WEF exploring Blockchain-based project to reduce corruption in public procurement

The Transparency project is expected to be piloted in Colombia later this year

The World Economic Forum (WEF) has collaborated with the Office of the Inspector General of Colombia and an Inter-American Development Bank (IDB) to develop a proof-of-concept project using the Ethereum Blockchain. The blockchain-based-project prevent corruption with its protocol in the bidding process for high-value government contracts.

The WEF’s report this month: Exploring Blockchain Technology for Government Transparency: Blockchain-Based Public Procurement to Reduce Corruption outlined the use of blockchain technology to increase transparency and ensure public accountability in public-sector dealings.

The report stated that,“a multi-stakeholder team to investigate, design, and trial the use of blockchain technology for corruption-prone government processes”. According to the Organization for Economic Co-operation and Development (OECD), governments around the world spend more than $9.5 trillion on the procurement of contracts, with over 30% of that lost due to corruption.

Sheila Warren, the WEF’s head of blockchain and data policy, explained the process of choosing procurement issues to test blockchain technology: “Most of the feedback we got from within the country [Colombia] after workshops that we ran there was that procurement would be the most conducive system to having a blockchain within it.”

The Transparency Project, therefore, aims to introduce high levels of transparency and accountability for government contracts. The multi-entity endeavour will be piloted in a ‘live procurement auction’ for goods and services supplied to Colombia’s national university later this year. The project is anticipated to be tested in a public education food program that had previously reported foul play.

“Corruption is a ‘high-potential’ space for blockchain because you really benefit from decentralization; records are very difficult to remove or censor, for instance,” said WEF blockchain project lead Ashley Lannquist. She added that the immutability of blockchain technology was crucial to the project as it ensures records are not being altered or censored through corrupt means.

The report further highlights the benefits of blockchain in terms of auditing and filing capabilities and emphasises the advantages of smart contracts and decentralization. “These properties make blockchain a high-potential emerging technology to address corruption,” the report said.

However, not all is well with the project. The procurement law in Colombia requires vendors bidding for contracts to be anonymous. “Companies are used to it and they know that it has to be this way. It depends on the law of the country; it could be different in other countries. But generally, it’s anonymous bidding in blind auctions,” said Ximena Lombana from the Inspector General Office in Colombia.