A foreign bribery report from the Organisation for Economic Co-operation and Development (OECD) stated that 57% of foreign bribery cases occurred to obtain a public procurement contract. When it comes to the allocation of national procurement budgets, the OECD reports that an estimated 20-25% is lost to corruption globally at the government level.
With the scale of many public contracts, which can be worth several million dollars, public procurement systems are an important component of a country’s spending. In Colombia, where the World Economic Forum and key partners are developing an innovative new project to address gaps in government transparency, the proportion of GDP attributed to public procurement is 12.5%, which accounts for 35.7% of the government’s total spending.
It is estimated that the annual cost of corruption in Colombia is $17 billion, which is equivalent to 5.3% of the nation’s GDP. Of this amount, $7.2 billion, or 10% of the government’s yearly budget, is estimated to be lost to corruption in the public sector, which includes public procurement.
One needs only to look at the famed example of Odebrecht S.A., the Brazilian construction firm who, between 2001 and 2016, conducted both illegal campaign financing and large-scale bribery of about $800 million to secure more than 100 contracts across 12 countries including Colombia.
In Colombia, school meal procurement is a smaller-scale yet salient microcosm of the problems that arise in public procurement. It is reported that the public sector has historically paid egregious prices for standard goods. The local Colombian newspaper El Tiempo, for example, found that chicken breasts were sold to schools at $12 (COL$40,000), or about four times the price of local supermarkets.
Even more concerning are the reports that goods that are purchased are not always delivered. The former mayor of Cartagena has been charged for illegally contracting a deal of over COL$23 million (about $7,000), in which 2.6 million loaves of bread were bought, one million of which were never delivered to schools.
School meals constitute the primary meal for many of Colombia’s poorer children. Where do these meals go? El Tiempo says the funding for their procurement has been pocketed by public figures and officials, as well as a small number of food contractors.
The project, which is taking place this year, is multi-faceted and includes a software implementation with blockchain technology for the selection of school food vendors. It is co-designed with several partners from academia, the IT industry, and the non-profit world, including economists and computer scientists from the blockchain economics and governance consulting firm Prysm Group, the National University of Colombia, U.C. Berkeley, and the blockchain security firm Quantstamp.
Blockchain technology provides three core economic benefits to many processes: commitment, coordination, and control.
