Government: Foreign Policy: The Miracle Cure for Corruption

Corruption isn't the only explanation for why [government] contracting goes awry. Even relatively clean governments are hardly models of efficiency, and private competition can often deliver better for less. The problem is transparency. When a government contracts out work, the distance between the people delivering the services and the ultimate customer — the taxpayer — grows. Contractors have little incentive to save the rest of us money, and our ability to make sure they're doing it is too limited. If a contract is failing, it may well remain a secret between one or two bureaucrats and the company concerned. Government audit agencies might uncover a problem if they are alerted or perform a random investigation. But the rest of us can't hold contractors (or the officials who hired them) to account if we don't even know what's meant to be delivered.

There's an answer to these problems: Publish the contract. That would allow citizens, watchdog groups, even competing firms to see whether taxpayers are getting their money's worth. It would also considerably reduce the legal costs of contracting (because we wouldn't continually have to reinvent the wheel when it came to writing contracts in the first place) and allow the spread of better contracting practices. [Emphasis added].

It is no surprise that where greater contract transparency is introduced, there is evidence that costs fall. A World Bank infrastructure project in Bali, Indonesia that included transparency combined with audit and complaint mechanisms reduced prices for goods and works by 21 percent compared with non-project contracts with less disclosure. Complaints related to contracts disclosed have led to contractors returning fees. Contract transparency also allows for improved delivery. You only need one expert — or an amateur with patience — to uncover issues if they know what's meant to be delivered. That's an approach that has allowed NGOs monitoring schoolbook procurement and distribution in the Philippines, for example, to reduce textbook prices by half while increasing the speed and reliability of delivery.

The usual argument against greater contracting openness is that it would disclose contracting firms' trade secrets or invade the personal privacy of staff, that it would betray information vital to national security, or that it would simply be too much work. But the experiences of the governments that are already publishing contracts give the lie to these complaints.

For more, see Foreign Policy: The Miracle Cure for Corruption by Charles Kenny, December 21, 2010 at National Public Radio.