In December the US Department of Health and Human Services received the go-ahead or “authority to operate” (ATO) a procurement system that leverages blockchain and AI. The system will be used to provide pricing information for procurement.
The project extracts data from 100,000 contracts which represent roughly $24.8 billion in annual spend across five separate legacy contract writing systems in the department. It then analyzes the prices paid and terms on those contracts. In turn, that data will be used as input for new purchases.
“We believe there’s significant savings and significant price negotiation power that will come with having full visibility into prices paid and terms and conditions,” said Jose Arrieta, the associate deputy assistant secretary for acquisition, speaking to Federal News Network. He gave an example as an analogy of how a consumer could say to a retailer that they can get it cheaper elsewhere and request a price match.
When the government goes to make a strategic buy, it can take a lot of time, even months, to pull all the market research data together and analyze it. Now that data is updated in real-time and can be available immediately and used for both planning and negotiating.
Blockchain is used as a layer that references all the contracting data in the department. All the data is stored in a standardized format or taxonomy and blockchain holds a timestamped record of the data in that taxonomy.
In addition to the blockchain layer, they added robotic process automation and machine learning. The latter is used for data cleansing when the data is extracted from the legacy contract systems. So it uses natural language processing to analyze the terms and conditions and pricing information in the contracts.
The aim is to get live data to users by March 2019. Once the data starts to flow through the next step is to get feedback from the teams on how to provide better analysis.
Other blockchain procurement initiatives
Procurement is a broad area, so there are several blockchain initiatives. In terms of government procurement the Asian Development Bank published a paper exploring the possibility of creating an international platform to act as a global database of suppliers enabling cross border bidding.
Accenture is working with Thailand’s Siam Commercial Bank on a blockchain solution to digitize procurement paperwork. In turn, the paperwork is integrated into a procure-to-pay solution.
Contracts are core to procurement. Deutsche Bahn is testing a blockchain contracting solution. And several blockchain projects are working on smart “legal” contracts including the Accord consortium that aims to standardize and automate the contracting process.