Topic outline

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  • Introduction

    This chapter will build knowledge of key concepts related to Open Contracting. The chapter, including this introduction, is structured in seven parts with one quiz.

     Contents of this course:

    1. Introduction

    2. Corruption in Health Procurement

    3. The Impact of Health Sector Corruption on Society

    4. Open Contracting and it's Benefits

    5. The Five Main Impacts of Open Contracting

    6. Value for money & Value for many: Video on Open Contracting from Hivos 

    7. Two Quick Questions

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    • This topic

      Corruption in Health Procurement

      Every year, governments spend huge sums of money through contracts, on everything from pencils and paper to building major infrastructure projects such as airports or hospitals. Open contracting is the bricks and mortar of public benefit, where taxpayers’ money gets converted into schools, roads and hospitals, into things that ordinary people really care about. 

      This global spending amounts to over US$9.5 trillion each year, a massive 15% of global GDP. That is a pile of one dollar notes stretching from the earth to the moon – and back.1

      However estimates suggest that 10 to 25 per cent of global spending on public medicine procurement is lost to corruption while procurement related issues have led the World Health Organization to conclude that 20-40% of health financing does “little to improve the health of everyday people”.2


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      • The Impact of Health Sector Corruption on Society

        When corruption occurs in public health procurement, the quality of health services decreases and citizens end up paying the deficit, partly as a result of funds being misallocated. However, corruption in the health system can also result in medicine shortages, inflated drug prices and the infiltration of falsified and substandard medicines into the health system. 

        Such issues will continue to disproportionately affect the users of public healthcare systems, particularly in low and middle-income countries, where resources are already strained. This is exacerbated by the escalating challenge of a rapidly ageing population, which in turn increases the prevalence of non-communicable diseases, and with it, the financial burden of procuring medicines to treat such diseases. Furthermore, the unpredictability of major health crises also serve to further undermine the future stability of global healthcare. 1

        However, healthcare providers, community organisations and the private sector have, through open contracting, the ability to drive significant changes­­­ to the structure of public health financing, facilitating its stabilisation, improving its efficiency and ultimately saving lives.


        Read about corruption in health from the point of view of real people
        here


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        • Open Contracting and it's Benefits

          Open contracting is the practice of publishing and using accessible information throughout the procurement cycle to ensure that the vast sums of public money are spent honestly, fairly, and effectively.

          The Open Contracting approach uses government transparency to foster participation between public bodies, business and civil society with the collaborative aim to boost the integrity, fairness and efficiency of public contracting.

          • Governments can use open contracting to obtain relevant information on contract performance; the use of open contracting can also encourage value-based procurement decisions, and mitigates the risk of awards being reversed, or projects being terminated, due to faulty processes. 
          • For businesses, open contracting data can unlock a better understanding of opportunities in markets, which in turn may support small and medium enterprises in deciding whether or not to compete for public contracts.
          • For civil society, open contracting can support more targeted, informed engagement and tracking of project delivery. 

          In short, open contracting can deliver better value for money and offers a range of benefits to different stakeholders.


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          • The Five Main Impacts of Open Contracting

            1. Improved Service Delivery

            Open contracting generates a greater understanding of what is working and what is not working in the health sector, allowing government departments to visibly progress, publicise their successes and ultimately save lives. Open contracting can:

            • Verify whether results are being delivered on the ground
            • Enable CSOs to collect data in areas where government does not have the resources to do so
            • Uncover patterns of ineffective procurement processes
            • Map trends and therefore develop strategies for long term and systematic improvements
            • Facilitate the monitoring of contracts, meaning a reduced chance of unfufilled promises

            In Uganda, it is estimated that over two-thirds of drugs meant for free distribution in the public sector are lost due to theft or are unaccounted for, and that 68-77% of formal charges are pocketed by workers.1







            2. More value for money

            Stakeholders will see increased value for money on their investments as a result of open contracting. Overall, products, works and services will be better quality for less cost, leading to less budgetary restraints in the public health system. Open contracting can:

            • Uncover issues of undue influence
            • Standardise prices, and enable comparison to similar entities
            • Enable procurement officials to have a better understanding of procurement challenges and opportunities
            • Provide increased competition and drive down costs
            • Build integrity and public trust in government

            The UK National Health Service standardised manufacturer and price data for generic products, which were being purchased at different rates by individual trusts. The data was analysed and the opportunities to aggregate demand and leverage collective purchasing were identified, leading to savings of between 15% and 50%.2







            3. Better Business

            Open contracting has a positive effect on private sector growth and competition. This is due to a diversifying of economies and the creation of a more transparent, level playing field for businesses bidding on government contracts. It also encourages small business innovation and participation through facilitating a greater understanding of the market. 

            Open contracting can:

            • Lower investment risks and reduce costs of accessing relevant information
            • Foster innovative approaches to production and promote wider access to dynamic local markets
            • Using an international standard to make intentions of, and efforts for reform, more credible
            • Enable market research. Businesses better understand what makes a winning proposal

            As a result of ProZorro implementation in Ukraine, they received a 50% increase in companies bidding for contracts - helping build business and citizen trust in the government process.3 







            4. Gender Equity

            The utility of open contracting can have a direct impact on the quality and types of health products and services provided to women and girls. Open Contracting can:

            1. Have a favourable impact on the quality and diversity of medicines and medical products used in the areas of family planning, and maternal and reproductive health, such as methods of contraception or treatment for HIV/AIDS.
            2. Enable funds that otherwise would have been lost or inefficiently allocated, to be invested in areas of the healthcare systems that are typically neglected
            3. A baseline for impact and progress of public procurement affirmative action initiatives. 
            4. Laws can be established based on evidence generated by OCDS

            In 2013, the Indonesian government commissioned research that showed male-owned businesses participated in government contracting at a much higher rate than women-owned businesses. Unlike male-owned businesses, the women-owned businesses said limited access to information was a significant barrier.4






            5. Reduction in Inefficient Spending and Corruption

            There is a wealth of evidence showing that companies and governments have consistently used opaque procurement systems as a vehicle for corrupt deeds. In 2015, Global Witness published an investigation uncovering the powerful actors were using a web of anonymous companies to hide their gains at the expense of the rest of the population.

            All stakeholders (civil society, the private sector, government and donors) have an interest in identifying and combating corruption in public contracting. Open contracting can:5

            • Facilitate the close scrutinising of individual procurements
            • Enable the identification of suspicious patterns, and make links between data-sets to map out networks of funding, ownership and interests.

            In Paraguay, open data has led to a reduction in the number of cancelled tenders as well as revealing over-spending and inflated contracts for basic goods at some ministries. Policies on value for money for frequently purchased goods were adopted across the government. 6   

            Icons made by Freepik from www.flaticon.com is licensed by CC 3.0 BY

          • Value for money & Value for many: Video on open contracting

            Take a few minutes to watch this video

              

                 

            Hivos Open Up Contracting from Hivos on Vimeo.

            Discussion Hub: What are your first impressions of Open Contracting? DISCUSSION BOX HERE