Links I Liked [Public Procurement]

1. Open Contracting Data Standard project. Just come across this the other day and I think it is a great idea, although on the long run my vote is for a blockchain type of solution.

2. Draft new public procurement law in Spain is under fire (Spanish only). The draft transposition proposed by the Spanish Government has been criticised by the Social and Economic Council which is technically part of the Government and has the power to provide opinions on draft laws. Full report (Spanish only) is available here. The SEC criticises the Government for not coming out strongly against abnormally low tenders and wants to include some sort of social clauses that would make bids from suppliers in countries with lower social standards, calling it "social dumping." 

3. Skills training programmes do not work in international development. This is not procurement focused, but the criticism is valid in our field. Even taking into consideration that my belief that better prepared procurement officials are needed.

4. Transparency International keeps driving the anti-secret companies crusade forward. I suspect that when "true owners" are mentioned effectively they mean "true beneficiaries". 

5. Milton Keynes Council loses case, will have to pay damages. Judge Coulson decided not to re-award the contract to plaintiff and considers damages to be an appropriate remedy. Full case text here.

Slovakia, public procurement and transparency

Transparency International put out a detailed report about the experience in Slovakia of mandatory advertising of contract award information. I am a huge fan of contract award transparency and am always on the lookout for things like this report which is full of interesting findings.

Apparently Slovakian contracting authorities have to publish the contract award information since 2011 and covers contracts both above and below the EU thresholds. The result is that a plethora of contract information is now available online and Slovaks are making good use of it: apparently the database website gets 54,000 visits...every month. That is a lot of people for such a small country. I wonder how many are from citizens and how many from suppliers trying to figure out how the market is working and what prices are being paid (I do not see this as negative, but Albert probably objects).

What about the effects of this radical transparency? On the one hand...

On the plus side the report claims the accountability brought by the interest citizens show on the information, plus the media is reporting more and more cases. This can be a double edged sword as Gustavo Piga told me: more information in the hands of good journalists is great, in the hands of bad journalists it's a nightmare. I can totally relate to that. As a lawyer one of the cases I was involved in was plastered all over the press. Obviously, the "journalist(s)" only presented one side of the story and had no interest in the actual truth. The authors also mention this as an issue.

Another positive finding claimed by the authors is that the radical transparency led to higher participation in tenders. There may be some correlation between transparency and more participation and perhaps suppliers are more confident that the increased transparency leads to reduced foulplay, but I saw no evidence of causation. In my view, the increased participation rate is probably due to a combination of factors wider than just transparency. Moving procurement online (cradle to grave e-procurement) seems to me as a bigger reason and one that can be married to the more difficult economic times which lead to suppliers having to compete more fiercely for business.

Increased transparency reduces the incentive to use non-transparent procedures as the benefit of the non-transparent procedure disappears if at the end you need to make the end result public. The authors mention the reduction in non-transparent procedures but make no claim about the connection to the transparency reform.

Another positive finding is a lower perception of corruption. I agree that putting all the information online can contribute to dispel foulplay myths surrounding many contracts, thus contributing to a reduction on corruption perception levels. Furthermore it apparently also led to a reduction in queries from the public (makes sense as well), thus reducing the burden on contracting authorities to provide that information time and time again with each request.

On the other hand...

The authors looked into costs and concluded that apart from startup costs (ie, systems and moving everything online) the marginal cost of uploading the information of each contract to the database is quite limited. Although it seems the data came from empirical research with only 4 authorities and it would have been preferable to test it wider, this seems a reasonable finding. I would add that we can reduce the marginal cost to zero with proper e-procurement software (ie, getting software to do it automatically). That is a hint for platform providers as other countries (such as parts of the UK) want to move in a similar direction.

I am less convinced however by the dismissal of collusion and cartels. The authors state that "As for fear of collusion in tenders or loss of interest of companies in dealings with the state, we find little evidence of their existence." Little evidence is one thing, lack of evidence another. I suspect they meant the latter. It is a well known fact that identifying cartels is difficult without whistle-blowing so the absence of evidence is not the evidence of absence. I am not sure the authors dug deep enough to reach the latter (Am I channeling Albert here?) and have made similar comments about Portugal in the psat. The contrarian argument made by the authors is that even with the added transparency, average tender participation numbers have crept up. In my view, it indicates that i) suppliers are discounting the fact the contract will be published; ii) in general, competition appears to have improved even with the added transparency. Additionally, as I mentioned here before more information tends to make markets better (by reducing arbitrage) not worse, except for the cases where there are underlying conditions for cartel formation. More information makes life difficult for the insiders who benefited from access to the decision-makers.

Issues

The authors highlight the lack of compliance monitoring as one of the current issues in the system. Compliance is still not 100%, contracts miss vital information and there are reports of contracts "disappearing" from the register. This will always be a problem with centralised systems, or any system that uses human intervention for that matter. I will take the bait and plug again my idea of a blockchain type of interface to deal with contract information and feedback.