Corruption in public procurement and Blockchain Intervention
Globally the public procurement sector is worth at least $9.5 trillion annually. This is a whopping 15 percent of world’s GDP. To make sense of these figures it is a pile of one dollar notes arranged to the moon from the earth and back! However, corruption reduces the potential of this sector almost crippling some developing nations’ economies.
In Kenya, similar to many developing nations’ data on public procurement remains undocumented rendering the public procurement susceptible to major corruption scandals in the first place. Public procurement process entails a number of steps including an agency of government issuing a tender for purchase of goods or services. Thereafter, interested parties place their bids prior to the lapse of a specified deadline. Bids are examined and awarded according to particular criteria. Later on, the announcement of bid winner and losing parties informed.
Along this process blockchain technology can transform the entire public procurement process especially among developing nations to improve the efficiency of the process and transparency. For instance, running of the tendering process benefits through transparent public procurement by all bids entered into the blockchain system.
Upon closure of bid, the tenders are evaluated using smart contracts, a technological concept aided by blockchain technology. This leads to the identification of winning bid while approved signers in the system scrutinize the digital records of entered bids in the blockchain system. It is impossible to alter any data relating to bids to allow for unfair awarding of bids favoring corrupt officials or citizens. As an effort to ensure transparency and correctness authorized signers to examine records submitted and announce formally the bid winner.
Corruption in tendering process
Another stage of corruption attack in the public procurement among developing nations is apparent with managing awarded tenders. However, with blockchain technology the digital yet public ledger is available to every stakeholder to trigger an action that is verifiable and transparent to every participant. For instance, after all the terms of tendering are met by bid winner the blockchain system triggers a further action such as payment to relevant parties and this information is easy to track unlike present tendering systems in most developing nations.
Developing nations’ corrupt budgets and blockchain application
An additional developing nation marred with corruption cases is the budgeting and allocation of funds to projects in developing nations. In many emerging economies state officials are very corrupt and remain adamant to be transparent on the utilization of the taxpayers’ money. Developing nations are rocked with rising cases misallocation of funds with instances of funds set aside for projects not used as budgeted.
Blockchain technology poses a solution to these cases of corruption in countries like Kenya and other developing nations. For example, through blockchain technology adapted into government systems such as National Treasury politicians are obliged to sign blockchain smart contracts. Afterward, politicians must stick to original ledger records in the blockchain system reducing chances of duping citizens of their money. Additionally, any revenues entered into the blockchain network will remain in the system with corrupt government officials having no chance to perpetuate corrupt activities.
Blockchain technology also through smart contracts reduces the opportunity for corrupt officials in developing nations to have time to negotiate for kickbacks as this new technology reduces inter-mediation of any activities such as lawyers or banks.
Interesting times await corrupt state officials as blockchain will promote transparency and governance not only in the fast world but more specifically among developing nations. It is not a question of when but how to integrate blockchain technology in government functions to tame the run-away corruption in Kenya and other developing nations.