Case Study: Open Contracting in the Slovak Republic

Introduction

Transparency and open data policies and initiatives have reached a state of maturity where it is crucial for us to evaluate them to learn what works, what doesn’t and why. Transparency is not likely to be a cure-all, but we think it is a cure-some; so, we need to figure out where and how it should be best applied. As part of that process, we have been conducting a series of in-depth case studies on the impact of technology enabled transparency policies around the world. Our initial case studies look at transparency in public procurement and we have chosen four countries to study. This analysis discusses our findings about public procurement disclosure by the Slovakian government.

For the Slovakian case study, we conducted interviews or sent questionnaires and surveys to members of the following groups: members of transparency NGOs, journalists who have covered procurement, academic researchers, the Slovakian Government Office of Public Procurement and the Slovakian Business Alliance. The experiences of these diverse respondents have allowed us to develop an equally diverse and comprehensive picture of the impact of the public procurement reforms enacted in Slovakia over recent years.

Several significant findings have become clear:

Open publication of data online can have a profound impact on the NGO and media oversight community. In Slovakia, the availability of this data has led to meaningful growth in the activities and range of organizations like Transparency International (TI) Slovakia and Fair Play Alliance as well as journalists on the corruption beat. This data has increased organizational capacity and, in turn, the scope of oversight by the civil sector.
Lowering barriers to entry for oversight has downstream effects that stretch beyond the role of intermediaries like NGOs or the media, allowing members of the public to be more proactively engaged. Prior to reforms, watchdogs and journalists received tips primarily from insiders who were party to corrupt practices. Now they often receive tips from outside the establishment including concerned citizens who are aware of the local contexts of municipal or regional procurements.
There are still gains to be made by lowering barriers further, by ensuring that data is made available in more suitable and machine-readable formats. Civil sector organizations in Slovakia devote considerable time and resources to make the data that is available more useful. They could reallocate those resources towards further analysis, investigation and advocacy, if this data were released in better shape originally.
In cases where disclosure following recent reforms has led to real, demonstrable accountability, public pressure and media attention have played a determinative role. Without public pressure, frequently stoked by the investigation and reporting of civil sector and media outlets, disclosure has not been a sufficient check on corruption, even when it has revealed suspect or corrupt practices. Effective transparency requires enforcement and the real threat of sanctions.

We find that in Slovakia increased access to public data has led to increased oversight and engagement by the civil sector and the public. However, because of a lack of enforcement, corruption in public procurement remains a significant problem.

Public Procurement Corruption in Slovakia

Corruption in public procurement in Slovakia has been a long-standing problem. By 2010, immediately prior to the reforms studied here, businesspeople and entrepreneurs listed corruption as the number one barrier to doing business in Slovakia according to a survey conducted by the Slovakian Business Alliance (Kicina, 17:00). According to Robert Kicina, the Executive Director of the Slovakian Business Alliance, «Public procurement didn’t have a sound name in Slovakia. Many people and enterprises think it is a very corrupt area. Maybe these suspicions make many entrepreneurs refuse to participate in tenders.»

However, according to Juraj Nemec, a Czech economist at Masaryk University who studies public procurement in Slovakia, the actual decision making process followed by procurement authorities has never been the primary locus of corruption. Manipulation of public procurement has tended to occur either before or after the awarding of the bid, rather than during the decision process itself, which is heavily regulated. Prior to the submission of bids, procuring authorities can limit competition and manipulate the results of the tender process by custom tailoring a contract or setting unreasonable conditions on who can submit a bid in the first place. Concern over manipulating procurement outcomes by setting conditions prior to tendering was widely shared amongst our interview subjects. Gabriel Sipos, the Director of Transparency International Slovakia, expanded on this point.

In Slovakia there is a big problem that some participants are excluded from tenders because the conditions of participating in the tender are illogical or irrational. For example they need to submit documents proving their experience in fields which are not directly connected to the award itself. One example would be when the state in Slovakia once wanted to create a website. One of the requirements on the tender participants was that the company needed to have experience in taking photographs from a plane. (Sipos, 20:50)

Our interview subjects also highlighted the problem of public procurement manipulation during the contract management phase. This form of manipulation occurs through not fully enforcing contracts, or through various addendum, amendments and changes to the contract. Prior to reforms, it was possible for this to result in the final contract differing significantly from the bid accepted during tendering.

Several of our interviewees pointed to the ‘Notice Board Scandal,’ a high profile procurement scandal in Slovakia, as indicative of a form of corruption that was possible before the recent reforms. In 2007 the Slovakian Ministry of Development published a tender request for construction services totaling 119.5 million Euros, by only posting a hard copy on a small notice board in the hallway inside the ministry building. As this was the inside of the Ministry building, which is not open to the public, only enterprises with pre-existing relationships with the ministry were able to see the tender request. A firm that was known to have close ties to Ján Slota, the head of the ruling Slovak National Party ultimately won the contract. More than a year after the fact, the procedure came to light and was invalidated by the Slovakian Office of Public Procurement. (Sipos, 4:00-5:00)

Reforms Enacted

Slovakian law was recently overhauled in response to the 2011 update of the EU Procurement Directives. Interview subjects, in response to the question “What triggered recent transparency reforms?” indicated both changes mandated by EU directives and a recent spate of high profile public procurement scandals as motivating factors.

There have been three major changes to public procurement since 2010 in Slovakia: 1) the introduction of e-procurement, in which dissemination of tenders, tender documents, the submission of bids and the publication of notification of awards is done publicly through a single portal; 2) the introduction of reverse auction mechanisms for procuring goods and services; and 3) the mandatory publication of all public contracts on a centralized online government contract repository.

The Government Public Procurement Office manages Slovakian procurement rules. This office publishes the official Public Procurement Journal, legal interpretation of the Public Procurement Act, maintains aregister of procurement documents and operates the procurement portal, which is called EVO.

The Office of Public Procurement’s website serves as the single point of access to public procurement information. In many ways this is a valuable development, which can help clarify procurement procedures. According to Robert Kicina, the rules and regulations are clear and well-understood by entrepreneurs who engage in the tendering process, although they might “complain about the extensive bureaucracy that must be complied with before submitting a bid.“ (Kicina, 27:00) However, several interviewees cautioned that the concentration of procurement authority may merit some concern as it provides additional opportunities to channel public funds for personal or private interests. (Nemec, 18:45; Kunder, 7:00)

Lowering Barriers to Entry with Online Data

These recent reforms have made it significantly easier for organizations and people outside the government to access public data about procurement. Prior to these recent reforms access to tender documents and other procurement data was granted primarily through channels mandated by Freedom of Information Laws (FOI). FOI requests were necessary to acquire the documents needed to conduct meaningful oversight. Often the FOI requests were not granted and the only mechanism for appealing requests was ineffective. Organizations like TI Slovakia, would have to go to court to appeal, which could delay the process until the information was no longer relevant. According to Sipos, under these conditions «often you would just not go after things at all.» (Sipos, 27:00) All of that information is now online, published proactively by contracting authorities and the office of public procurement.

Juraj Nemec offered a quite positive view of the level of data availability under current disclosure regimes:

Almost all information is now available in Slovakia, except for details for the bid descriptions. Everything else is available: the call for tender, number of participating companies, in most cases [people] can even get even tender conditions from public bodies[…] Everybody who wants to can get all data necessary to be able to evaluate procurement actions[…] The data are available. I don’t think it is necessary to change anything from this point of view. (Nemec, 13:20)

Through EVO, the Slovakian government makes available various procurement related data. Notices published through EVO include pre-contract informational notices, calls for tenders, statuses of contracting processes, and contract award notices (example here). Contract award notices contain:

Name of the contractor who was awarded the contract
Number of bids received
The monetary value of the contract
The criteria used for selection
The type of procedure used (e.g. negotiated, restricted or open)
The committee members who evaluated the bids
Complaint adjudication authority

Notices are displayed in chronological order, with fairly limited search functionality. Notices are in plain text rather than PDF. While most relevant information is technically available, there is no easy access to well-structured machine-readable data, either via an API or via bulk download.

In addition to the information made available through contract award notices, a great deal of valuable information is published in the online central contract and document repository. In addition to all government contracts, which must be published to have the force of law, minutes of tender assessment meetings and requirements are published in a document repository.

There was wide agreement amongst all interviewees that the central contract repository is immensely useful. Peter Kunder, data analyst at Fair Play Alliance, summarized the general view: “the central repository of contracts is a big help to us.” (Kunder, 21:00) In particular, the central contract repository has made post tender procurement manipulation more observable, and enabled much greater public participation in uncovering suspect procurements. A survey by TI-Slovakia, for example, found that as much as 9 percent of the Slovakian population had viewed a government contract or invoice online in the last year. Prior to reforms, only 4 percent of the population had even filed a FOI request in the previous decade. Since FOI was the only way to gain access to contracts at the time, this number can be thought of as an upper bound for public exposure to contracts prior to reform. Lowering the barriers to entry for oversight has altered both the amount and manner in which the public engages with government contracts.

Gabriel Sipos noted that all of the newly available data enables a different kind of oversight from that made possible by FOI. The data makes it possible “to compare who is a better contractor, and what kind of supplier is giving the government the best deal.“ Not only are these high level comparisons now possible, “there are other kinds of data that are not necessarily related to procurement that you can connect with [the procurement data]. The company register gives you information about the owners so you can tie the tender results to the owners so you can see if some cities or government institutions are buying from only some companies and you can try to track if it is donor related or these guys are friends or maybe somebody worked in that company before and now he is a purchaser. You can look at those links…You can connect it to other data.” (Sipos, 18:00)

Changes to the Oversight Ecosystem:

The widespread publication of procurement data online has fundamentally reshaped the civil sector and media oversight ecosystem. The value of the change from reactive publication of information in response to FOI requests to default publication of all materials should not be underestimated.

The availability of data has lowered the barriers to entry for participating in the oversight process. This has enabled three significant changes from the previous baseline:

Tips now come more frequently from the public, rather than just from insiders.
Civil society organizations (CSOs) can conduct new and broader analysis.
CSOs can serve better as experts and intermediaries.

These changes are discussed in more detail in the following subsections.

Tips From The Public

The availability of the data online in an easily digestible form, through the Open Public Procurement Portal, has also changed the character of who brings suspect tenders to the attention of journalists and researchers. Before the reforms, leakers or whistleblowers had to alert journalists or watchdogs of suspicious proceedings. Once alerted a reporter or researcher would then file FOI requests. In these circumstances corruption could only be exposed from within: “someone would have to know that something wrong was going on and try to get that information from the public body.” (Sipos, 8:30) According to Adam Valček, “Previously, only a few people have read the contract, because contracts were unavailable.” As a result, “Most of the tips came from the interior of authorities.” Now, it is possible for journalists and CSOs to proactively monitor procurement and highlight suspicious cases:

In the past tips came from companies who felt passed over, and sometimes from officials. So, it often happened for personal or private gains. Now this is still the case, but a lot more come from local activists and individuals. People who have access to this information, who just care and who don’t like it. That is mostly the case for tenders in smaller cities and in smaller places. (Sipos, 33:00-35:00)

Now, added Adam, “there are more tips, because people [are] reading contracts on the web.” Veronika Folentova offered an example tip that was representative of their new sources. Teachers, she said, sent in information about Ministry of Education procurements for flowers in the amount of 9,900 Euros, and a contract for 36 bottles of alcohol for 132 Euros each. These small examples paint a picture of a type of contextualized, public and participatory oversight that would have been impossible without online publication. Lower barriers to using public information make this type of engagement possible. Ultimately, the Ministry of Finance conducted an audit of the Ministry of Education’s procurement activity. According to the Slovak Spectator, the audit found the Ministry of Education to have committed “a grave violation of the procurement rules”, but suggested no recourse other than that Čaplovič, the Minister of Education, “avoid such problems in the future.”

These lower barriers have also made a difference for participants in the business community. Robert Kicina noted that the only way to discover tender restriction manipulation is through public control and access to tenders. According to him, it is now easy for competitors to “look this up and send it to the media. This is the only mechanism that works in Slovakia…It is used by entrepreneurs to protect themselves from unfair competition and unfair procurement.“ (Kicina, 19:00)

Local engagement of this kind brings an important type of diffuse knowledge to bear, which is otherwise hard to capture. At the local level, people are much more aware of relevant context. They may know who the mayor is friends with, and which local businesses have relationships with people of influence. It is possible for them to know that something is suspect, because of those contextual factors that would not be evident to a researcher farther removed from the process.

Broader CSO Analytic Capabilities

Before the reforms, data was only available to watchdogs through freedom of information requests. According to Kunder, “Many times we had big problems because we couldn’t get the information we requested, and we needed to go to the court. In Slovakia that means you will get the information in 2-3 years. This is much easier today. And we can use our capacities much better.“ (Kunder, 43:00). Peter went on to summarize the impact of new data availability on Fair Play Alliance’s oversight capacity as follows:

Before the publishing of the huge amount of data… we needed to go through all contracts [individually] and now we can select hundreds or thousands of them which are suspicious and mark them as suspicious or interesting for us and we don’t need to waste our capacities on searching and going through all of them. We can do it electronically. We don’t need to request them according to the freedom of information law, going through all of them, so it increased our capacity very much. (Kunder, 44:50)

Since 2009, TI-Slovakia has maintained an online portal called ‘Open Public Procurement’ (tenders.sme.sk) built off the procurement data they have scraped and structured from public sources. This portal visualizes procurement expenditures by procurers, suppliers, sectors and regions as well as provides downloadable structured procurement data in bulk. Having data available in these formats also enabled TI-Slovakia to conduct broader analyses than were previously possible. Lack of competition in tenders is the hallmark of improper procurement. Using the curated data, TI-Slovakia was able to conduct research that showed (PDF)an increase in competition from 2.3 bids per tender in 2009 to 3.6 bids per tender in 2011, a positive indicator for the impact of reforms.[5]

Citing a problematic, and “amateurish” lack of analytic capacity within the government, Sipos said “basically nobody had [these numbers], even the office of public procurement in Slovakia[…] Nobody noticed what was happening.”(Sipos, 25:00) After TI-Slovakia released their findings, the main political party behind the government that had enacted the reforms used the findings in their campaign as evidence that those reforms were working. These preliminary results, according to Sipos, offer a “great example of how a little online tool can make such analysis available and actually this could become a topic of elections. It could show the public that there is an impact and that these reforms work…” (Sipos, 26:00) Without data available to facilitate these analyses, it is impossible to observe whether reforms are working or not.

Enabling Effective Intermediaries

In response to the question “what data do you look for/use about procurements, why, and where do you get it?” our journalist interview subjects Adam Valček and Veronika Folentova, both of whom have covered procurement for the SME daily, highlighted the work of civil society intermediaries as information sources. Adam said that while the Official Journal published by the Office of Public Procurement is “the most fundamental source of information,” he and Veronika prefer to “use other NGOs’ projects with the data from Official Journal [that can be] browse[d] faster and more efficiently.” In particular, Adam highlighted TI-Slovakia’s portal, tender.sme.sk, and OtvorenéZmluvy.sk, the open contract portal collaboration between TI-Slovakia and Fair Play Alliance. Veronika also noted the value of the analysis done by both TI-Slovakia and Fair Play Alliance.

Procurement processes are highly technical, and procurement data is often dense. Organizations like Fair Play and TI serve an important role in making both the data and relevant expertise accessible. In fact, Veronika mentioned that she had taken a course on procurement offered by the Fair Play Alliance. Through these functions, civil sector organizations lower the barriers for journalists and ultimately the public to engage with public procurement. According to Gabriel Sipos, now members of the media “just check the contracts being published and they go over them…they check contracts the way they check the latest news from agencies. They scrutinize if it is fine or not.” (Sipos, 9:00)

It is worth mentioning, however, that Transparency International Slovakia has devoted significant resources to scraping, cleaning and munging the data into machine-readable bulk formats to be able to run their portal. Such a resource intensive process is especially taxing for a small NGO with limited means. Increasing the availability of the data necessary to drive this portal would allow organizations like TI-Slovakia to use their resources more effectively, and devote more energy to analysis, investigations and public campaigns rather than spending so much to simply make the data accessible.

Room for Improvement in Data Availability

Despite the general availability of relevant information detailed above, several interviewees noted potential areas for improvement. Peter Kunder observed that while this expanded type of investigation based on connecting data is now possible, rationalizing the manner in which the data is released and formatted would make that process much easier. The data is “spread on various websites and hidden in various databases” often without the types of consistent entity identifiers for contractors, tenders and contracting authorities which would facilitate simple connection. Peter offered, “for example…in the bulletin in the public procurement office it would be great if there were relational information or reference to contracts related to this tender and invoices. What we are missing is connecting information and relationships between them.”(Kunder, 42:30)

Technical users of procurement data commonly complained about (TI-Slovakia and Fair Play Alliance) the poor formats in which the data is released. For example, “Public data [formats] tend to change very often, and they need to be cleaned. It is not so easy to keep [the data] in one dataset for a number of years, but recently the data is in relatively good shape.” (Sipos, 20:30) Furthermore, the release of data through the procurement journal is not very user friendly. There is no option to download the data in a structured format, like XML, and no way to download all of the data in bulk form. Instead, oversight organizations must scrape each notification individually from the bulletin.

If we had this data [in a better format] we would be able to set alerts on tenders which are interesting for us… Now we try to scrape this data from the bulletin or the journal of the public procurement office but we have a problem because the format is still changing every four months, so it would be a big help for us if the data had one XML format that we would be able to download and work with…. Also, these scraped data are not official so we have a problem to work with them and publish them then. (Kunder, 35:45)

On top of that, there are no data licenses attached to public data, which has presented a problem for Fair Play Alliance’s use of the data. “It is not clear how we can use the data, [or] what all we can do with the data.” (Kunder, 32:30) For example, without the protection of clear re-use terms in public data licenses, Fair Play Alliance was taken to court for their use of public data, when they added data from the business register to their larger procurement database.

Peter Kunder noted one additional aspect where disclosure could be strengthened. He said that the state should make more data available about the requirements imposed on tender participants prior to bid submission. In light of the fact that this appears to be an area where manipulation frequently occurs, as contracting authorities limit who is able to bid to their favored candidates, this data is extremely valuable for oversight purposes. Greater transparency into these requirements would significantly aid oversight capabilities of organizations like TI-Slovakian and Fair Play alliance. (20:50, Kunder)

Outcomes and Enforcement

Despite these positive developments, there remains a crisis of legitimacy and enforcement in Slovakian public procurement. While the availability of data has been a positive step in bringing corrupt practices to light, significant corruption remains in the procurement process.

Peter Kunder concluded that, “One lesson that we learned from publishing data… is that it is critical and totally important to have the state publish the data but it is only one part of the success. The second part is that other institutions in the society and other aspects in the society need to work, judiciary, police and public pressure and that is nowadays a bigger problem in Slovakia then the publishing of information.» (Kunder, 55:00)

According to Juraj Nemec, much of the problem of enforcement is institutional and cultural. The National Audit office is ineffective and Public Procurement Office does not have a mandate to take initiative and proactively investigate suspect procedures; they only respond to complaints. He added that for the most part, the European Union is a disinterested watchdog, which may step-in for important cases. (Nemec, 23:00)

In fact, EU enforcement presents an interesting special case. In Peter Kunder’s experience in cases where tenders are backed by EU funds and mistakes or problems can cause stoppages in EU funding, transparency is a notably more effective proposition. He added that “Publishing information about these tenders is very helpful because there are cases where there is punishment that can lead to corrections. In these cases it is much better than in cases where tenders are not funded by EU funds. Because the EU sanctions people and can stop EU funds and that would [hurt] the government and all officials.” (Kunder, 26:00-27:00) This suggests that the threat of real enforcement, is critical to the ability of transparency and disclosure to lead to effective change.

There was wide agreement amongst all interviewees that if recent disclosure reforms have led to a decrease in overall corruption, it has only done so marginally. Increased access to information has led to increased oversight, but bad actors still tend to operate with relative impunity:

Publishing information… has a very small impact on the behavior of officials in the public procurement office. In Slovakia we have a lack of responsibility. When it comes to the case that the public procurement office makes a bad decision or there is a scandal, no one is interested in taking them to account for their mistakes [… ] Other institutions are not able to correct their mistakes or punish them for their mistakes… [when] violation of the law was quite obvious people who were responsible were not punished or brought before the courts. So the bad actors feel that they are safe and will not be punished. (Kunder, 23:00)

Given the lack of effective formal/legal enforcement procedures, when change does occur it is often because of the informal pressure from the public. But this is not always effective: “If things are improving it is almost only because of public pressure, but public pressure itself does not always lead to changes.” (Kunder, 54:45)

Conclusion

The Slovakian disclosure regime around public procurement offers both encouragement and caution about the effectiveness of transparency in combatting corruption. All of our evidence points to the notion that transparency is a necessary, though not sufficient condition for curtailing corruption. The availability of data through e-procurement and the contract repository has significantly lowered the initial and ongoing costs of oversight. Watchdogs and journalists are now able to scrutinize more procurement proceedings, more intelligently refine their searches for suspect procurements and ultimately conduct more research, investigation and analysis. This expanded capacity has increased the likelihood that improper processes will be uncovered. However, there are still gains to be made by further lowering those costs. Data should all be proactively released in machine-readable bulk formats, which would save CSOs and researchers significant costs, thereby enabling them to better focus their resources on expanding their oversight work.

Our interviews indicated that in Slovakia, formal mechanisms and institutional means of sanction are not currently very effective. This only serves to highlight the importance of informal enforcement mechanisms, namely public pressure. Our respondents indicated that when disclosure has led to real results, it has been because of sustained media attention and public outcry. And, according to the journalists we interviewed, the training, data accessibility work and analysis done by specialist transparency organizations like TI-Slovakia and Fair Play alliance is critical to their ability to cover procurement and corruption. In this particular case, lowering barriers for civil sector watchdogs (and enabling more sophisticated analysis) by giving them access to machine readable data should be understood as directly strengthening the efficacy of public pressure and informal sanctions. When formal sanctions don’t work, this is all the more crucial.

Our respondents were mixed but generally pessimistic about the extent to which recent reforms have ultimately altered the behavior or incentives of officials. Some offered that politicians are more aware of the possibility of scrutiny, but most concluded that relatively little has changed in terms of the overall level of corruption within the tender process.

It is worth noting that even our most skeptical interviewee, Juraj Nemec, did cite the mandatory publication of contracts in the online contract repository as a significant positive step that (at least begins to) curtail post tender manipulations.

Most significantly, transparency alone, it appears, cannot change deeply ingrained corrupt practices in a short time span. Transparency can only highlight the problem, and provide tools for oversight and investigation. Enforcement mechanisms, both formal and informal, must be brought to bear to sanction those whose transgressions are revealed by transparency-enabled oversight.