Open contracting: lessons from the COVID-19 pandemic
Image: As emergency procurement, extracting the genome of the virus is a delicate affair. Dean Calma / IAEA. CC BY 2.0
The COVID-19 crisis has affected countries all over the world, forcing exceptional amounts of public funding to be redirected towards the pandemic response. According to the Open Contracting Partnership and Spend Network, governments worldwide spent at least $100 billion on COVID-19 related contracts between January and July of 2020, thrusting procurement into the public spotlight.
As governments have worked hard and fast to mobilize the resources needed to care for the sick, protect essential workers and support those economically affected by the pandemic, journalists and civil society organizations (CSOs) have been keenly following their spending decisions. By monitoring contracting data published on government websites, such as the UK’s Contracts Finder, ChileCompra, or Nigeria’s NOCOPO (to name just a few), these actors have been able to identify a wide range of problems with government spending dedicated to the crisis. In many cases, their findings have prompted outrage amongst citizens shocked by the apparent mismanagement of public procurement, at a time when governments’ spending decisions have a direct impact on public health and welfare.
As part of our recent research, Oxford Insights has worked alongside the Open Contracting Partnership paying close attention to the ways in which open contracting data has been used during the pandemic. Over the course of our investigation, we have identified several key contracting issues which arose throughout the COVID-19 crisis, building on our research to bring together a series of recommendations to help governments buy quickly, openly, and effectively in an emergency.
Issue 1: Shortages
Over the course of the past few months, we found that headlines globally have been dominated by news stories detailing how inefficiencies in government contracting have contributed to shortages in personal protective equipment (PPE) and other crucial supplies.
In one case from the United Kingdom, journalists from The Times reported that the government ordered 50 million face masks from a private equity firm Ayanda Capital, which didn’t meet NHS specification standards, and therefore couldn’t be used.
Meanwhile in Nigeria, the organization Dataphyte reported that national purchasing authorities failed to adequately prepare for a health emergency. This meant that there was only one ventilator per 1.2 million Nigerians available in April 2020. Similar shortages have been reported in Kenya, where the Ministry of Health only had 259 ventilators available for a population of over 47 million, until local engineering students started an initiative to produce low-cost ventilators domestically. Turning to local suppliers can be advantageous for government contracting during a crisis, allowing authorities to avoid potential issues with global supply chains.
Issue 2: Gross overspending
Elsewhere, journalists have revealed how rushed buying practices have often led to governments paying well over market prices for goods and services.
Even though some level of price inflation is to be expected during a crisis, when certain key items such as masks or ventilators are in high demand, one report carried out by the Latin American network of journalists, Red PALTA, revealed that governments in Mexico, Colombia, Peru, and Uruguay had purchased N95 masks at almost double their normal cost. Overall, this represented a potential overspend of up to US$282,000.
Issue 3: Lack of competition and “corruption of the process”
Under pressure to buy quickly, many governments have resorted to using direct award contracts to procure goods and services related to COVID-19, abandoning standard procurement protocols which stipulate that the tendering process must be conducted transparently and competitively.
Direct awards might be useful for buying at pace, but by nature they also eliminate all tendering competition, risking cooling the public procurement market at a time when governments need to stimulate the domestic economy. This is especially true when the reasoning behind a direct award isn’t made public.
One of our interviewees for this project, speaking from the United Kingdom, referred to obscure direct award processes as a contributing factor in what they called the “corruption of the process.” Whilst people working in procurement authorities are often not looking to personally profit from the crisis (the traditional sense of “corruption”), the process of awarding contracts, nonetheless, directly promotes a culture of opacity, discouraging other potential suppliers from participating in fair and open tendering competitions.
Following this model, succeeding in winning government contracts becomes a question of having the right contacts, as opposed to possessing the talent or innovation to provide the best service to government at a fair price. Therefore, even if normal procurement procedures may be forgone in extreme circumstances, transparency should not be compromised if buyers want to create a fair and competitive contracting environment.
Issue 4: Personal connections to officials
Building on the point above, a lack of competition during the pandemic has often provided fertile ground for potential conflicts of interest, where contracts have been directly awarded to companies with links to government officials. These kinds of awards cast doubt on the fairness of the procurement process, and have caused a number of government scandals during the pandemic.
In one particularly striking case from Argentina, the news outlet La Nación caused a stir when it revealed that the government of Buenos Aires had procured hotel services to house people in quarantine from the mayor’s half-sister. Even though the half-sister had no direct stake in the company in question, two officials were asked to leave their posts in response to the scandal and the mayor promised a new website for disclosing coronavirus contracts.
Similarly, in Mexico, El Malpensado and EMEEQUIS have identified several direct awards made to companies with links to government during the pandemic, by monitoring data published on CompraNet. After ordering ventilators from a company belonging to the son of a state senator, the government was forced to cancel the contract when the goods failed to meet specification standards.
Elsewhere, in the United Kingdom, openDemocracy used Contracts Finder to reveal that the government had made a direct award to a company named Public First, which has close ties to the government’s advisor Dominic Cummings and to the Minister for the Cabinet Office Michael Gove.
Our insights: from damage control to proactivity
Many of these issues stem from procurement authorities’ need to work quickly and efficiently during a pandemic, meaning that normal procedures and safeguards are set aside.
However, a combination of rushed and opaque buying practices has often meant that journalists and CSOs have not been able to track spending as it happens, but rather have only been able to draw attention to scandals well after the fact. This has forced governments to take corrective action as a form of damage control, by firing officials or launching inquiries.
Rather than resorting to clandestine direct awards, we propose that a crucial way to accelerate the process of problem identification and corrective action in a crisis is to encourage civil society to cooperate with governments to identify irregularities quickly and resolve them proactively.
In order to achieve this, procurement authorities need to commit to publishing open and accessible data and do so in a timely manner. As the managing director of the International Monetary Fund, Kristalina Georgieva, aptly advised governments; “spend what you can, but keep the receipts.”
Indeed, the advantages of having established open contracting practices have already been laid bare during the emergency. In one particularly instructive case from Moldova, civil society organizations realized that the government was planning to buy over 2 million protective suits and screens to deal with the pandemic, more than would ever be needed in a country with a population of only 3 million. After pressure from civil society, the government reduced its order drastically, all according to data published on the open data platform tender.health.
The case illustrates the benefits of open contracting during an emergency and beyond. If governments are to improve their contracting practices, transparency can and should be reframed as something which is useful to procurement authorities, rather than as a difficult exercise which only leads to punitive consequences. For example, publishing some details of a planned direct award two or three days before the contract is signed could allow civil society to conduct a brief social audit, helping procurement authorities correct any irregularities and avoiding scandals further down the line.
Yet even when urgency trumps all other considerations, contracting decisions should still be made transparent in a timely manner, in order to preserve public trust in government, and better identify irregularities. In one case of good practice, authorities in Ukraine established rules early on in the pandemic, declaring that all emergency contacts must be published on the e-procurement platform ProZorro within 24 hours of being awarded.
Ultimately, the lessons of COVID-19 indicate that the more open a government’s procurement was before the pandemic hit, the better positioned they were to spend wisely during the crisis. Arguably, countries with transparent and data-driven procurement systems in place at the start of 2020 have been more successful at inviting scrutiny, tracking supply and demand and getting resources to people who need them at the right price. Governments ready to reform their procurement should heed this lesson and establish emergency buying protocols that enable them to ensure transparency in the future. This year will not be the last in which they have to buy under extreme pressure.
For a detailed listing of our COVID-19 recommendations and the open data use cases we have identified over the course of the pandemic, see our full report titled “Global procurement responses to COVID-19: How to do better in an emergency.”
