The deals behind the meals
How open contracting helped fix Colombia’s biggest school meal program
In the early hours of the morning, in an industrial area of Colombia’s capital, Bogotá, a warehouse hums with workers, their faces barely visible under white masks and hair nets. The walls are stacked with colored plastic crates. Filled with various fruit, cereals, drinks, and desserts, they will be packed into refrigerated trucks and delivered to public schools all over Bogotá before most children have settled in for their first classes. A similar operation is underway in five other warehouses across the city, as part of a $170 million program to ensure fresh, nutritious food reaches more than 800,000 hungry students between the age of four and 18 every day.
Food delivery and its quality have not always been so streamlined in the past. High poverty rates in the city mean that many children consume their main meal for the day at school. And getting those refreshments to the schools at over 700 locations each day is a huge logistical challenge. With a population of nearly nine million inhabitants, Bogotá is one of the largest cities in Latin America and one of the most traffic congested cities in the world.
Then there’s the notorious inefficiency and corruption in the provision of school meals across Colombia. Suppliers throughout the country have regularly been accused of failing to deliver food or inflating prices in scandals that made national headlines. In the city of Cartagena, chicken breasts sent to schools cost four times the amount as those at markets and the children reportedly never received 30 million meals. In the Amazonas region, an investigation by the Comptroller General found the price of a food contract was inflated by more than 297 million pesos (US$100,000), including pasta purchased at more than three times the market rate.
Many public entities are overly dependent on direct contracting with a single supplier, which accounted for 18% of school meal contracts awarded in Colombia in 2017. With many open tenders themselves attracting just one bidder, a handful of suppliers dominate the sector, leaving administrators prone to accepting suppliers’ terms to ensure their pupils have a reliable supply of food.
Colombia’s public procurement agency, Colombia Compra Eficiente (CCE), and the ministry of education began tackling these issues in 2015. With funding for the food program coming from both national and local government, it was hard for CCE to identify cities and regions with both the data about their past purchases and willpower to resolve the problems.
In Bogotá, however, they found enthusiastic partners and were able to effect a dramatic change. Working with the city’s education secretariat, along with other government agencies and businesses, they introduced radical reforms that were driven by open data and open contracting.
This is the story of those changes — changes that helped overcome undue interests and improve the efficiency and quality of school meals. The number of suppliers has quadrupled, cutting out intermediaries and giving more companies a chance to compete. And prices are much better regulated, with savings estimated at 10–15 percent. But it was far from easy, dirty tricks and attempts to exploit the process were abundant.
Large resources, little competition
Bogotá sets aside US$1.2 billion annually to spend on services that support education, like school meals, transport and security. In 2015, the city’s education secretariat and CCE worked on a pilot to develop a new structure for the contract process for school meals in some areas of the city.
Coming in as a new head of the education secretariat in 2016, Maria Victoria Angulo said she had great expectations. She had spent the last 20 years working in education, much of it in the public sector. Having anticipated her focus would be on training teachers, and the quality of the curriculum, she admits she underestimated how important procurement and contracting would be and how much of her work would be taken up by them.
“Using transparency and integrity as our guiding principles, we introduced new policies, opened up information about our contracts and involved citizens in that process.”
Maria Victoria Angulo
“My team and I had to take risks and believe what our ethics told us was right. Using transparency and integrity as our guiding principles, we introduced new policies, opened up information about our contracts and involved citizens in that process,” she said.
The pilot revealed that the complex demands of the school meals contract, which placed suppliers in charge of the delivery along the entire supply chain, meant that the money was concentrated to a few companies. A budget of around $170 million dollars was distributed among just 12 suppliers, who handled sourcing, packing and delivering thousands of meals every day and relied heavily on subcontractors to complete the job.
In most cases, companies were contracted in a “reverse auction process” in which the bidder with the lowest price won. Acting as intermediaries, some companies submitted their offers at auction with one set of companies and then switched to buy from cheaper providers after winning the contract to maximise their revenue, according to Carlos Galeano, who represents El Recreo, a company that now supplies dairy products to the city directly.
Cutting out the middlemen
When María Margarita “Paca” Zuleta, then director of CCE, and her team began looking at the situation in Bogotá, one big mystery was why none of the big food brands were suppliers.
“We had this big question,” explains Nicolás Penagos, a former deputy director of CCE who now works for the Open Contracting Partnership across Latin America. “If I were to give food to my children, I’d go to a supermarket and buy these brands. You’d think that they’d be the least expensive because they produce it in bulk. So why aren’t the children receiving that food at school?”
So the CCE team spoke to these large companies. Some said they were concerned about the corruption risks, or that working with government would be too bureaucratic for them. Others said they were interested in the contract but didn’t have the resources to assemble the snacks and distribute them to every public school in Bogotá each day.
The solution, based on the pilot and these conversations, was to divide the process in two to cut out the middlemen and reduce transaction costs. The first part was sourcing the food. The second was to organize the assembly and distribution of the snacks to every school.
Suppliers are now commissioned by participating in a tender for a framework agreement that sets the general conditions and price caps, while quantities and final prices are established when a purchase is needed.
“In a normal contract, we say, for example, ‘you will give me five apples and they will cost 100.’ In a framework agreement, we say ‘you will provide me apples for one year at a maximum price of X’, and each time we put up a purchase order, we have several suppliers and capped prices. So they bid on purchase orders when needed,” explains Penagos.
Each food item has several suppliers under this new framework agreement. So if one supplier can’t fulfill the purchase order or has a logistical issue, another supplier can take over. This prevents a situation where suppliers have so much bargaining power that they can set their own prices and conditions knowing that the administration can’t refuse because it would mean the children don’t receive the food.
The purchase orders are filled each month on the government’s online marketplace, with the details of the order published for the public to see which supplier won.
For the sourcing agreement, the education secretariat and CCE designed a chart of 74 different food items outlined according to the nutritional needs of children at different stages of growth, and fair prices according to the characteristics of the food.
This is where newly available open data in CCE’s system came in handy. Aside from drawing on cost and budget studies conducted by the secretariat, CCE studied data from current and past contracts easily accessible through its open data system. Analysing the data also gave CCE a quick overview of potential suppliers.
“The roadmap for developing a tender begins with a study of the market, that’s where open data is most valuable”, said Sergio Peña at CCE’s business unit. “We first look at the size of the market. Then we find out who has been doing similar contracts in the past and its value. This is what provides you with the best insight. You can identify what guarantees companies gave, if they were local or from other regions, if they were temporary unions or sole providers. Open data can provide you a lot of information about these processes. Now, there is a database that includes everything the government has bought and how much it cost, and under which conditions.”
By the end of 2016, the team had established a plan that included a framework agreement for food prices, a framework agreement for the logistics process (receiving, packaging and distribution), and a guide of terms and conditions for bidding and contracting that included a scale of minimum and maximum prices to avoid manipulation. The procurement process would be competitive, taking the standard prices from market studies into account.
“Mayor Enrique Peñalosa and I set out radical reforms based on an open contracting approach. We established minimum and maximum prices for meals and we made the whole contracting process competitive and fully open, because our children need healthy food to thrive, and governments need transparency and integrity so that taxpayers’ money is spent wisely and truly benefits citizens. The multi-billion-dollar world of public contracting urgently needs a revolution, not only in Bogota’s School Feeding program but in every public contracting process: integrity and transparency must lead public management.”
María Victoria Angulo, Secretary of Education
The education secretariat and CCE also created a system to monitor the food inventory and delivery of meals to each school. A business consortium, with a team of 347 people, would be responsible for the monitoring, making visits to the food production plants, schools and packing plants to track the quality of the food from its production through to the delivery of the snacks to students.
Resistance, threats and boycotts
The education secretariat and CCE faced resistance from all directions. Some existing suppliers threatened to sue, with nine lawsuits filed to halt the process. Tensions flared in the politically polarized city, with more than ten debates and motions to take back political control of the process held by the city council. A media smear campaign attempted to discredit and sabotage the changes by spreading misleading information about, for example, food arriving damaged because of the new contracting model.
CCE and the education secretariat started receiving threats from the moment the draft document was disclosed before the actual tender. Certain suppliers said they wouldn’t participate at the set price cap and that nobody would.
During the tender process, CCE and the education secretariat detected behavior that might have been an indication of non-competitive practices. They reported it to the the competition oversight agency, the Superintendency of Industry and Commerce (SIC), which initiated an investigation. SIC’s preliminary review found that these companies were colluding to boycott the fruit tender, attempting to force the education secretariat and CCE to re-advertise the tender at a cost of US$22 million, or nearly 50% more. According to the SIC, the higher prices would have caused fruit shortages for around three months for more than 80% of public schools participating in the meals program in Bogotá, and locked other bidders, not involved in the alleged collusion, out of the market.
In September, charges were brought against the fruit producers accused of attempting to organize the price-fixing agreement. Colombia’s president described the scheme as “a sign of the pettiness of the corrupt, who even steal food from children.” Investigations are ongoing.
Sharing information with the public, parents and potential suppliers was an important part of the plan, too. Details about how the meals were procured became available on a public online platform for all to see, in a way that was easy to understand.
Through a public awareness campaign, Angulo, the education secretary, told the public about the faults in the market that the secretariat had detected. They had changed the process of public contracting to be more transparent.
She emphasized that this was a national issue: “If Bogotá could do it, Colombia could do it too”.
How does standardized open data help?
Much of the government data that informed the design of the pilot plan in Bogotá was available thanks to the CCE’s database called SECOP. Government contracts have been recorded in SECOP since 2007. In 2013, purchase orders under framework agreements began to be awarded through the government’s online market, Tienda Virtual, a SECOP platform. For national entities, such as central government ministries, agencies and the president’s office, framework agreements are legally mandatory and they must procure through the online marketplace. Other entities choose to use the marketplace but aren’t obliged to by law, including national autonomous entities like the central bank, oversight institutions and sub-national entities.
While open data was available before, in September 2017 SECOP data started being published in an open, standardized, and reusable format called the Open Contracting Data Standard (OCDS), which is considered a best practice schema for open data on contracts. National and subnational entities have begun using a new platform SECOP II, a fully transactional e-procurement platform that goes beyond publishing data and documents to increase transparency and agility. It is set to replace the original SECOP platform later this year. SECOP’s database now contains data on at least one million contracts, compared to 195,000 in 2011, the year CCE was established.
Data can be downloaded from the CCE site directly or via an API, and from the government’s general open data portal, www.datos.gov.co, allowing anyone who has an interest in that data to reuse it, structured in a way that’s most meaningful to them. This made analyzing and sharing the information to shape the program much easier.
New opportunities for businesses
By adopting open and competitive procurement processes focused on each component in the supply chain, the US$170 million that was previously shared between 12 companies is now spent among 55 specialized producers. Some 14 of those had never participated in a bid process before.
Luz Marina Rojas, a food engineer and young entrepreneur, is the founder of the company Dipsa, which produces specialty healthy snacks developed for communities, with a particular focus on low income families. The new procurement process has allowed her to do business with the government without an intermediary for the first time, supplying peanuts to Bogotá’s schools.
“We’ve been trying to participate directly in the school feeding program for the last 12 years. Dealing with the intermediaries has been challenging as the operator makes the decisions on how and when to pay you; what food they want from you. It’s been a daily battle. In one case, about six years ago, the intermediary went broke and never paid up.”
“Now, we can sell to the city directly. We have a direct contact. And we also have a direct responsibility to fulfill.”
Every school feeding program is audited regularly, and companies are directly responsible for the quality of their food. Previously, the quality could decrease after the intermediary won the contract if they decided to switch to subcontractors who could provide cheaper products. 24 companies that previously participated only as subcontractors now contract directly with the city.
Being able to plan ahead has been one of the key arguments for companies to participate — and negotiate better prices.
Carlos Galeano, a representative of El Recreo, which has been delivering dairy products such as yogurt to local and regional governments for the last 20 years, explains: “It has been a very positive change. In economic terms, we are getting a better price as the intermediaries used to take a large cut. Secondly, we have more security to project our income. Now, we have a secured budget and can plan for the longer-term. To produce yogurt, for example, we have the capacity to negotiate better prices from our providers for packaging and milk.”
Today, he says, the best word for the process is “fabulous.”
This new process has incentivized new businesses to participate; businesses that might not be interested in dealing with the logistics of delivering food to the schools, such as well-known food companies including Colombina or Colanta. And open data has allowed interested companies to better analyze the market.
The two-year contract for storing, preparing and distributing Bogotá’s school meals was awarded in November for 177,461 million pesos (around US$61 million). The next round for contracts for food is currently underway.
With an eye on the data
Andrés Hernández, executive director of the anti-corruption group Transparencia por Colombia applauds the efforts of CCE and the education secretariat, but notes there will be other challenges to overcome to tackle the problem in other parts of Colombia. In particular, he points to weaknesses in the legal framework and insufficient political will, which have prevented top authorities like the comptroller general from being able to stop the powerful vested interests that may hinder other school food programs.
That said, “having Bogotá — the biggest city in Colombia with the biggest budget compared to the other regions — conducting this kind of experiment, through CCE, actually changes the rules of the game for those who were used to keeping money in their pockets,” said Hernández.
But when discussing the school meals with parents, it’s sometimes the basic information that matters most. Information that might not even be detailed in the contracts. Since September, when data on contracting was restructured into the reusable OCDS format, tech-savvy communities have begun working on tools that are designed specifically for users like parents, who might need very different information to a public servant or potential supplier.
In March, a 24-hour hackathon named #Alimendata (a play on the Spanish words for food and data) was organized by a coalition of government and civil society organizations to mark Open Data Day and increase social monitoring of the public resources spent on school meals programs countrywide. The winners, informatic students Gabriel Álzate and Yakkay Bernal, presented a simple tool to provide parents with the information they need most to check on their schools’ menu of the week, with a module for sending complaints.
The education secretariat now has one of the highest percentages of open competitive processes of any public entity in Colombia, and applies them not only for meals, but for cleaning services, school materials, insurance, and computers too. For all of them, the prices are now in line with the market.
“This battle against corruption and waste has been the most difficult in my 42 years,” says Angulo. “But it has also filled me with great pride, since my team and I have dared to use our school meals program to fight one of the greatest stories of public corruption in Colombia in recent years.”
Galeano from El Recreo believes the new process gives honest businesses a better chance to work with government.
“A transparent process incentivizes companies that are ethical and serious about their business to participate. Obscure processes will attract people who don’t want transparency,” he says. “I won’t participate in processes that aren’t clean. It’s the name of the company.”
These businesses have been seeing opportunities pop up in other cities as well. “The lack of information makes corruption possible. When everyone knows the prices and the companies, and the information is passed on through Colombia Compra Eficiente, this becomes a supermarket for municipalities,” says Galeano.
The lessons from Bogotá have been passed on to the president’s office, which is considering new legislation to underpin these reforms nationally, Angulo said. Similar contracts are being considered in other jurisdictions, according to CCE’s director general Juan David Duque.
This open contracting-powered model to improve public contracting through open data and increased participation will be important for other sectors as well. “Public goods and services other than education and public works will benefit from better value for money, a boost in competition, increased accessibility of information, and, crucially, smarter oversight and accountability”, highlights Zuleta.
The education secretariat remains determined to improve the opportunities for children in Bogotá’s public schools through education but also effective management.
A new framework agreement will cover the school meals until the end of 2019. Tendering is currently ongoing with the expectation that the new process will boost the number of suppliers even further, and increase the number of food items on offer.
“Mathematics, languages, and teachers should be priorities for public educators. But we must continue to make very firm changes in contracting schemes too. Contracting, transparency and management make for better education, and go hand-in-hand with social policy,” says Angulo.
With the deals behind the meals now firmly in the open, the changes to the school meals program will hopefully have lasting effects on the children’s futures, in Bogotá as for Colombia.
Story written by Sophie Brown and Georg Neumann.
Learn more about the Open Contracting Partnership and how to implement open contracting in your country at www.open-contracting.org