The Costs of Secrecy: Economic Arguments for Transparency in Public Procurement

This report examines data from three selected procurement systems to
demonstrate the practical benefits of openness in public contracting, and specifically to demonstrate that the adoption of open contracting leads to more competitive procurement processes, and ultimately to cost-savings and gains in efficiency. While the heavily contextual nature of pricing and procurement processes make causation difficult to prove, the trend around the world among countries that have incorporated greater openness into their contracting schemes
suggests that there is indeed a relationship between openness and
competitiveness, and that open contracting has a tendency to lower prices paid. In particular, analysis of contracting data from three robust open procurement systems reveals significant increases in competition and in contracting diversity following the systems’ adoption. Although basic economics suggests that increased competition should decrease prices, this impact is also supported by analysis of indicators such as whether contracts were awarded for less than their estimated budget, as well as the decline in prices for relatively stable procurement categories. In some instances, these savings can be tracked in the hundreds of millions or billions of dollars. Together with the relatively modest costs of establishing an effective open contracting system, these research findings present a convincing case for why transparency in procurement makes sound fiscal sense.