Chapter 1 Introduction
1.1 Background
The competitiveness of a country is essential to its overall national prosperity during the contemporary globalized economy. Many researchers, institutions and studies shows the negative direct impact that corruption has on macroeconomic and microeconomic indicators, such as GDP growth, employment, tax revenues, local and foreign investments and in general its negatives effects on the economic environment and its high political and social cost (Tanzi, 1997) (Tanzi, 2000)
According to the OECD Anti-Bribery Convention 57% of cases of corruption prosecuted are bribes to get public contracts (OECD, 2016), every year, governments spend huge sums of money through contracts, this global spending amounts to over US$9.5 trillion each year, represented 15% of the global GDP. This corruption is partly due to the information about, how, when, and where this money is spent, is often not publicly available.
Frequently, there is limited information in the public record about (a) the planning of public contracts, (b) how public contracts are formed, (c) the content of the agreements; (d) the progress of their performance or (e) the government supervision procedures. This lack of information can make difficult to assess whether the government is getting good value for money or whether the parties to the contract are fully complying with their obligations. It also creates an uneven playing field for private sector actors who are seeking to compete for and get public contracts. At the same time, there is a limited opportunity for citizens and communities to participate and monitoring public contracts or for the private sector to give feedback on public contracting processes (Marchessault, 2016)
The open publication of the different phases of a contracting process can strengthen transparency, impacting positively the prevention and struggle against corruption (Cerrillo, 2016) besides, it helps to improve the efficiency of public spending.
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For those reasons the concept of open contracting is emerging as a global strategy to increase contract transparency and monitoring, with major expected benefits in terms of quality of governance, better value for money, corruption prevention, better service delivery and superior development outcomes (Chêne, 2014).
In the last years Open contracting has gained a lot of recent momentum with the foundation of the Open Contracting Partnership in 2011, currently, more than 40 countries are working towards publishing open contracting data. Debate on the topic of Open Contracting and Open Government Data is expanding in practice and academic literatures on latter-day governance (Pizzicannella, 2015) (Lathro & Ruma, 2015) (Coleman & Boland, 207) (Parycek & Sachs, 2015) (Janssen, 2017) (Janssen & Zuiderwijk, 2016) (Ubaldi, 2017) The desirability of increased openness of government datasets as open contracting is emerging as a political standard across the world (OCP, 2018) and Colombia is not the exception.
Based on the recommendations of the Organization for Economic Cooperation and Development (OCDE in Spanish) and the commitments acquired with the alliance for the Open Government, Colombia implemented in 2012 the guidelines to create the strategy for the online Government through the decree 2573 and adopted technologies with the purpose to make open the public procurement. Colombia’s e-purchase system was created in 2013, this electronic system of public procurement called SECOP, which was improving in 2015 (SECOP II) it’s a platform that allows transactions between buyers and sellers, and manage all the process to get a public contract in order to ensure the efficiency and transparency of the public budget. Currently, more than 1200 entities and 7,900 data sets are part of the platform.
All of these anti-corruption initiatives are an advance to Colombia, however, there are any rigorous assessment about the impact of those e-procurement platforms had have in the transparency, participation, efficiency, etc. of the public procurement processes, what does not allow to analyze the benefits of the e-procurement implementation, thus, it is crucial to make a properly evaluation to get a good understanding of the attributes and variables which enable not only to determine its impact, but also to control and improve the adopted tools and policies regarding to public contracting in Colombia.
3 1.2 Motivation and Objectives
According to the open data barometer Colombia is ranked 7th in the world as a government that have adopted open data policies, regarding to open contracting initiatives Colombia implemented the e-procurement platforms since 2012, however, the corruption perception index in this country increased in 2018 in reference with the previous years.
This fact raises the question whether the implementation of open data in public procurement has improved the efficiency of the process, however, few resources are found about the performance of the e-procurement system in Colombia SECOP, perhaps in part because is a young platform, the information generated corresponds to scarce indicators produced by the National State Contracting Agency - Colombia Compra Eficiente-, who is responsible for managing the platform.
Therefore, the interest of this research stems from the desiring to approach an unexplored but essential topic to face the problem of the corruption in public contracting in Colombia.
The lack of an evaluation together with the huge volumes of data what can be extracted from the platforms suggest a data mining technique as a properly manner to assess the impact of e-procurement determining data patterns and trends to be able to identify the potentially benefits of the platforms.Data Mining is a set of techniques that consist of non-trivial extraction of information from large volumes of data. It involves preparation and exploration of the data to discover information patterns, new knowledge, etc. to support decision making in different domains of knowledge. Its foundations are based in artificial intelligence and statistics.
The primary aim of this study is to assess the impact of open contracting and analyze the objectives’ compliances of the e-procurement platforms implemented in Colombia thought data mining techniques allowing the generation of a descriptive model and the data analysis to identify possible behaviors regarding to the public procurement and public spending. The objectives of this study as summarized as follows:
- To identify the variables that affect the efficiency and effectiveness of e-procurement - To assess and analyze the benefit of open contracting implementations in Colombia
(e-procurement)
- To provide associations and relations between the variables which allows the guidance to improve the open contracting initiatives in Colombia and the public spending
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Additionally, all the factors under examination in this research could serve to provide new alternatives to gain a better understanding of the open procurement variances in Colombia, those results could lead to formulate better policies that encourage open government initiatives to face the corruption and at the same time influence the competitiveness and economic growth of the nation.
1.3 Research Procedure
This research focuses on the e-procurement implementation in Colombia due to the open contracting policies adopted. Based in this topic the research question and the purpose are formulated. Consequently, reviewing other related research is conducted in order to achieve a better comprehension to determine solution alternatives for the formulated question. Then, the methodology and research model are designed explaining each process stage followed in conducting this study. This research employs secondary data from governments institutions in charge of the e-procurement process and from international institutions such as The World Bank.
The public data used consist of more than 1 million record transactions between public entities and suppliers. The analysis and evaluation of this data collection is done through a specialize software to execute the appropriate data mining model. Finally, the finding and results will be exposed, followed by conclusions. The fig.1 shows the research procedure of the thesis.
Figure 1: Research process
Source: Author, adapted from A structured approach to presenting research thesis (Perry,1998)
5 1.4 Thesis Overview
This five major chapters of this thesis are:
Chapter One: Introduction. This chapter includes three main sections: The topic background, followed by the thesis purpose and objectives which guide the thesis statement, and lastly, a schematic outline of the thesis remainder
Chapter Two: Literature review. In this section a reviewed of the most relevant and significant studies and publications regarding to the topic is provided, including the main contributions and its authors in order to achieve a comprehensive look and conceptual framework about the topic to support the theoretical bases of this study.
Chapter Three: Research Method. This Chapter explains the research methods and design that were used to conducted the study, including the data sources, data gathering procedure, data analysis, statistical treatments and research instruments.
Chapter Four: Analysis Results and Discussion. This section presented the findings of the study, its analysis and interpretation.
Chapter Five Conclusions: In this last part the summarized of the major research findings, its implications, the contribution and suggestions for future research directions are displayed.
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Chapter 2 Literature Review
2.1 Open Contracting
In order to understand the definition of open contracting, it is necessary to clarify how its arises and explain its theoretical bases, which have been developing with the evolution of open data and open government initiatives. Firstly, public sector procurement refers to the government activities of purchasing goods, works and services, which it needs in order to carry out its main functions (Arrowsmith, 2010). Public contracting is an essential part of the public financial management cycle. Public contracts generate revenues through the issuance of licenses to operate public services, concessions for the extraction of natural resources, and the sale of public property.
These public contracts cover all economic sectors and types of agreements, ranging from the small procurement of goods to large capital spending for development of major infrastructure projects.
That means public procurement refers to the acquisition of goods, services and works by a procuring entity using public funds in a country and concerns contracts between the government and the private entity in many different areas such as health services, the military and construction.
Throughout the world, public procurement is a big business. Public entities have always been big purchasers, dealing with huge budgets. Public procurement is an area of interest, since it contributes between 16% and 18% to a country’s GDP (Rolfstam, 2013). All governments worldwide spend approximately 9.5 trillion USD every year on public procurement (Estefan, 2014), which can be very vulnerable to corruption, inefficiency and mismanagement. Despite the procurement system will be subject to the constitutional outcomes of fairness, equitability, transparency, competitiveness and cost-effectiveness, according to the OECD Anti-Bribery Convention 57% of cases of corruption prosecuted are bribes to get public contracts (OECD, 2016), in both wealthy and developing countries around the world, public contracting has been identified as the government activity most vulnerable to wastefulness, mismanagement, inefficiency, and corruption.
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The above is partly due to there is limited information in the public record about (a) the planning of public contracts, (b) how public contracts are formed, (c) the content of the agreements; (d) the progress of their performance or (e) the government supervision procedures. This lack of information can make difficult to assess whether the government is getting good value for money or whether the parties to the contract are fully complying with their obligations. As a result of the growing recognition of these issues, as well as emerging norms related to access to information and collaborative governance, there has been a recent avowal of increased disclosure and participation practices in public contracting around the world.
Therefore, the Open Contracting concept appear to develop open data standards for disclosure of public contracting information. In short, Open Contracting basically refers to the pro-active publication of government contracts. At its core, open contracting consists of: 1) the affirmative disclosure of information; and 2) participation, monitoring, and oversight. According to the Open Contracting Partnership (OCP), “open contracting is about publishing and using open, accessible, and timely information on government contracting to engage citizens and businesses in identifying and fixing problems.” (OCP, 2018) Most importantly, open contracting consists of disclosure and engagement throughout the entire chain of procurement, including planning, tendering, awarding, and implementation (See Fig 2.)
Figure 2: Open contracting and the procurement chain Source: Author, adapted from Open Contracting Partnership
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The information that must be publish in an open contracting policy regarding to the stage of the contracting process its summarize in the Table 1. It is important to emphasis that this information should ideally be published in open and machine-readable formats, and in a manner which is easily searchable and accessible.
Table 1: Publications categories for a Strong Open Contracting System Publications categories for a Strong Open Contracting System Stage of the process Information to Publish
For The general process
• Procuring entity and buyer (name, identifier, address, contact) [depends of the stage bidder of supplier]
Planning Phase • Contracting process Identifier (ID)
• Procurement rationale
• List of milestones in the planning stage
• Budget reserved for the contracting process
• Project the contracting process forms part of
• Link to further information on the budget for the contracting process
• Documents relating to the planning process
• Tender identifier
• Description of the tender
• Status of the tender
• Items to be procured
• Classifications for the items to be procured
• Estimated tender value
• Procurement method
• Rationale for the procurement method
• Category of the object of the procurement
• Award criteria
• Submission method for bids
• Tend period
• Inquiry period
• Eligibility criteria for the tender
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• Evaluation and award period
• Estimated contract period
• List of other key milestones for the tender stage
• Documents and attachments related to the tender Tender Phase • Contracting process identifier
• Tender identifier
• Description of the tender
• Status of the tender
• Items to be procured
• Classifications for the items to be procured
• Estimated tender value
• Procurement method
• Rationale for the procurement method
• Category of the object of the procurement
• Award criteria
• Submission method for bids
• Tender period
• Enquiry period
• Whether enquiries were received
• Eligibility criteria for the tender
• Evaluation and award period
• Estimated contract period
• List of other key milestones for the tender stage
• Documents and attachments related to the tender
• Amendments to the tender Awards Phase • Contracting process identifier
• Bidder identifiers and bid prices for winning bidder/s &
• losing bidders.
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• Classifications for the items awarded
• Period of the contract
• Documents and attachments related to the award
• Amendments to the award of the contract Contracts Phase • Contracting process identifier
• Contract identifier
• Identifier for the award which resulted in the contract
• Description of contract
• Contract status
• Contract period
• Contract value
• Contracted items
• Classifications for the items in the contract
• Date the contract was signed
• List of other key milestones for the contract
• Documents and attachments related to the contract
• List of key milestones for contract implementation Implementation
Phase
• Contracting process identifier
• Date and value of spending transactions against the contract
• Payer and payee for spending transactions against the contract
• Links to further information on spending transactions against the contract
• List of key milestones for contract implementation
• Status of contract implementation milestones
• Documents and reports that are part of the implementation phase
• Rationale for amendments to the contract
• Amendments to the contract period
• Amendments to the contract value
• Amendments to contract items or terms
Source: Guide to Defining Open Contracting Data Standard Functional Requirements for Electronic Government Procurement Systems,2016.
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However, the publishers will need to decide the extent of the data that will be published and also determine their technical approach from among the basic, intermediate, and advanced data and documents levels that governments are able to publish along with the below five-star framework for the technical approach (See Fig 3.)
Figure 3: Five-star framework for the technical approach in open contracting Source: Standard Open Contracting org
In short, open contracting goes well beyond anticorruption, improving value for money, efficiency, competition, quality of services, and public integrity. Open contracting data can enable efficient oversight of government services by revealing who is getting paid how much to deliver what, as well as how they were selected, and whether they delivered on time and with quality. This can expose anomalies that alert the public and government officials to procurement processes that are inefficient or uncompetitive, delivered the wrong results, delivered them late, or are too expensive (OGP, 2019). In addition, the transparency of the announcement and awarding of tenders can encourage new, often smaller, companies to participate in public procurement, and clarify demographic differences in who is applying. This, in turn, can promote sustainable development and higher-quality goods and services derived from a greater offer.
For the reasons mentioned above Open Contracting is an emerging global movement which is increasingly adopted by more countries around the world. In 2015, the G20 recognized openness in contracting as a key element in its Anti-Corruption Open Data Principles and Principles for Promoting Integrity in Public Procurement. Some empirical evidence as the 2017 World Bank
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study covering 34,000 firms in 88 countries found that greater transparency in the contracting process leads to greater competition–particularly from smaller firms–and fewer kickbacks to officials. Afterward, at the 2016 OGP Global Summit, the governments of Colombia, France, Mexico, the United Kingdom, and Ukraine founded the Contracting 5 to advance open contracting.
The Paris Declaration on Open Government, signed by all members of OGP in 2016, pledged to promote open procurement as its first “collective action.” At the same time, the Open Contracting Data Standard (OCDS) has become a global standard for open contracting. As a global, non-proprietary standard, the OCDS defines a common data model for disclosing data and documents at all stages of the contracting process.
Currently, 23 countries are disclosing procurement data in OCDS format, and more than 60 countries are pursuing open contracting more broadly and each time more countries are working towards publishing open contracting data on business and civic engagement. For other side, the Open Contracting Partnership, founded in 2012, develops and promotes the implementation of the later-stated Open Contracting global principles supports practitioners with training, resources, seed funding, coaching, coalition and network building, builds evidence for Open Contracting through research, monitoring and evaluation and finally, communicates and advocates the importance of Open Contracting (Stephan, 2014)
2.2 E- procurement
E-procurement is one of the most powerful tools to carry out open contracting policies. The concept of E-procurement has many different meaning ranging from shopping on the internet through reverse auction to collaborative initiatives taking place in virtual meeting, but one of the definition most accepted is from Van Weele (2010), who considers that “E-procurement includes web technology-based purchasing solutions aimed at simplifying commercial transactions within and between organizations and information technology solutions for ordering, logistics and handling systems as well as for payment systems”. E- procurement is defined also by Boer, Hanrink and Heijboer (2012) as “using internet technology in the purchasing process”.
In short according to the literature, e-procurement refers to the implementation of electronic
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methods, commonly internet to conduct transactions between awarding authorities and suppliers.
E-procurement systems represent a major e-business innovation that is used within supply chains.
They rely on the internet and capitalize the novelty of web-based technologies to automate and streamline procurement process. This process covers every stage of purchasing, from the demand estimation and the needs identification, through the tendering process, to the payment and potentially the contract management. When successfully implemented, these systems can offer many benefits including cost savings, buying reduction, greater accuracy, timely information, transparency and reduction in process complexity (Eassig and Amann, 2013).
There are various models of E-procurement, these has been classified depends on the model bases,
There are various models of E-procurement, these has been classified depends on the model bases,