The US Department of Health and Human Services (HHS) is continuing its exploration of blockchain technology with a $7 million investment into its BUYSMARTER AI/blockchain initiative.
BUYSMARTER was formed in response to an Office of Management and Budget (OMB) memo which required each governmental agency to come up with plans to improve their efficiency and effectiveness.
The aim is to modernize and improve HHS’ procurement systems. Currently, HHS’ procurement model often means departments make identical purchases, independent of one another. This means that not only does HHS procure things unnecessarily but that it also loses the benefits of economies of scale.
BUYSMARTER plans to collect all of HHS’ procurement contracts and place it on one blockchain-facilitated database, built by HHS ACCELERATE. An AI tool that uses Natural Language Processing can then analyze and structure the contracts to reveal places where procurement overlaps.
This would allow HHS to employ shared acquisition vehicles, which various departments can then use to ‘pool’ their orders of similar items to achieve volume discounts.
These discounts are not trivial. A data sample revealed that price differences in procurement can balloon to 322%.
Overall, BUYSMARTER forecasts say that, if fully implemented, the new system can yield savings of $720 million on an annual basis.
This is not the only benefit. Federal agencies are also required to check system logs for suspicious activities. Oki Mek, chief product officer in the HHS Division of Acquisition, in an interview with GCN, said that blockchain can also prevent fraud and tampering. “If the logs are fed into a blockchain instead of traditional log folders … then it is impossible for one person to delete or manipulate the logs because they are immutable and have provenance.”
Other organizations are also looking at blockchain to help improve their procurement systems.
Accenture is working with Thailand’s Siam Commercial Bank to use blockchain as part of a digitization effort of the bank’s procurement paperwork.
Additionally, the Asian Development Bank published a paper outlining the possibility of an international database of suppliers to enable cross-border bidding.