The benefits of open and participatory public procurement are increasingly being recognized by international bodies such as the Group of 20 major economies, the Organisation for Economic Co-operation and Development, and multilateral development banks. Value for money, more competition, and better goods and services for citizens all result from increased disclosure of contract data. Greater openness is also an effective tool to fight fraud and corruption.
However, because public-private partnerships (PPPs) are planned during a long timeframe and involve a large number of groups, therefore, implementing greater levels of openness in disclosure is complicated. This complexity can be a challenge to good design. Finding a structured and transparent approach to managing PPP contract data is fundamental for a project to be accepted and used by its local community.
There are already solid examples of greater openness and more detailed policies on contract disclosure. For example, Mexican President Enrique Peña Nieto announced at last year’s Open Government Partnership meeting in Mexico City that the country will use open contracting in building its newest airport and selecting businesses to deliver services at the facility. It’s a significant announcement, because the airport is one of the largest infrastructure projects in Latin America this decade, and the largest one in Mexico.
Open contracting facilitates data disclosure
In open contracting, all data is disclosed during the public procurement process—from the planning stage, to the bidding and awarding of the contract, to the monitoring of the implementation. A global open source data standard is used to publish that data, which is already being implemented in countries as diverse as Canada, Paraguay, and the Ukraine. Using open data throughout the contracting process provides opportunities to innovate in managing bids, fixing problems, and integrating feedback as needed. Open contracting contributes to the overall social and environmental sustainability of infrastructure investments.
In the case of Mexico’s airport, the project publishes details of awarded contracts, including visualizing the flow of funds and detailing the full amounts of awarded contracts and renewable agreements. Standardized, timely, and open data that follow global standards such as the Open Contracting Data Standard will make this information useful for analysis of value for money, cost-benefit, sustainability, and monitoring performance. Crucially, open contracting will shift the focus from the inputs into a PPP, to the outputs: the goods and services being delivered.
Benefits of open data for PPPs
We think that better and open data will lead to better PPPs. Here’s how:
1. Using user feedback to fix problems
The Brazilian state of Minas Gerais has been a leader in transparent PPP contracts with full proactive disclosure of the contract terms, as well as of other relevant project information—a practice that puts a government under more scrutiny but makes for better projects in the long run.
According to Marcos Siqueira, former head of the PPP Unit in Minas Gerais, “An adequate transparency policy can provide enough information to users so they can become contract watchdogs themselves.”
For example, a public-private contract was signed in 2014 to build a $300 million waste treatment plant for 2.5 million people in the metropolitan area of Belo Horizonte, the capital of Minas Gerais. As the team members conducted appraisals, they disclosed them on the Internet. In addition, the team held around 20 public meetings and identified all the stakeholders in the project. One notable result of the sharing and discussion of this information was the relocation of the facility to a less-populated area. When the project went to the bidding phase, it was much closer to the expectations of its various stakeholders.
2. Making better decisions on contracts and performance
Chile has been a leader in developing PPPs (which it refers to as concessions) for several decades, in a range of sectors: urban and inter-urban roads, seaports, airports, hospitals, and prisons. The country tops the list for the best enabling environment for PPPs in Latin America and the Caribbean, as measured by Infrascope, an index produced by the Economist Intelligence Unit and the Multilateral Investment Fund of the IDB Group.
Chile’s distinction is that it discloses information on performance of PPPs that are underway. The government’s Concessions Unit regularly publishes summaries of the projects during their different phases, including construction and operation. The reports are non-technical, yet include all the necessary information to understand the scope of the project.
Furthermore, during the course of a PPP, additional work emerges frequently, such as adding more structural supports to ensure that a bridge can withstand an earthquake. Chile created new accountability mechanisms in 2010 to handle additional work on projects underway. The country introduced additional bidding for new work that emerges during the course of a project, and dispute-resolution mechanisms that have reduced the extent of renegotiations and improved the quality of competition for contracts.
An argument for radical transparency
The key to further progress is making all public contracting information open. “Open” means not only that information is available, but also that it is readily shareable and usable, and in data formats that enable large-scale analysis.
Siqueira, writing in the World Bank Group’s PPP Blog, has proposed this type of “radical” transparency: “Transparency makes it difficult for either party to disrespect the contract. When brought to the light of the day, decisions tend to become better, and opportunistic behavior is highly discouraged.”
Equally important, open contracting makes financial sense. Under open contracting, ratings for Minas Gerais increased, providing better conditions for the state to borrow more money. Indeed, the state’s strong fiscal management system, including the publication of its contracts, led Standard & Poor’s to raise its credit rating in 2012.
Increasingly, private-sector financing will be needed to finance the growing demand for infrastructure projects that address the UN’s Sustainable Development Goals. The infrastructure goals alone carry a hefty price tag. We need to ensure that money is well spent and results in real benefits for the world’s poorest people.
From the Multilateral Investment Fund Trends blog