Two Questions for the Open Contracting Partnership

One of today’s more promising global anticorruption movements is The Open Contracting Partnership.  A venture that brings together organizations as different as the World Bank, the Philippines Government Procurement Policy Board, and Oxfam, its goal is to open government contracting to greater transparency and public participation.  As many studies show (click here, here, and here for recent examples), corruption infects all stages of the procurement process  — from skewing the specifications to favor a single firm to rigging the tendering process to rampant cheating in contract performance.  And as many of these same studies argue, less secrecy and more public involvement in the process is one way to curb it.

The Partnership has taken important steps towards realizing these objectives since its launch in October 2012.  It has developed global principles governing contract openness, created a standard format for reporting data on government contracts, collated information on open contracting in the award of natural resource concessions and land, assembled a quality staff and advisory board, and a fostered an enthusiastic global community of practice.

All this is not only welcome but laudable, and the organizers and supporters of the Partnership are to be congratulated for the initiative.  Now that the Partnership is firmly established, however, it is time to address two questions it has so far avoided.

The first question is:  Are there ever circumstances in which less disclosure of information about a contract – involving either its formation, process of award, or execution – serves the public interest?  A reading of the material on the Partnership’s web site would suggest the answer is “no, never,” that more transparency is good and even more transparency is better.

But that answer is wrong.  As procurement professionals and students of public procurement know, there are indeed circumstances where less disclosure is in the public’s best interest.  One example is when government tenders for construction projects.  Disclosure of who is likely to bid, how much is budgeted for the procurement, what firm won the bid, and at what price helps bidders fix the price at levels far above what it would be in an unconstrained market. (Click here for an authoritative explanation of why.)  A second example would be revealing government’s plans for road construction.  If it were known that the government was considering building a road from point A to point B or upgrading an existing stretch of highway it could provoke land speculation if not outright grabbing.

There are two reasons the Partnership needs to be clear that situations exist where transparency in the contracting process is harmful: to maintain its credibility within the procurement community and to avoid contributing to bad policy.  Opening up the contracting process promises to be a long, difficult battle; for those who profit from opaque procedures can be counted to vigorously resist reform. The Partnership needs all the allies it can muster, and two important ones are procurement professionals and students of the procurement process.  It will be easier to garner their support if the Partnership advances an intellectually credible transparency policy rather than one than can be dismissed as naïve and uninformed.

The second reason for offering a more nuanced view of transparency in the procurement process is the risk it could lead to bad policy. Lawmakers might write into procurement statutes provisions mandating transparency in circumstances, like infrastructure procurement, where the harm would outweigh the benefits.

Transparency is a powerful rallying cry, and one can understand why the Partnership might think any qualification would dilute its potency.  But the transparency message can be crafted in ways that preserves its power while acknowledging the nuances involved.

The second question it is time for the Partnership to address is public participation.  As its web site acknowledges, transparency is the first of two steps required to curb abuses in public contracting.  Once information about the contracting process is revealed, there must be someone with the time and expertise to assess what has been disclosed, identify instances of misconduct, and ensure action is taken.  This is the role the Partnership assigns to the public.  “Open contracting truly comes alive,” the Partnership explains, “when champions change policies, institutions and practices.”

But who does the Partnership expect will be these champions?  Citizen volunteers? Will they be willing to devote the time required to monitor contracts of any significant duration?  Will they invest the time required to learn how to monitor more complex contracts?

NGO staff is another possible source of champions.  They can be trained and, if paid, time will not be a problem.  The issue here is sustainability.  Who will fund the NGO?  In the Philippines the NGO Road Watch gained international acclaim with its successful monitoring of all phases of highway construction contracts — from planning and project identification to construction, auditing and monitoring.  Yes, despite the plaudits it lost its funding and had to suspend work.

The Partnership has promised a robust research program “documenting what is working and what is not . . .[and tracking] . . . the spread and effectiveness of open contracting practices in terms of uptake, changing attitudes and impact . . . .”  As a wide-ranging review for DfID concluded, the leap from open data to its use in bring about change is not an easy one to make, and the Partnership should make research on who will take that leap and how a priority.

The Open Contracting Partnership is an important initiative in the fight against corruption.  To realize its ambitious objectives, the Partnership needs to be able to produce solid answers to these and the many other questions likely to arise as it continues to promote openness and public participation in government contracting.

6 thoughts on “Two Questions for the Open Contracting Partnership

  1. Thanks Rick. Thanks for your thoughtful post and the shout out to the Open Contracting Partnership. You are raising great questions for us at the OCP as we finish crafting our strategy now that we are independent of the Bank. Generating evidence to address these kinds of concerns and to learn what is working will be a core part of our strategy.

    I think that we would mostly agree with you and we will post a longer blog here exploring these questions and the early impact that we are seeing in detail. They are important and, as you point out, they are key to fostering credibility with procurement professionals.

    On question 1: I don’t think anyone is asking for indiscriminate posting of immediate information but rather that there is a profound public interest in sharing information that explains procurement and contracting decisions at the appropriate time. There is a great paper by Charles Kenny at the Center for Global Development that goes into publication of contracts and contracting information and sums up the needs and necessary limits in detail here: http://www.cgdev.org/publication/ft/publishing-government-contracts-addressing-concerns-and-easing-implementation

    Some of the concerns from your specific example could also be addressed by using reverse auctions such as in Georgia or Ukraine (I know that these aren’t perfect either). There is often a lot of concerns around publication but if you speak to countries like UK, Georgia or Australia where much of this information is published, it tends to have been less of a drama than is initially supposed.

    Your second question was on who and how the data is being used. Here there is a some really interesting information on our side. I think that, perhaps relatively uniquely among transparency initiatives, there is a very strong private sector data use case for contracting and procurement information, both by companies wanting to know what contracts are coming up and how to bid for them but also by companies raising red flags where procurement processes have been stacked against them. More generally, contracting info seems to be wider public interest that might be supposed. Data from TI Slovakia suggests that almost 10% of citizens – 480,000 people – say they have checked at least one public contract or receipt online since the government began to publish them in 2011, and the main contract registries get around 46,000 visits a month from citizens.

    See here: http://www.cgdev.org/blog/learning-slovakias-experience-contract-publication

    We would completely agree with you though that its is probably not going to be citizen activists who will drive sustained change. The good news is that OCP has data use at its heart through the Open Contracting Data Standard and we’ve thought relatively hard about this and who will use the data and for what. We also did a global review of what information is currently published and by who and matched the two together. The biggest sustained users will be government, the private sector and specific CSOs and we plan to structure our interventions and tools around supporting them.

    Anyway, great questions. Watch this space for a more considered response in the near future.

    • Thanks for the very nice response. I am glad you found the post useful and even happier that the Open Contracting Partnership is alive to the issues I raised.

      Transparency in public contracting is an important weapon in the fight against corruption. But as you acknowledge, if not wielded skillfully it can do more harm than good. My fear is that some (many?) advocates of open contracting don’t seem to be cognizant of this.

      I think the root of the problem is that the anticorruption community does not appreciate how serious the problem of bid rigging or cartelization in public procurement is. Both its frequency and the harm it does is underestimated.
      We of course have little data on how often bids on public tenders are rigged. The one effort to gauge frequency I have seen is Anderson and Kovacic’s analysis of price fixing cases the U.S. Department of Justice prosecuted between 1972 and 1992. https://www.ftc.gov/sites/default/files/documents/public_statements/competition-policy-and-international-trade-liberalisation-essential-complements-ensure-good.anderson/2009procurementmkts.pdf They found more than half the cases arose from bid rigging on public tenders. In poor countries where a much larger percentage of market activity is the result of government purchases, the percentage is surely higher.

      Information on harm is a bit more plentiful thanks the long-running, heroic efforts of an American scholar. Purdue University Professor John Connor reports that the price a cartel sets on a public procurement can be as much as double what the price would have been in an unconstrained market. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2400780 To get a sense of what that can mean for developing countries, consider that for fiscal year 2014 the World Bank committed just over $10 billion for infrastructure, a sector where bidding rigging is rife, to the world’s poorest countries, where the laws against bid rigging are weak to non-existent and the ability to enforce what laws there are questionable. http://www.worldbank.org/ida/financing.html If prices on half the $10 billion were twice what they should have been thanks to bid rigging or even on “just” ten percent, $1 billion. Now consider if a construction industry cartel is in business year after year after year.

      The existence of a competitive market for public tenders is critical not only for deciding what information on a contract to release and when but for whether someone will put that information to use to curb corruption. I agree that private firms can be a significant “user” of open contracting data and harnessing their self-interest in winning contracts by spotting the corrupt behavior of rivals is likely to be more effective in the long-run than relying on citizen volunteers or good governance NGOs to do so. But there has to be genuine rivalry among firms for this to be true, and given how cozy firms in many developing countries are with one another and with procurement staff I fear the necessary rivalry is absent. Every story I read out of Brazil these days adds that fear. http://www.reuters.com/article/2015/06/19/brazil-petrobras-scandal-idUSL1N0Z50JB20150619

      But thanks again for engaging, best of luck on the effort, and yes I shall watch this space with great interest.

  2. Great post Rick! And I love the dialogue with Gavin Hayman. When I wrote my post on the Open Contracting Data Standard last year, your earlier post about how transparency in government procurement is not always a good thing was foremost in my mind. I can’t tell you how many hours I spent puzzling over whether the OCDS would facilitate the formation of cartels or disrupt them — and I’m not sure that I ever came to a satisfactory answer. I came down on the side of the OCDS for exactly the reasons outlined by Gavin in his response to your second question — in my gut, I feel that having sophisticated public entities (like governments, news outlets, and NGOs) keep an eye on public procurement will outweigh the increased risk of cartelization. But I grant that this is a complicated issue and one that deserves more attention than my gut can provide! Thanks again for a great piece and of course I too will be watching this space closely.

  3. Pingback: Disclosing Government Contracts « Another Word For It

  4. Hello Rick, wonderful article and great questions you have raised. The response you provided to the first question would have been spot on for me if in fact, Government officials were excluded from various forms of collusion. In countries like Nigeria, this is not exactly the case. In fact, from some of our assessments, it would seem that the bidders are less united amongst themselves and are more interested in forming ties with people within the procuring entity. As a result, I think it is best that disclosure is as wide and as far reaching as possible. I’m a bit of an extremist, I know, but a certain level of information disclosure starts a conversation around why certain infrastructure costs a certain amount and takes us onto to the discussion on disclosure of standard pricing benchmarks for public contracts. With more people being able to tell how much it would cost to procure a primary health care centre for example (because they can estimate the cost of the materials and the quantity of these materials that would be required for a primary health care centre), if there is an abnormal rise in the cost and as a matter of policy it is in the public domain, then it would generate questions. However, this scenario I have tried to paint is only possible when many more people become numerate on the estimate pricing for public infrastructure and services and such numeracy is fuelled by growing information accessibility.

    This is not to discount the possibility and reality of cartel movement, but in situations where the cartels or individual bidders can only succeed in close association with Government, I think that disclosure across every step in the contracting process would be of greater benefit.

    Of course, in countries such as mine, Nigeria, we also need to develop our frameworks for competition so that we can deal with resulting red queen effects.

  5. Thanks for additional comments Rick. You can see a more detailed response from the Open Contracting Partnership team exploring these topics here: http://www.open-contracting.org/the_more_the_merrier. We agree re concerns of collusion etc.

    It’s important to look at evidence of what has happened in Slovakia, Georgia etc as well as the theory when governments start routine publication of contracts: overall, I think it is pretty positive including on competition. We are seeing this ourselves in our engagement with the Ukrainian government and their new ProZorro.org o-procurement approach. Hopefully we can post our full blog on the GAB as these are important issues.

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