Let’s ‘think different’ about procurement

This article was originally published here by Apolitical and forms part of a series on public procurement reforms that we will be republishing here.

In 1997, Apple was a niche brand with some devoted followers hanging on from the early days in the 1970s and 80s.

With Steve Jobs back at the steering wheel, after a brief stint away where he founded the computer and software company NeXT, Apple kicked off what is considered to be one of the greatest turnarounds in business history.

Jobs began a campaign that completely reinvented the identity of a company that essentially sells a commodity: computers. The campaign wasn’t about the product (a faster computer with more memory and a better graphics card), it was about what you could do with it, what it enabled you to do more of.

The campaign imagined that if Einstein were alive, he would have used a Mac to revolutionise physics. “Think different” became the new company slogan.

Government has a largely untapped opportunity to think different: in public procurement and contracting.

Just like the computer industry saw computers as merely a product, public servants see public contracting just as a box-ticking, paper-based, risk-averse chore – not as a way to think about how to use it to improve public services and citizens’ lives.

Governments don’t seem to know what they are buying, from whom, when and for how much. Transparency is generally seen negatively by government officials: it costs time and trouble, and they risk getting called out for small technical mistakes. This makes it easier to go to the same reliable old companies again and again, rather than embracing innovation.

Public contracting makes up a substantial part of the work government does. One in every three public dollars globally is spent on a contract with a company, some $9.5 trillion a year. Public contracts really matter, delivering vital goods and services to the public such as medicine, schools, roads and parks.

“We need to shift from paper documents to data and reinvent procurement as a smart digital service shaped around users”

For these reasons, and many more, we need to shift from paper documents to data and reinvent procurement as a smart digital service shaped around users.

(How to) think different

Our work at the Open Contracting Partnership is all around supporting that transition. We are a non-profit working across government, business and civil society in more than 30 countries to bolster a transformation in procurement so it delivers a radically improved service, ultimately to get everyone, everywhere, the public goods, works and services they need — and deserve.

We try to help innovations jump scale to global impact and foster a culture of openness about the policies, tools, data and results. Our goal is not to deliver a small boost in transparency: we want a transformational shift in how business is done.

Procurement should be fair and efficient, and the only way to achieve that is through openness. Openness is at the core of open contracting reforms and successful digital government, and it should be embedded by design around the policies, teams, tools, data and results needed to deliver impact.

Open contracting envisions this change will happen in four steps: starting with user-driven and goal-oriented reforms, building digital contracting services using open data, embedding feedback and collaboration throughout, and, ultimately, making sure reforms stick and enable systemic change.

Reforms based around user- and outcome-driven rethinking of public contracting and creating radically improved open data for users to drive improvements are resulting in impressive impacts – from savings to increased efficiency and competition, busted cartels and improved public services and public accountability.

A standard for better procurement

A good example for goal-oriented reforms comes from Colombia. In 2016, the then secretary of education of Bogotá, Maria Victoria Angulo, worked with the national public procurement agency to rethink how they provide school meals. In the past, it had been a logistical nightmare, with widespread perceptions that suppliers were inflating prices and food quality was poor.

Using open contracting data for market research, analyzing and sharing the data from prior contracts, the city’s education department and the national public procurement agency were able to entirely re-engineer the process to provide more than 800,000 high-quality meals for school children each day and break up a US$22 million price-fixing scheme. The number of suppliers increased from 12 to 55. Managing contractors, suppliers and the delivery of school meals directly had a positive effect on government efficiency, quality control and achieving value for money.

Standardized open data and tools, the second component of open contracting reforms, can help drive analysis and use of procurement information beyond just the government. After all, to understand how to win contracts with the government, businesses may want to see what the government is planning to buy and analyze the opportunities themselves.

Open data helps connect the information about what’s planned in the budget to how it’s assigned and spent through public contracts, allowing anyone to follow the money. It also enables the opportunity to build digital services that automatically gather the latest data and analyses and visualize it, for example via an app on your mobile. Think from “When’s your next bus coming?” to “When’s the next tender out for painting services?”

To solve this challenge, we developed the Open Contracting Data Standard, which more than 20 countries and cities around the world now follow. It’s a free, non-proprietary data schema that facilitates publishing data for the full contracting process from planning to delivery. This has helped identify $140 million extra spent because of payment delays in Paraguay and build red flag dashboards in Chile and Ukraine to better track risks in procurement.

“Improving transparency without improving accountability just doesn’t cut it. It takes political leadership to embed data, monitoring and feedback into the contracting system, decisively shifting the equilibrium of interests so ordinary people and businesses win”

The public contracting process also needs to be open to feedback. Vendors and government should be able to provide feedback on how well each other performs, whether the company delivered the service or if the agency paid on time.

Citizens and users of services should be able to provide feedback to improve the service. Anyone who might be affected by a decision should be able to provide feedback and participate at the right time. This will build the trust needed to improve and innovate procurement.

Lastly, we don’t just need policy and technology reforms; we need a change in culture toward openness, engagement, and results. This takes time: we see open contracting as a journey rather than a single destination.

The more users are engaged and the government responds to that engagement, the further and deeper insight and reform will go and the more likely that change will be embedded and defended.

Improving transparency without improving accountability just doesn’t cut it. It takes political leadership to embed data, monitoring and feedback into the contracting system, decisively shifting the equilibrium of interests so ordinary people and businesses win. They then have a stake in defending progress.

Transparency is a must, not a nice-to-have

By building public procurement reforms around these four cornerstones guided by a principle of openness, a paradigm shift, we can see transformational impact. Ukraine has been one of the leaders that has implemented open contracting at the core of its procurement transformation.

The reforms, initiated in 2014, were first and foremost a triumph of government, business and civil society working together. Putting the Open Contracting Data Standard at the heart of the country’s new e-procurement platform led to a healthy ecosystem of tools built around it, including a citizen monitoring platform, a powerful business intelligence tool and a tool for identifying corruption risks.

Together, these platforms attracted around 220,000 users. That’s impressive. But what really matters is the fix rate – the number of issues that were raised by citizens that got resolved. The citizen monitoring platform Dozorro currently unites 22 civil society organisations that are actively monitoring procurement and use the platform to identify suspicious activity.

Of more than 5,000 cases of suspicious activity reported over a six-month period, around half were resolved, including more than 1,200 cases where tenders were re-awarded as a result of the feedback – a fix rate of 25% of all cases.

This is the kind of change in culture that we are aiming for. It will take some time, but it will emerge from an open, rather than closed, process.

Warren Smith, director of the UK’s Digital Marketplace program, has been thinking hard about how to support this shift: “User-centred design should be the norm. This requires first understanding what the problems are that you’re trying to solve, for whom, and who needs to be engaged. Fundamentally, open contracting is about how procurement data can help solve people’s felt needs.”

Transparency is not just a nice concept put forward by do-gooders. Academic research shows that improved openness and transparency is good for public integrity, value for money and competition. A study of more than 3.5 million government contracts across Europe determined that every additional item of information shared about a tender decreases the risk of a single-bid contract. This matters because single-bid contracts are both a governance risk and over 7% more expensive than the norm.

But too many myths keep government from making contracting more open and transparent. Concerns about commercial confidentiality, impacts on competition and potential risks of collusion from making more data available continue to deter decision-makers from taking the bold steps needed to transform contracting.

However, over 70 experts from more than 20 countries have found surprisingly little evidence that supports keeping contracting information secret.

Over the next months, in a number of articles on Apolitical, we’ll dig deeper into the kind of initiatives (and the champions behind them) at the cutting edge of innovation and thinking differently to:

• Make procurement about goals and solving problems, not ticking boxes.
• Make public contracts much simpler and shorter. It shouldn’t take nine hours without bathroom breaks to read a standard UK government IT contract.
• Provide smart digital services enabling government, business and civil society to work together and look at the data, not the paper.
• Get business excited about working with the government (in cities like Baltimore, less than 1% of business is registered to receive notifications on local bid opportunities) and reduce hurdles for women-owned businesses and small businesses.
• And finally, we will dig deep into the opportunities for improving procurement in frontline areas, such as public health and infrastructure, where investments are huge and managing risks is enormously challenging, especially in changing political and environmental times.

Public contracts matter. We are in the foothills of what is possible in making a critical government function fundamentally better. So, to the crazy ones: it’s time to challenge the status quo and think different and think open around public procurement.