Improving Public Procurement, With Transparency And (Fin)Tech

Procurement

Public sector procurement loses huge amounts of money to corruption. FinTech and better transparency in managing vendor relationships can help stanch the bleeding, explains Citi’s head of FinTech acceleration, Laura Gaviria Halaby, as the firm moves toward launching the Citi Tech for Integrity Challenge.

Friction in payments stretches across various pain points and across consumers and enterprises alike. Inefficiencies of another sort bedevil the public sector, as public procurement — purchasing goods and services from companies — is marked by corruption.

As noted by the OECD, public institutions disburse a staggering amount of money to these firms globally, at roughly $9.5 trillion. Of that tally, as much as 25 percent, or $2 trillion annually, is siphoned off by corrupt practices. Separately, the costs of corruption can be seen in a different, also staggering, light, as the WEF has estimated that the cost of corruption is as high as 5 percent of global GDP, or roughly $3.7 trillion.

Against that backdrop, Citi is launching a global accelerator program, dubbed the Citi Tech for Integrity Challenge and slated to launch in early 2017, which will collect submissions from FinTech and other players in innovation to help government and public entities gain better transparency in the procurement process and battle corruption. The call for participation extends across startups, established tech outfits and developers. The end goal is to bring new solutions to governments worldwide as they manage vendor relationships and supply chains with a sharper eye on reducing costs.

In an interview with PYMNTS, Laura Gaviria Halaby, global head of FinTech acceleration at Citi, said that the overarching theme is one where “fighting corruption is among the biggest priorities for governments beyond infrastructure and connectivity … Digitization [for these governments] is at different stages.” With so much inefficiency in the system, she added, it is imperative that governments seek out technology, via FinTech and other avenues, “to cut red tape” and especially “to reduce manual processes” in managing vendor relationships.

And to do so, through the Integrity Challenge, she stated, there are eight points being addressed — among them information security and the ability to efficiently track the “results of projects as they are being completed” and payments (such as in construction or infrastructure projects that may be done via percentage of completion method). Other goals include social ethics and even the movement to embrace efficient crisis management for these far-flung governments.

In terms of process, Halaby stated that regional and country-specific problems to be solved among the aforementioned list “are crowdsourced globally from private and public sector entities” and will be anonymized upon presentation to the tech innovator community when the challenge opens for applications. “The Challenge is structured as a global virtual accelerator competition,” said the executive, “with curriculums and mentorship to support participants” at each step.

It is likely that several different avenues of technology will be presented, and considered, in streamlining procurement processes, including blockchain, open API structures and smart contracts, among other solutions.