February 4, 2013Doug Hadden
Doug Hadden, VP Products
I attended the International Consortium on Governmental Financial Management( ICGFM _ DC Forum last month where Marcela Rozo from the World Bank described the Open Contracting initiative. Her presentation is available and some of my notes are located below via Storify.
Ms. Rozo pointed out that even a 1% improvement in government costs through procurement transparency is material because total annual government procurement is $9.5T. Procurement transparency leads to increased competition and reduced corruption. Jorge Claro, formerly of the InterAmerican Development Bank, and an expert in government procurement at a DC Forum in 2008 suggested that Public Sector Procurement accounts for approximately 15% to 20% of GNP in many countries Procurement has traditionally been poorly managed with inefficiencies adding anywhere between 15% to 20% to the cost of the works, goods and services being procured. Corrupt practices add an additional 15% to 20% to the cost of those works, goods or services In other words, inefficiency and corruption combined could account for 2.25% to 4% of GNP in most countries, thus negating growth – yet there seems to be little concern about this loss of GNP in most countries.
These are staggering figures.
We’ve been delivering government procurement automation including e-procurement portals and transparency for a few years. Many governments have initiated e-procurement portals – but without direct integration to back office procurement and commitment accounting systems. I think that this integration is critical to reducing corruption because it eliminates a point where data can be “treated” manually. It also improves efficiency and ensures that the procurement opportunity was posted only after meeting all fiscal discipline rules. (It’s not unusual to hear about the disconnection between systems so that Ministries of Finance are caught unawares of budget arrears.)
I wrote about performance procurement last year and the need to integrate front and back office processes. Yes, open contracting is an important step towards government value for money. But, tight integration with back-office systems will provide significant improvements in procurement performance.
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