Senior fellow Charles Kenny aruges that the United Kingdom is well positioned to push for global transparency in procurement through publication of government contracts
The following column originally appeared in The Guardian.
As the new secretary of state for international development, Justine Greening, begins her first full week at DfID's headquarters, it's a good time to propose that the department supports a new global initiative to add transparency to government financial transactions worldwide. The idea is a simple one: governments should publish the contracts they sign with companies to deliver goods and services. And the UK is in a uniquely strong position to promote the agenda.
Every year, governments worldwide sign contracts with private companies to provide around $9tn (£5.6tn) in services – from running prisons to constructing roads to building rockets. The contracts between procuring governments and their suppliers outline who is to be paid what to deliver which services and when. But those contracts are rarely published, which is a shame, because the information they contain is incredibly useful.
For bureaucrats, access to a number of completed contracts to provide the same kinds of goods or services (a 10km tarmac road over flat ground, or 10,000 packages of medical gauze, for example) provides models to emulate or mistakes to avoid, and can be used to build up more accurate cost and time estimates. That is a real issue in government contracting, where planning expert Bent Flyvberg has estimated that large infrastructure projects consistently come in over budget by between 20 and 45%.
For companies, meanwhile, looking at existing contracts can help firms to decide if they want to bid when that contract is up for renewal, and provides information that will allow them to put together a cheaper, better bid. Again, that's a real plus in situations when completing a bid on a complex construction project can cost millions. And it has knock-on benefits for governments – because competitive bidding leads to lower prices. An analysis of World Bank-financed infrastructure contracts in Africa, for example, found a strong correlation between cost overruns on contract delivery and low bidder competition for the original contract.
Finally, for citizens, access to contracts allows people to know if they got what their taxes paid for. Was the new school built with the number of classrooms and quality of materials specified in the contract, or did contractors scrimp on quality and keep cash that should have gone on plaster and cement? Again, this can be a serious problem. An audit in 2010 of 18 Zambian road projects jointly financed by the government and donors found that in all projects substandard cement had been supplied and that in half the projects the concrete was too weak. Sometimes, contractor fraud is linked to government corruption, but often bad contract outcomes are the result of incompetence, changing circumstances or simply poor procurement practices. Whatever the cause, contract transparency that makes it easier to understand when and why something went wrong can help make government procurement function better.
And contract publication is a global issue, not just a domestic solution to a development challenge. First, poor contracting outcomes aren't limited to the developing world. In the US, for example, $745bn in federal contracts experienced significant overcharges, wasteful spending, or mismanagement over the period 2001-2006, suggested a recent Congressional report. Second, and especially for small economies with a limited stock of domestic contracts, being able to draw on a global collection of existing models in order to better write and price their own government's next contract will be a huge benefit. Third, contracts often cross borders as firms in one country provide services to people in another. Global contract publication will allow firms and civil society organisations to better monitor such cross-border contracts – allowing civil society groups in Ghana to hold a UK-based DfID contractor to account, as it might be.
Twenty years ago, the cost of physically publishing contracts that can run to thousands of pages would have been prohibitive. Today, the vast majority of contracts are available electronically. Most governments haven't altered their practices to account for that, and inertia is probably the biggest factor. The most common argument against contract publication – that parts of contracts sometimes contain commercial or national secrets which would be complex and costly to redact – doesn't stand up. And we know that not least because some governments have started publishing the text of their contracts. They include the state government of Victoria in Australia, the US county of Miami-Dade, the federal and state governments of Colombia, and the UK.
The UK system isn't perfect: searches on Whitehall's contracts finder frequently turn up documents with entire pages of price data blanked out. But the fact that Britain is already a leader in in contract publication is one good reason why DfID is well-placed to push the global agenda. Add to that the department's key role in transparency initiatives covering extractive industries, medicines and construction that have been vital to opening up contract information in those sectors. And, finally, this year the UK is the co-chair of the Open Government Partnership, an international grouping of governments and civil society organisations that promotes commitment to greater transparency by member countries.
A global contract publication movement is a simple idea that doesn't require a vast new international bureaucracy to oversee. It could start with a small secretariat of a few people, housed within an existing transparency organisation or the World Bank (in its role as a major international financier of government contracts, and as the sponsor of open contracting). The secretariat would support the development of guidance and sharing experiences in areas including publication format and commercial secrets and confidentiality.
The bigger challenge is political – getting national leaders to sign on. This year, the UK has both the credibility and the bully pulpit to push for that.
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