A blockchain-based government contracting system will go live in Colombia this year, developed through a partnership between the World Economic Forum, Colombia's Inspector General, and the Inter-Ameri
A blockchain-based government contracting system will go live in Colombia this year, developed through a partnership between the World Economic Forum, Colombia's Inspector General, and the Inter-American Development Bank. The Ethereum network will underpin the project, which aims to cut corruption in the bidding process for major government contracts.
The WEF released a report this month called "Exploring Blockchain Technology for Government Transparency: Blockchain-Based Public Procurement to Reduce Corruption" that lays out how blockchain can improve transparency and ensure government agencies remain accountable. The project stems from research into what government processes lose most money to corruption.
The numbers are staggering. Governments across the world spend more than $9.5 trillion on procurement each year, according to the Organization for Economic Co-operation and Development. About 30 percent of that amount disappears through corrupt practices.
Sheila Warren, who leads the WEF's blockchain and data policy work, described how workshops in Colombia shaped the project's direction. "Most of the feedback we got from within the country after workshops that we ran there was that procurement would be the most conducive system to having a blockchain within it," she said.
The pilot will run as an actual government auction. Colombia's national university will purchase goods and services through the system later this year. The project will also test the technology in a public school food program that had previously seen corruption problems.
Ashley Lannquist, who leads the WEF's blockchain efforts, explained why the technology fits the problem. "Corruption is a high-potential space for blockchain because you really benefit from decentralization; records are very difficult to remove or censor, for instance," she said. The permanent nature of blockchain records prevents officials from tampering with evidence of wrongdoing.
Smart contracts and decentralized record-keeping offer advantages for auditing and filing, the report noted. These features position blockchain as a promising tool for fighting corruption.
One obstacle remains: Colombian law mandates that companies bidding for government contracts stay anonymous. "Companies are used to it and they know that it has to be this way. It depends on the law of the country; it could be different in other countries. But generally, it's anonymous bidding in blind auctions," said Ximena Lombana from the Inspector General Office.
