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Investigating contracts: a how-to guide by open contracting, full of ideas for investigative journalists

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Slides from Hera Hussain's presentation at Data Journalism UK 2019, Salford UK May 2019

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Investigating contracts: a how-to guide by open contracting, full of ideas for investigative journalists

  1. 1. The data behind the deals - investigating how public money is spent through procurement @herahussain @open-contracting hhussain@open-contracting.org
  2. 2. This slide-deck is a primer for investigative journalists. Learn how to spot red flags and use public procurement data to tell stories about public spending.
  3. 3. How to make the most of this slide deck. 1) Use the hyperlinks for more information. 2) Read the speaker notes! 3) Like it? Download it. Share it. It’s in the public domain!
  4. 4. 1 Why it’s important
  5. 5. US$ 9,500,000,000,000
  6. 6. US$ 9,500,000,000,000 read the speaker notes
  8. 8. Public procurement represents around one third of public spending in developed countries (OECD, 2013). 20 per cent of EU GDP annually spent by government, public sector and utility service providers for goods, services and public works.
  9. 9. The European Parliament found that corruption and fraud in contracting in EU countries may cost taxpayers €5 billion every year.
  10. 10. Public procurement scandals in the news
  11. 11. Former head of Chicago Public Schools cheated to help her former employer get contracts, most prominently a $20 million sole-source training contract in exchange for kickbacks. The Economist concluded that “stealing from Chicago’s poorest children (the vast majority of children at the city’s public schools are black or Hispanic and from poor families) is a new low, even by Chicago standards.” Byrd-Bennett will probably get about seven years in prison.
  12. 12. When bogus army contracts hindered the fight against terrorism in Nigeria
  13. 13. 2 What Open Contracting is doing to open up the data behind government contracts
  14. 14. The Open Contracting Partnership is a silo-busting collaboration across government, business, civil society and technologists working to transform public contracting worldwide using open data and improved oversight from multi-stakeholder cooperation and feedback.
  15. 15. Open Contracting connects to open up & monitor public contracting Government Business Civil society
  16. 16. What we do ■ Advocacy that challenges vested interests and changes the global norm in public contracting from closed to open. ■ Support for a network of partners who implement open contracting projects and the adoption of the Open Contracting Data Standard. Where necessary, we’ll be leading specific demonstration projects ourselves. ■ Learning how and why open contracting works and gathering compelling evidence of what open contracting can achieve.
  18. 18. ● Replicating freedom of information laws. Open contracting is a proactive approach to disclosure that levels the playing field, ensuring that information is available to everyone, not reactively and privately exchanged between individuals making FOI requests. ● An e-procurement system (i.e. an electronic system for publishing and marketing tenders online). Open contracting can improve e-procurement by structuring, linking and publishing documents and data related to the planning, procurement and implementation of public contracting. ● The end of legitimate commercial sensitivity. There will always be a balance between the need to redact commercially sensitive or private information and the open-by-default approach. Open Contracting is not...
  19. 19. Open Contracting Data Standard (OCDS) Planning Tender Award ImplementationContract
  20. 20. Unified, structured data & records (with unique IDs etc)
  21. 21. O C D S Procurement Regulation Procurement System/ database Paper-based procurement e-procurement Procurement Portal International commitments & MDB projects Budget Payments Contract management OTHER SYSTEMS OCDS National State City OTHER TRACKING FIELDS Policy Media INTERNAL ASSESSMENT Academia ...
  22. 22. The Open Contracting Data Standard (OCDS) has been endorsed by the Cabinet Office and GDS. The guidance documentation for implementation can be found here.
  23. 23. What Open Contracting Data Standard is not a software a licensed standard unable to work without an overhaul of all systems
  24. 24. Open Contracting and ProZorro has saved the government £1.2 billion, or 1.4 per cent of GDP. According to a 2017 survey, 29 per cent of businesses believe the system is corrupt. In 2016, 59 per cent did.
  25. 25. Open contracting reforms save Ukraine more than $1 billion
  26. 26. Busting price-fixing scandal in Colombia
  27. 27. • Exposed price-fixing scheme that increased costs by 45% • Increased 14 suppliers to 46 • 700,000 meals served per day
  28. 28. But what... about the commercial confidentiality of contracts?
  29. 29. mythbusting.open- contracting.org REPORT We've talked to over 70 experts from more than 20 countries and found surprisingly little evidence that supports keeping contracting information secret.
  30. 30. Intelligently and intentionally making public contracting information ‘open by design’ will lead to significantly improved outcomes. Any concern that this would lead to what we call the three Cs of breaking commercial confidentiality, harming competition and enabling collusion doesn't hold up. The evidence now shows what these arguments really are - myths. We have to avoid a lazy default where routine information is classified as confidential to prevent public scrutiny. Governments should not be stifled by the tentacles of private interests and better understand what they are buying, from whom and if they're getting their money's worth.
  31. 31. Not all contracting information will be published all the time but we have to avoid a lazy default where routine information is classified as confidential to prevent scrutiny. Only 2.7% of defense contracts in Australia were flagged as confidential and this is from the most secretive part of government. Government contracts shouldn’t contain patented information or commercial secrets.
  32. 32. 1. Full contract publication should be the norm – redaction should be the exception, supported by a public interest justification. 2. Government contracting processes should be designed for transparency. 3. There should be an enforcement system for ensuring that contracts and contract information is in fact disclosed in practice and in a usable form. 4. Where there is not up-front requirement for full publication of the contract, any redaction for commercial sensitivity should be based on a robust application of the public interest test. 5. The ‘public interest test’ should take into account the economic benefits of the sharing of commercial information, such as more competitive public contracting, as well as the broader case for the public’s right to know.
  33. 33. 6. It is particularly important that the pieces of information needed to judge value for money are disclosed. 7. Governments should issue clear guidance to public entities, agencies and firms on the issue of when contract information may be exempted from publication on the basis of commercial sensitivity to set clear expectations and reduce uncertainty. 8. When a case by case redaction approach is used, only the contracting party that claims potential direct financial harm from a specific release of information should be able to request redaction of information. 9. When a case by case redaction approach is used there should be a clear process and time limits for determining what is redacted in individual contracts, why, for how long, and with what appeals process. 10. Redaction on the grounds of commercial confidentiality should be grounds for increased scrutiny through other oversight mechanisms.
  34. 34. 3 Common red flags & how to find them
  35. 35. RESOURCE Red flags for integrity: Giving the green light to open data solutions ● introductory guide to how countries can reference their procurement data against a set of over 150 suspicious behavior indicators, or “red flags.” ● flags occur at all points along the entire chain of public procurement-from planning to tender to award to the contract, itself, to implementation-and not just during the award phase, which tends to be the main focus in many procurement processes. Read more: https://www.open-contracting.org/wp-content/uploads/2016/11/OCP2016-R ed-flags-for-integrityshared.pdf
  36. 36. Corruption can happen at different stages of the procurement cycle Planning Tender Award ImplementationContract
  37. 37.    Key planning documents not provided Non-public bid opening High number of contract awards to one bidder Large difference between contract award and final contract amount Change orders issued after contract award on line item requirements Short notice to bidders Supplier address - P.O.Box - Similarities btw suppliers Supplier receives multiple single source contracts Change orders to increase prize substantially (or multiple by a smaller amount) Vague description of supply terms Bidder that has never bid previously wins tender Final prize is higher than industry average Payment without delivery of service
  38. 38. Winning supplier provides a substantially lower bid price than competitors. INFORMATION ABOUT SUPPLIER BIDS Winning bid is too close to price estimate. COMPARE BUDGET WITH FINAL CONTRACT Company has no history in providing service or product: PRIOR CONTRACTS & DESCRIPTION OF COMPANY PURPOSE E.G. ON WEBSITE FRAUD
  39. 39. COLLUSION / CARTELS The difference between bid prices is an exact percentage (a whole number). INFORMATION ABOUT SUPPLIER BIDS Companies registered vs companies actually providing vs control of market ANALYSIS OF CONTRACT AWARDS & DATA ON COMPANIES IN SECTOR
  40. 40. BID RIGGING Single bidder only (limited, competitive, direct) Use of direct awards/exceptions Multiple contract winner WHO ARE THE TOP SUPPLIERS? LOOK BY SECTORS, e.g. HEALTH
  41. 41. ● The eligibility criteria for deciding which companies can bid for a contract can be set too narrowly, including by favouring a preferred company. For example, the UK High Court found that the Nuclear Decommissioning Authority fudged an evaluation of tender requirements to prevent the disqualification of one of the bidders for a £7 billion contact. ● Issue the tender at an inconvenient time. The week before Christmas can be good. Half of the contracts that Slovenia announced then only received one bid. FIXING THE PLANS
  42. 42. ● Inside information can be shared with a preferred company such as one company receiving the terms of reference before others do. ● The tender can be not very well advertised. Doing this has the effect – whether intentional or not – of discouraging bids from unfavoured companies. In an extreme example of this, the only place that a €120 million tender in Slovakia was advertised was on a bulletin board in a corridor inside a closed-off ministry building. ● Competing companies can conspire to drive up prices: Such cartels are a big problem – the European Commission imposed €1.9 billion in fines on cartels in 2017. FIXING TENDERS
  43. 43. FIXING AWARDS ● Contracts can be awarded to companies with a clear conflict of interest. For example, the ex-head of Chicago Public Schools funnelled contracts to an ex-employer who she was still secretly working for. Nigeria’s ex-oil minister, Dan Etete, handed out a contract for an offshore oil block to a company that turned out to be his. ● Contracts can be given out without any bids at all. For example, more than $23 million of contracts for schools in Chicago were given out without any other bids being received, in return for kickbacks and bribes to the head of city’s public schools. FIXING IMPLEMENTATION ● Modifying the contract after it’s been awarded so that it’s even more favourable to ‘chosen’ company. Contracts can often end up costing much more than the original award. ● Turning a blind eye to shoddy implementation. In China, schools that should have been earthquake-proof have collapsed on children. And in Romania, hospital patients have died because the disinfectant was watered-down.
  45. 45. A red flag is something anomalous that deserves further investigation. It is not proof that anything is wrong or that a transaction is corrupt, collusive, fraudulent, or otherwise illicit. A flag cannot, and is not intended to, prove corruption in the procurement process. Flags can, however, offer insight into the risk of corrupt or illicit behavior in individual contracts and signal troubling patterns across the procurement system worthy of further investigation. The use of analytics for red flagging may also showcase more general opportunities to increase integrity and value for money across the procurement process.
  46. 46. 4 In Focus United Kingdom
  47. 47. We’re going to look at the public procurement landscape in the UK. What data is available, what’s missing & how to
  48. 48. The value of public sector procurement within the UK exceeded £301 billion in 2016.
  49. 49. G7 The UK is the first G7 country to commit to the Open Contracting Data Standard (OCDS) for contracts administered by a central purchasing authority, the Crown Commercial Service (CCS). UK Anti-Corruption strategy The cross-government anti-corruption strategy provides a framework to guide UK government action to tackle corruption for the period to 2022. “Reduce corruption in public procurement and grants” (priority 4) is identified as one of the 6 priority areas. The strategy discusses the UK’s commitment to open contracting principles and data standard. It also promises a review of local procurement practises.
  50. 50. OPEN GOVERNMENT PARTNERSHIP In 2013, the UK endorsed the Open Contracting global principles in its second Open Government Partnership National Action Plan. In 2016, in its third Open Government National Action Plan, the UK committed: “To implement the Open Contracting Data Standard in the Crown Commercial Service’s operations by October 2016; we will also begin applying this approach to major infrastructure projects, starting with High Speed Two and rolling out the data standard across government thereafter.” The 2016 NAP was announced at the International Anti Corruption Summit, hosted by the UK government on 12th May 2016. In the Anti Corruption Summit Communique, 40 governments agreed to: “ensure public contracts are awarded and managed openly, accountably and fairly, consistent with applicable law – making public procurement open by default – so that citizens and businesses can have a clear public record of how public money is spent.” It is worth noting that under Open Government Partnership Sub-National program, Scotland committed to implement Open Contracting Data Standard and released a strategy in late 2017.
  51. 51. OPEN DATA CHARTER The Open Data Charter is a collaboration between governments and experts working to open up data. It was founded in 2015 around six principles for how governments should be publishing information. The aspiration was that data should be open by default, timely and interoperable. More than 70 governments and organisations have joined the movement. CONTRACTING 5 The governments of Colombia, France, Mexico, United Kingdom, Ukraine and Argentina, have agreed to come together to found the Contracting 5, a group of governments working to foster openness, innovation, integrity and better business and civic engagement in government contracting and procurement through the Open Contracting global principles and data standard. MAYOR OF LONDON The Mayor’s office has committed to ‘research the viability of the Open Contracting Data Standard and explore new routes to market’ as part of its new “Smarter London Together” strategy (pg.39,45).
  52. 52. Who must publish what... Requirement: Publish advertised and awarded opportunities (tenders, awards) Central government Over £10 000 on Contracts Finder and EU’s Tenders Electronic Daily (TED). Councils Over £25 000 on Contracts Finder and EU’s Tenders Electronic Daily (TED). PROCUREMENT SPENDING Requirement: Central and local government bodies (including NHS) are required to publish the details of their expenditure transactions every month. This document provides links to the official guidance and details of how to add it to data.gov.uk. https://guidance.data.gov.uk/25k-spend-dat a.html Central government Once a month Councils Quarterly though monthly is recommended
  53. 53. http://spendmatters.com/uk/exclusive-contracts-finder-analysis-suggest-government-tender-opportunities-arent-theree/ Just 27% of tenders published by Government bodies makes it onto CONTRACTS FINDER [2017]
  54. 54. http://www.wired.co.uk/article/revealed-carillions-billion-pound-government-clients
  55. 55. Single bids in tenders over 2012 - 2017 have increased by 476%
  56. 56. This analysis would not have been possible without structured open data.
  57. 57. 5 Data sources & tools
  58. 58. The reality of doing this work systematically... • Web scraping e.g. Chrome extension Scraper • Python and panda libraries to better analyse large data sets (use Jupyter notebooks to document what you’ve done) • Use the Open Contracting Data Standard as a tool to link and identify information and structure your datasets • Tools to visualise and search OCDS data GOOD OLD FASHIONED FOIA
  59. 59. • National portals • Debarred companies: World Bank, AfDB, ADB, AIIB • International Finance Institutions: contract awards World Bank, UN Global Marketplace, UN Procurement & Annual Statistical Report, UN Development Business, AfDB, ADB, AIIB • Extractives Industries: 40+ countries disclosing contract information here including the UK (see here) • Others: Panama Papers or Offshore leaks database by ICIJ WHERE TO FIND DATA
  61. 61. Linking contract information with other datasets in the UK ● Company information (via OpenCorporates.com) ● Beneficial ownership (via OpenOwnership.org) ● Spending (via OpenOpps.com) ● Grants (via 360Giving.org) ● Land registry ● EU tenders (via opentenders.eu)
  62. 62. What next 1. Make contracts your new favourite data set to monitor 2. Build a list of where & what information you have access to 3. Set up a database to import data 4. Make better FOIA requests for the specific info that is missing 5. Got a story? Talk to us. Let us know if you've written a cool story! Our helpdesk can also help with technical questions if you’re working on a public interest investigation. Email info@open-contracting.org.
  63. 63. Join the community! ● Sign up for our newsletter! We’ll send our alerts for new tools and resources. Send an email to info@open-contracting.or g to sign up for the alerts with the headline “Journalism newsletter”. ● Join our slack