According to the World Economic Forum, governments dedicate more than 9.5 trillion dollars to public procurement. About fifteen percent of countries’ national gross domestic product is allocated towards contracting out to individuals or private organizations to fulfill the needs of communities such as paving roads, improving technology, or updating public buildings. The problem that arises when governments offer public contracts is that they are often tailored to financially benefit government officials. The United Nations estimates that 10-30% percent of contract value is lost to government corruption. This is a significant amount of money that is recycled, adversely affecting the economy instead of being given out to businesses and individuals outside of the government. The World Bank concluded that “curtailing procurement corruption may represent one of the most effective economic development programs that a country can adopt.”
A significant amount of the procurement corruption is due to poor record-keeping, low public accountability, close interactions between the private sector and government officials and centrally controlled processes. In order to break up this cycle, researchers at the World Economic Forum and the University of Southern California worked alongside the Inspector General’s Office in Colombia to create a newer, more advanced type of blockchain technology. Blockchain technology, in a general sense, is an electronic record-keeping system that was originally used in tracking bitcoin cryptocurrency transactions. It is resistant to tampering or modification and serves as a permanent public ledger.
When used in government as a procurement ledger, it would increase transparency and streamline spending on procurement contracts. Creating a database much like that of GovDirections, LLC that requires all open procurement and government contracts to go through this system are thereby auditable and traceable. It eliminates some of the key causes of corruption such as poor record-keeping and lack of access to information. In Colombia, their new Ethereum-based blockchain procurement system, which eliminates third party organizations or groups, is being tested on contracts for school lunches in Colombia. Researchers are awaiting results from that study with hopes of making this tech a worldwide procurement database.
Colombia is certainly revolutionary when it comes to using blockchain technology on the national level, but other cities and states are looking to legitimize the use of cryptocurrencies and blockchain technology in government practices. During the 2017 Georgia General Assembly Legislative Session, Senators Michael Williams and Joshua McKoon attempted to pass a bill that allowed citizens to pay taxes using cryptocurrency with the hopes of introducing blockchain technology later.
Just last year, The United States Department of Defense released a Cryptographic Modernization Program that intends to use blockchain to protect the country on a digital level, writing that “blockchain networks not only reduce the probability of compromise, but also impose significantly greater costs on an adversary to achieve it.” Although blockchain technology seems to be gaining popularity, it does not appear that the United States is willing to implement this nationwide. The lack of understanding what blockchain means in addition to not understanding its value largely affects why the practice is overlooked by both local, state and national governments despite its ability to increase transparency, government trust, and accountability.
Until blockchain technology becomes a global reality, you can find up-to-date listings of invitations to bids, opportunities for quotes, and general solicitations for information by Industry and State groups using the GovDirections, LLC database.
About the Author
Jessica Davis is a student at The University of Georgia majoring in International Affairs and Political Science, graduating in May of 2021. Within her university community, she serves as a member of the Arch Society, University Judiciary and a Campus Tour Leader at the UGA Visitor’s Center. Jessica has worked with the Georgia Public Defender Council, the Partnership Against Domestic Violence, and the Women’s Public Leadership Network. She is from Riverdale, Georgia and her interests include criminal justice reform, international diplomacy, and environmental policy reform.