Bidding on Trust: Can Blockchain Help Fix the Public Sector in the Time of Pandemic?
During the COVID19-triggered economic recession, the lowest cost of ownership becomes an absolute business necessity both in the private and government sectors. Whether it is managing public procurement contracts or government-run enterprises, operating and renewing critical enterprise assets in the public sector requires strong technological acumen. When applied correctly, technology offers a path to address the pitfalls that are largely due to the lack of trust-verifying mechanisms.
High level of financial, operational, and compliance risks.
The underlying operational complexity of large-scale public infrastructures such as communications (e.g., 5G base stations), power (e.g., high-voltage power plants), and transportation (e.g., federal and regional railways) requires a lot of human and technical resources to establish double (and even triple) verification to ensure the source and accuracy of critical operational data. This makes internal processes time-consuming and requires a lot of coordination between the stakeholders.
The lobbying of private interest hurts the national economic interest.
The Michigan Department of Health did not follow the state’s procurement process selecting political consultants to manage a large-scale recent public health data collection project tracing the spread of the coronavirus. Crain’s Detroit.
Since public infrastructures are strictly regulated by the government and offer high economic gains, contract parties and project partners often have conflicts over their financial interests and operations. Technology has long been viewed as an efficient way to battle lobbying and bribery: in 2016, the UK committed to open up more data on public contracting using the open contracting data standard to protect the public interest.
In this review, we offer a glimpse into how blockchain technology can transform the contract management and government resource planning through a bridge of transparency and trust.
A path to data integrity and accountability
The trustless nature of distributed ledger helps to mitigate operational risks associated with contract management and asset maintenance in large-scale public infrastructures.
Asset-intensive industries such as coal-mining, agriculture, energy, railroad construction, urban transit, will all benefit from smart contracts and trustless audit trail of critical operational data. Here are some of its major value props.
Mitigate operational and financial risk
There are already huge opportunities for using blockchain for public procurement and contract management. Beyond its obvious application as a part of streamlining payments with digital currencies, it can also be applied to many other areas and processes that are currently paper-based and that rely on trust between business partners in the value/supply chain.
An immutable audit log of facts and events delivered by DLT helps to ensure the authenticity of operational data greatly reducing the friction points between collaborating parties — both internal and external.
Case Study 1: Dun & Bradstreet, a service provider that many Procurement organizations use for financial monitoring of suppliers, recently launched a new service that expands “the value of the D-U-N-S® Number through blockchain technology.” Among other things, it addresses the topic of reputation management to help increase security and confidence in supplier discovery and B2B commerce activities.
Case Study 2: This use case has also been widely applied in large-scale cross-border operations offering a bridge of trust with overseas partners.
Eliminate intermediaries and build stakeholder accountability through smart contracts.
Blockchain’s potential goes way beyond the recording and verification of data. Smart contracts running atop a blockchain ledger deliver a robust mechanism for keeping contract parties and stakeholders accountable for their actions. Contract terms are encoded and then recorded on the blockchain, which makes their fulfillment transparent and traceable. This eliminates larger issues such as lobbying of private interest and bribery.
Case Study: These technologies are already being used in improving the tendering process. Smart contracts help to build operational transparency and eliminate broader issues such as lobbying of private interest and bribery in public procurement and tendering process (closing, communication of decisions, bid analysis based on defined criteria).
Smart contracts significantly improve the tendering process by proving the identities of bidders and auditing the process from start to finish (closing, communication of decisions, bid analysis based on defined criteria).
Step up supply chain management with blockchain-geared auditing.
With blockchain solutions applied to machinery and facilities operations, enterprises will be able to monitor and audit their performance through the signals that are transmitted to the cloud and anchored to the blockchain.
Case Study: WAVE connects all members of the supply chain to a decentralized network where they can directly exchange documents via the blockchain, eliminating disputes, forgeries, and unnecessary risks.
Case Study 2: Freight tracking and the associated import/export paperwork have been tested by Maersk.
The use case looks particularly promising when coupling blockchain with IoT using a bundle of software and hardware modules to establish digital identities on factory floors.
Case Study: ‘We use the proper hardware support to secure the source and invariance of the data collected from hardware devices. Hardware modules developed by Taraxa have onboard key generation and signature functions to maintain the device’s independence. MCU’s application logic disables the write permission in advance to ensure anti-tampering behavior. ‘This way, the module helps asset leasing companies to reach a consensus on the revenue of each machine and ensure a fair profit distribution. We see the market demand and anticipate that such modules will be integrated into most edge devices in the future’, says Steven Pu, CEO, and Co-Founder.
Blockchain offers a visible path to trustless contract management in the public sector where enterprises and contractors effectively track responsibilities and significantly cut operational costs associated with asset-intensive resource planning.
