With e-procurement becoming the global standard for government procurement, governments are turning to disruptive technologies to secure and automate procurement processes. For example, a number of governments have experimented with blockchain in procurement in recent years – Japan to improve information security; the U.S. Health and Human Services to automate pricing analysis; Mexican state of Jalisco to increase transparency, and the municipal government of Seoul to accelerate bid evaluation.
Blockchain is especially useful in helping agencies track and validate bidders and purchases. By leaving in place a time-stamped record of each transaction, blockchain is also hoped to help combat corruption and human error in procurement processes. SMEs benefit from blockchain-based procurement, as it increases the transparency and legitimacy of the procurement process, and also empowers SMEs to track their bids in real time.
Mexican and Canadian governments are experimenting with blockchain in public procurement. Mexico first tested a blockchain-based public procurement process in August 2018. The Digital Government Unit of Mexico’s Ministry of Public Administration manages a project HACKMX aimed to use blockchain to track and validate bids for public procurement contracts. Mexico is now looking to create a blockchain-based contracting system on the federal government’s bidding portal using Ethereum. The government envisions using smart contracts to automate each step of the contracting process – registration of the buying unit or procuring agency, registration of the supplier, verification of the supplier’s background based on data stored in the blockchain network from previous bids, and the process of awarding the contract.
In Canada, the Public Services and Procurement Canada (PSPC) has used blockchain to help MSMEs and bidders to enter data on themselves on blockchain and re-use it. Other Canadian public organizations such as the Province of British Columbia and Indigenous and Northern Affairs Canada developed similar blockchain systems and linked them together, for businesses to have even greater scale economies in bidding for government contracts. In addition, the National Research Council (NC IRAP) is also experimenting with Ethereum blockchain to improve transparency in government contracts. Specifically, NC IRAP uses blockchain to publish real-time contributions and grants data on the Open Government website. As of 2019, the blockchain prototype project had published 7,669 disclosures with a total value of about US$811 million, at an average publishing cost of $0.46. Users from 203 countries accessed these disclosures. This initiative and the PSPC project form a network of blockchain-based procurement strategies Canada is piloting to improve the transparency, accuracy, and efficiency of the procurement process.