Public procurement, which accounts for roughly one-third of government spending in OECD countries and up to 50% in developing economies, is well-known as an area associated with high corruption risk. Hence, it is hardly a surprise that a range of policy recommendations from international organizations (such as the OECD), civil society networks (such as the Open Contracting Data Standard), and research projects (e.g. Digiwhist) have emerged to promote anticorruption in public procurement. And one of the most popular prescriptions for achieving this goal is increased transparency. Transparency, of course, can mean different things. For purposes of the discussion here, we will follow the OECD and World Bank in defining “public procurement transparency” as entailing the timely, free, and accurate publication of public procurement documents in a central e-procurement portal in a machine-readable format, with this publication requirement applying to every major step of the contracting process, and disclosing all key characteristics of the tender and contract. (For a comprehensive data template see here).
Research suggests that this sort of transparency does make a difference in terms of bidder numbers and composition. Yet it remains an open question whether public procurement transparency is necessary or sufficient for controlling corruption in public procurement. Indeed, if one looks at a sample of European countries’ public procurement transparency and their suspected corruption risks, one finds a surprising result: the best governed countries in Europe have the lowest levels of transparency in public procurement.
Consider, for example, the monetary thresholds (for contract value) that trigger mandatory public advertisement of government contracts. If these thresholds are high, a lot of public spending goes unnoticed by potentially interested bidders and civil society monitors. But, as the bar graph below shows, these monetary thresholds tend to be lowest in high-corruption-risk countries such as Portugal, Cyprus, Armenia, or Georgia. In contrast, well-governed countries such as the Netherlands, Germany, or Austria only require publication of contracts above the higher thresholds set by EU Public Procurement Directives.
Consider next, the question whether the country maintains a single national website for public procurement information—which can decrease the cost of obtaining information and finding relevant tenders. Austria, Luxembourg, and Sweden, three high integrity countries, stand out by not even having a public platform, only private portals; Germany and Italy also limit transparency in procurement by having multiple partially overlapping platforms, making it difficult even for researchers to understand which tenders appear on which site (for details see Digiwhist).
Perhaps even more important than the monetary thresholds or accessibility of the websites is the amount and type of procurement information that must be publicly disclosed. European countries’ national reporting requirements vary widely. The UK is at one extreme, only requiring publication of a handful of key variables such as the name of the winning firm and the contract value. At the other end of the spectrum are countries like Hungary and the Czech Republic, which require publication of over 200 variables for almost all contracts. (These variables include things like the details of legal remedy bodies, scoring rules, and product descriptions.) In Slovakia, even the full contracts and the submitted bids are publicly available. (All that said, only one well-country — Norway — reports the actual payments during the implementation of the contract.) The map below–where darker shading indicates that more information is available–illustrates the variation.
One might object that the formal requirements on the books matter less than what happens in practice. Remarkably, though, when one focuses on the quality of the actual data reported, the patterns identified already continue to hold: countries with the highest amount of missing or erroneous information are the best-governed countries of Europe: Sweden, Finland, Switzerland, or Luxembourg, while the countries with more complete records are include many countries widely perceived as being highly corrupt: Slovakia, Iceland, Romania, or Hungary.This is illustrated in the chart below, where the length of the horizontal bar indicates the percentage of erroneous data.
In sum, looking across a range of possible measures, it seems that transparency in public procurement is inversely associated with perceived quality of governance: countries with high-integrity public institutions tend to have the lowest levels of transparency, while countries with high corruption risk institutions tend to have the highest levels of transparency in public procurement. What’s going on? Consider two possible interpretations.
- First, perhaps transparency in public procurement (on the strong definition of transparency used here) is not a necessary condition for maintaining integrity. Indeed, it might not even be particularly strong contributing factor. Maybe other, less stringent forms of transparency (such as local advertising) are sufficient. Or perhaps other good-governance institutions (such as a meritocratic bureaucracy, or an independent and well-resourced judiciary) could step in and fill the gaps left by insufficient transparency. Importantly, on this interpretation, a high degree of transparency in public procurement might still be necessary for the transition from a situation of high corruption to one characterized by high integrity.
- Second, a grimmer alternative is that transparency is indeed fundamentally important for maintaining integrity in public procurement, and that many of the countries perceived to be of high integrity are much less clean than we thought. Perhaps our perceptions of good public institutions are biased—for example, the prevalence of petty bribery in a given country may color overall corruption perceptions but may not be that closely correlated with high-level procurement corruption. Such an explanation is supported by the below graph showing the distribution of Romanian and Swedish municipalities according to their share of single bidder contracts in 2015 (i.e. nominally competitive contacts where only one company submitted a bid). Single bidding on competitive contracts is an objective corruption proxy increasingly used in academic research and policy making (see for example here, here and here). What is apparent is that the distribution across municipalities within each country of the frequency of such contracts is rather similar. (Only the extremes differ, with Romania having somewhat more high-risk municipalities, and fewer low-risk municipalities.) If corruption perceptions are driven by salient extreme cases, these two countries are likely perceived to be more different than they actually are.
While the association between levels of transparency in public procurement and control of corruption is by no means decisive evidence on the causal relationship between these two variables, it is nevertheless informative, and ought to prompt more systematic and careful inquiry into whether transparency is necessary for maintaining integrity in public procurement, and whether countries currently perceived as having relatively “clean” procurement systems deserve that reputation.