Last week the Seoul district of Yeongdeungpo-gu in South Korea announced that they successfully implemented a blockchain-based proposal evaluation system.
The new blockchain system aims to enhance the transparency and trustworthiness of assessing responses to public tenders. Because data stored on a blockchain cannot be easily falsified, it should ensure greater fairness in public service bidding procedures.
Initially, the blockchain will be used to evaluate all proposals in the district during 2019. Depending on progress it may then be expanded to other local governments.
The blockchain project won the Grand Prize in the “Contest for Anti-Corruption Best Practices” in November last year.
Academic’s provide a how-to document for blockchain public tenders
In 2016 a number of students at the University of London wrote a whitepaper outlining the possibilities for blockchain in public tenders. The desire for open governance motivated the document.
The main thrust of the paper is the potential for blockchain and smart contracts to enable citizens to have oversight of government activities with limited financial cost. As a proof of concept, they suggested a solution for a government tendering process. The system would enable fairness through immutability, privacy protection, and the prevention of third-party bidding.
The proposed approach had three prongs to prevent corruption. Firstly once a tender is published it can’t be altered. Otherwise, someone could change the criteria to match one of the bidders. Secondly, bidding must be confidential, so other applicants don’t know the amounts or details. And the bids must be tamperproof. That prevents both the bidder altering details but also a corrupt government official changing proposals to make them less attractive compared to their preferred bidder. Finally, the organization that publishes the tender can only evaluate bids after the tender process is closed. All three are achievable using blockchain.
Besides the Seoul district, in July last year, the Mexican government announced plans to hold the first public tender using blockchain technology. Their aim is also to increase transparency and reduce corruption.
In the US, the Department of Health and Human Services is also using blockchain, but its focus is on analyzing the costs and terms for previous purchases.