How Public Procurement Reform Can Drive the Fight Against Corruption (Part 2)

My conversation with Open Contracting Partnership (OCP) Executive Director Gavin Hayman and Head of Communications Georg Neumann continued with an exploration of two issues: 1) infrastructure procurement, particularly regarding Ukrainian reconstruction and China’s global role in the sector; and 2) developments in beneficial ownership transparency (BOT).

First, I asked Hayman and Neumann how Ukraine can address corruption risks in the eventual post-war reconstruction. They explained that the country has already started, launching a tool called “DREAM,” the Digital Restoration Ecosystem for Accountable Management. OCP was closely involved in this effort. As Hayman noted, the goal is a “Prozzoro for reconstruction,” bringing together project planning, procurement digitization and robust civil society engagement.

Hayman calls DREAM a “digital workflow for reconstruction.” Its goals are to identify the steps in project approval; encourage decentralization; empower communities to propose projects and get them funded; and mobilize the power of artificial intelligence to carry out advanced analytics, identify potential red flags, and speed data collection. To date, about 10,000 projects valued at $15 billion have been approved; just under 10% are funded fully and about 30% partially. The European Investment Bank and UNESCO are already using DREAM, and project selection and approvals that previously took six to twelve months are coming online in one to two months.

Next, we discussed the risks of China’s infrastructure investments globally. Hayman points out that for many developing countries, the incentive is to just get projects done. The perception is that China is fast, efficient and inexpensive – and in the “best value versus cheapest bid” calculation, many governments take the cheapest bid. He also points out that projects may be funded by resource-backed deals or concessional financing, often with “mysterious intermediaries” or bespoke investment vehicles which may extract rents and direct the flow of funds, as well as  “padding” costs. When you add all this up, governments may not be getting such a good deal. 

By the same token, Hayman noted, the performance record of Chinese contractors is lately of improved quality, and where steps have been taken to ensure fair procurement processes, Chinese contractors will take part. Thus, it is critical to maintain global momentum in terms of cleaning up the processes, making contracting more transparent, strengthening relevant public institutions, carrying out needs assessments to avoid so-called “white elephant” projects, and ensuring effective public and small business engagement.

Finally, we touched on improving beneficial ownership and the transparency of companies in business, as Hayman helped launch, and serves on the Steering Group of, Open Ownership, an organization that advances BOT reforms and increases the availability of beneficial ownership information. Hayman and Neumann explained that BOT reduces corruption through a variety of channels, including by making public procurements more transparent, encouraging competition and supplier diversity, discouraging bribery, reducing conflicts of interest and undue influence, preventing money laundering and countering tax evasion.

BOT has run into recent headwinds following the scale-back of the US Corporate Transparency Act. However, Hayman noted that many other countries are still moving ahead. He pointed out that a well-publicized EU court ruling limiting access to beneficial ownership information was widely misread as a rollback of BOT; but in fact, it was more about how to do BOT properly, using laws around corporate formation. Many BOT advocates were encouraged by the revised set of 2024 EU rules to strengthen the fight against money laundering.

Marc Schleifer

Governance, Democracy and Economic Development Expert