Why transparency and competition are critical to infrastructure procurement
Learn how transparency and competition increases the outcomes of infrastructure projects
By AnsaradaFri Mar 03 2023Tenders, Audits and compliance, Governance Risk and Compliance
It is estimated that globally, governments spend around US$9.5 trillion on public procurement contracts annually. A sizable percentage of this procurement is for public infrastructure, built to connect people; provide access to jobs, communities, and goods; and deliver vital social services. According to the World Bank, “public procurement is a fundamental, crucial component of democratic governance, poverty reduction, and sustainable development.”
In the context of this article, ‘competitive’ is defined as being open to all and transparent is defined as all information and decisions are shared with all parties. Without transparent and competitive procurement, the ability of the public sector to deliver critical infrastructure and related services in a timely and cost-efficient manner is severely curtailed.
When transparency and competitive accountability measures are not enforced, institutional corruption by government elites and private sector collaborators often results in the embezzlement of government fiscal resources and lost opportunities for the delivery of effective, safe, and sustainable infrastructure. In the European Union for example, corruption in public procurement amounts to two-thirds of procurement inefficiencies.
Why is transparency and competition important in government infrastructure procurements?
A well-performing and transparent public procurement system increases the private sector’s confidence in government and private sector competitiveness. This is particularly important for the private sector’s ongoing participation in procurements who are weary of investing millions of dollars on preparing bids on rigged procurements.
Many reputable companies will not bid on risky procurements in countries where there is a suspicion that procurements are rigged in favour of well-connected bidders. This diminishes the benefits of competitive procurements.
Transparent procurements level the playing field for small and medium-sized bidders as well as new innovative businesses that are interested in entering the infrastructure market. Competition also opens up opportunities for sustainable partnerships, innovation, and effective collaboration between private and public sector stakeholders.
Consequences of poor procurement process transparency
When corrupt procurements are exposed, there is a symphony of consequences that arise, including the cancellation and delay of the procurement process, delayed delivery of the project, costly penalties, and the possibility of companies being blacklisted from future bids. This is particularly true for infrastructure procurements launched by donor and development banks which have mutual debarment agreements for companies convicted of procurement fraud.
A particularly well-documented example is the case of a well-known engineering, procurement, and construction consulting firm which was sanctioned by the World Bank in 2013 because of allegations that it engaged in misconduct during the procurement of two World Bank financed projects, the Padma Multipurpose Bridge Project in Bangladesh and the Rural Electrification and Transmission project in Cambodia.
The ramifications for this firm were substantial. As a consequence of the exposed corrupt practices, the firm and one hundred of its affiliates were debarred. It was only in 2021 that the debarment ended because of the corrective remedial steps the company had taken. Remedial steps included the appointment of a Chief Integrity Officer, annual anti-corruption training, mandatory due diligence for all third parties, and the creation of a procurement compliance investigation team.
If robust procurement process tracking and documentation tools had been in place, this and similar events could have been prevented.
What does best practice transparency look like in a procurement process?
The use of procurement process tracking and documentation tools play a key role in enhancing transparency. They prevent the gaming of the procurement system by nefarious actors. However, governments need to also enact mandatory institutional procurement transparency and competitive policies that are mandatory for all public sector procurement officers. This requires government procurement officers to be receptive to the use of emerging procurement tools that automate and enhance process and probity. In addition, procurement legal frameworks should include clauses that mandate that the private sector is also held accountable for any corrupt procurement actions.
To achieve full procurement probity, it is essential that apart from institutional capacity building, government institutions also embrace a secure, centralized and automated procurement management platform that augment the following during the procurement cycle:
- Track all procurement activity - Implement, manage and prove equal access to documents and fairness of process for all stakeholders involved. Prove unfaltering due-diligence and governance at every step, protecting the project and its stakeholders from potential legal challenges and resulting reputation damage. Automate all legal requirements for activity tracking, including Q&A for probity and audit purposes, and take repetitive manual work out of the equation.
- Increase document security - Maintain control over document lifecycle distribution and access, preventing any attempt to nefariously tamper procurement information. There are now procurement platforms that provide the ability to self-destruct files remotely, providing control over documents even if they’ve been saved externally. This comes in handy when document access needs to be revoked from any stakeholder at any point of the procurement process.
- Set document hierarchy permissions - Control document rights based on proprietary and need to know considerations from general access to restricted access for bidders.
- Manage stakeholder communications in one platform - Allow bidders to ask for clarification on the RFP documents, and the evaluation teams to ask clarification questions on bidder submissions – keep questions and answers accessible and auditable within a single location.
- Enable secure online submissions - Handle bidder submissions securely within a single controlled environment, keeping bidders’ identities, files and confidential questions completely segregated.
- Enable the evaluation of submissions online - Advanced procurement platforms provide robust submission evaluation tools to enable the procurement officer to set the project’s evaluation criteria and create reports that individual evaluators and teams can complete. Once the evaluation phase is complete, a full report extract can be used for the award process.
- Long-term and secure storage of procurement files - Avoid storage of sensitive documents in disparate systems during and after the procurement process. Store and access records and documentation securely and indefinitely in one place, on the cloud.
Procurement probability will be enhanced if effective e-tools that address the above listed needs are employed in a collaborative manner with all procurement stakeholders including the private sector. This includes assessment of all document processes, the identification of document storage goals and oversight roles, the implementation of document retention schedules, the actual storage facility (paper or digital), and real-time automation of documents with information flows.
Proven transparent and competitive procurements will increase the confidence of the private sector and make them more willing to participate in procurements that are not biased to “favoured” bidders. It will also lower the risk of costly and time-consuming procurement bidder challenges. Additionally, meticulous archiving of all procurement information will lay the foundation for informed post-procurement project management procedure and decisions.
Ultimately, the employment of modern, digital procurement tools enhances the transparency and competitiveness of government procurement.
The author, David Baxter, is a Senior PPP Advisor to the International Sustainable Resilience Center (ISRC) located in New Orleans. Additionally, he is a steering committee member of the World Association of PPP Units and Professions (WAPPP). During 30 + years of international development consulting he has worked in Asia, Africa, the Middle East, Europe and North and South America. David has collaborated on infrastructure policy, project development, and project procurement for institutions such as the World Bank, Islamic Development Bank, African Development Bank, USAID, and the Millennium Challenge Corporation (MCC).David Baxter, Senior PPP Advisor, International Sustainable Resilience Center (ISRC)