by Ethar Alali
This week, we had the very great pleasure of speaking to Dr Silvia Fierascu, of SN Research and Romania’s Universitatea de Vest din Timisoara. Sitting at the intersection of real-world industry and Academic research, Silvia helps organisations drive evidence based decisions and shapes government policy by including systemic factors normally invisible to government commissioners across the globe.
As with all the greatest collaborations, we met via twitter after Silvia posted a link to a very exciting piece of research carried out by Dr Fierascu and her team at the University. They applied network analysis to model systemic behavioural relationships between actors in any public service market. The study assessed the interplay between submission and acceptance of corruption risk from businesses and public bodies across 2 million public procurement contracts collated from over 10 years of public contracts within the European Union;s member states.
Most interestingly, the analysis considered triads of government policy, supplier behaviour and their respective relationship to the market itself. That last element being a novel approach to such analysis. An important clustering that is missing from all public buyer interactions seen to date. This simple addition accounts for invisible commissioning failures. Whether businesses supplying corrupt bids to government or public buyers accepting corrupt bids, knowingly or otherwise is one dimension. The interplay of suppliers with their competition, being another.
Silvia’s Network Analysis model offers exciting potential. Visualising invisible effects like abuses of process that simply aim to exclude competitors, regardless of a bidder’s ability to deliver the contract. It’s certainly the most sophisticated examination to date and dare I say, confirms our own experience of the ecosystem’s behaviour.
A Hidden Benefit
Yet, the model’s potential goes way beyond corruption. By including taboo factors known to exist by all actors, yet rarely considered in practise, the analysis has the potential to model wider buying impacts. One of which is actor incompetence.
The customer is always right: fine when it’s their money. When it’s public money, the customer isn’t right. The customer’s customer, residents, citizens and legislators, are always right. Public buyers are simply middle-people. Inhabiting the delicate space between resident taxation, and valuable public services.
Public Service Incompetence
Public service incompetence takes many coexisting forms, including:
- Buyer inability to evaluate supplier offerings. Especially common in technical or healthcare fields
- Buyer inability to apply organisational buying policy. Common in new, dynamic framework agreements
- Buyer inability to apply best practice procurement or even being aware of them
- Poor evaluation methods by the buyer. Making them unable to prune incompetent suppliers
- Buyers wrongly rejecting competent suppliers
- Suppliers over-promising and under delivering
- Suppliers using dynamics processes to bypass procurement safeguards and law
- Ideal candidate self-exclusion where a process encourages corruption, requirements are contradictory or the process is naturally unfair
- Operational relationships that lack a process for failure part-way through contracts. Commonly resulting in wasteful project resets
- Policy decisions fostering corruption by allowing abuse of the process to simply disadvantage supplier competition
- Weaknesses in civil law permitting the exploitation of loopholes exposed through procurement legislation
All of the above mean wasted public funds. Regardless of source.
To taxpayer finances, a $1 million loss to corruption is equivalent to $1 million loss to incompetence. If buyers accepted corrupt bids, procurement is at fault
Public customers, the citizens and residents of metropolitan boroughs, municipalities, counties and nations, demand tax money is spent wisely, on services they actually need. Ensuring value for money and is up to governments around the world.
[Yet another] UK public contract failures regularly demonstrate equivalent loss to the public sector. Some extreme failures are worse than corruption.
Britain’s largest forensic IT firm, Eurofins, processed 70,000 criminal cases and personal evidence, including biometric data, every year. Having been hacked, the firm paid a ransom to the hackers, who locked down their systems using a Ransomware attack. UK taxpayer money directly paid to criminals. Such incidents are a primes example of incompetent provision in public services. In this case, supplied by a private firm to the police.
Eurofins offers us a perfect example of the most extreme example of incompetence. It risked the exposure of the biometric data of several million UK residents, including nationals of other countries and crucially, residents innocent of any charge, including victims. At the same time, Eurofins paid out the hackers with access to that information. In essence, using public funds to pay the ransom.
Highlighting this example drew other commentary after positing incompetence and corruption are essentially the same at network level.
Corruption=Incompetence
Ultimately, lost value from incompetence and corruption is identical. In both cases:
- Taxpayers don’t get value for money
- Missing public money for future procurement and resolution
- Governments fail to prevent the loss of funds
- It closes competition for good suppliers to deliver the best value for money
This proved controversial to legal experts in the field, which I totally understand. However, it is worth remembering that public procurement legislation aims ensure any procurement process opens competition, delivers good value for money and is transparent. Legislation serves that ultimate aim not the other way around.
Both incompetence and corruption leak funds in places it shouldn’t. Whether that is a ransom paid by governments to suppliers who then pay out to criminals, or paid to panel members with undeclared interests, who then receive consideration. Whether that is commission, “bungs” or worse, dividends.
Furthermore, every corruption scenario can be presented as incompetence. It’s up to the legal process to determine which. Creating common and civil law is retrospective. It doesn’t prevent corruption until the next time. Legislative distinctions simply create defences of “constructive ambiguity”. In turn, requiring further policy and statute to close, when preventative measure in process are cheaper to enforce and much lower risk. Patches of patches make such processes unnecessarily convoluted, change behaviour for the worse and lead to exacerbating the very behaviours it intends rot address, such as self-exclusion.
Even when legislation exists, fixing the process through common law requires a claimant. Yet, shortening procurement processes can make suppliers less likely to engage the legal process and in turn, less likely to close open loopholes. Simply due to the costs and time of litigation which the buyer can argue is not a materially significant loss to suppliers in any event.
A Step Change in Public Buying
Before we finish for this week, I also want to quickly shout out Mihaly Fazekas of Cambridge University, who is researching models that include the effects of such incompetence. This crucial, fledgling addition to an already fledgling field, shows incredibly promising results.
Both Silvia and Mihaly’s work offer revolutionary insight into a field that badly needs systemic understanding of public service engagement. Opportunities to improve this field are huge and have the potential to finally deliver a step-change in what has otherwise been a very slow burn to improve government commissioning. Having argued for improvements to the buying process, both for civic society and ethical suppliers, changing the public service is not an easy ask. Buyers are incredibly irrational, commissioners exhibit far too much of the Dunning-Kruger effect to be aware of their organisation’s development needs. So this might take some time to bed in, even when the case studies are overwhelmingly positive.
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