Nepal29.

Part of the larger Open Development Mekong initiative, Open Development Cambodia30 and Open Development Myanmar31 feature publicly disclosed contracts on their databases. The contracts published cover a range of sectors from infrastructure projects, to agriculture, to the extractives industry, to labour, and land concessions. Understandably, in the case of Myanmar, there are also a number of contracts and reports listed concerning the jade industry. However, it is important to note the stark difference between both databases - there are upwards of 4000 results on publicly disclosed contracts in Open Development Cambodia, as opposed to 37 results in the Myanmar database. Here contextual factors and limitations substantially factor into the availability of data, however; it is still possible to publish contracting data and gain insights from it (exemplified by investigations into the jade industry). Taking note of national and international discrepancies in terms of the data available and in the integrity of the procurement data itself can allow the polity to hold government figures to account. On the other hand, parliamentarians have the opportunity to recover or spend revenues more efficiently while addressing the needs of their constituents.

Challenges

As an enabler of wider objectives, open contracting data will thrive in an environment in which institutions are equipped to routinely disclose comprehensible information. This will require laws and policies that enable open contracting and grant citizens the right to participate in accountability and monitoring programs32.

Moving forward, bolstering intermediaries, increasing collaboration between actors, commitment to action, creating accessible and centralised databases, and supporting laws and legislations must be actively pursued33. Developing a transparent and equitable contracting framework involves well-defined regulations, competitive procurement processes, transparent advertising, clear tender documents, disclosure, creating a conflict of interest policies for involved parties, and having mechanisms in place for appealing and redressing contracts34. Ultimately, parliamentarians can work towards creating an infrastructure in which contracts, and contracting data, is open by default, distributed internally within government bodies with an end-goal to publish, and can receive feedback on machine-readable, usable, and comprehensible data.

Pledges and policy promises: Mentioned previously, several governments have made pledges and promises in their national policies which are monitored by external bodies. According to data from 2016, only 6 of the total 47 procurement commitments examined included engagement with civil society and public participation35. Additionally, sector-wide implementation of open contracting data is generally lacking36. Less than half of the commitments listed have been completed by governments37. Thus, not only are policies not being implemented, but the policies themselves do not meet the standards necessary to instrumentalise several open contracting data goals.

Classified information concerns: Apprehension surrounding public safety and interest when it comes to determining whether or not contracts should be published poses a challenge to the amount and consistency of information disclosed. Many of the perceived restrictions and barriers to open contracting by government officials include: compromising commercial, public, or privacy interests, questioning the claim that open contracting limits instances of corruption, the cost of resources needed to increase disclosure, and concerns that information will be unused or abused38.

These concerns disable proactive attempts to disclose contracts for fear of re-contracting, incurring costs, and risking public safety. In fact, reactive measures to inefficiencies in public spending are more costly than acting preemptively39. In cases where open contracting is not in place, contracting information can be made available in certain contexts with information requests, which are time consuming for both citizens to request and governments to process40. While there are some contracts that may have to be redacted in the name of public interest, the criteria for redactions must be detailed and it is recommended that the contract be eventually published, once safety is no longer a concern.

Lack of collaboration and technical know-how: There are several actors involved in open contracting: businesses, stakeholders, government institutions across all sectors, public companies, and civil society actors. Contracts themselves are tools used both in market and public practices and their disclosure would be relevant for a large majority of the population. However, lack of standardisation and interoperability of data due to lack of technical know-how, act as a barrier for collaboration and communication between actors41. Moreover, the intermediaries that do exist are limited in capacity - in terms of their ability to enforce policies and monitor their implementation42. Evidence does suggest that standardised e-procurement strategies prove useful as platforms and channels to centralise information and make it accessible to all relevant parties. However, infrastructure and channels must also be specifically created to facilitate two-way consultation and communication, particularly between governments and civil society actors43.

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