Fighting corruption, reducing information asymmetries and verifying subjective requirements: these are the aspects that could most benefit from the use of blockchain in public tenders. We are talking about a technology that has been defined as “one of the most fundamental inventions in the history of computer science” (Marc Andreessen), capable of driving what is identified as the fourth industrial revolution (Klaus Schwab, The Fourth Industrial Revolution, 2016).
The importance that this technology can have (and, in part, has already taken) in monetary matters is well known (think of the so-called cryptocurrencies, primarily Bitcoin), but the versatility potentially offered by the blockchain is now just as clearly perceived. If, however, the potential of blockchain technology is intuitively perceived, its concrete use and its areas of application have not yet been explored. To describe the current ‘state of the art’ related to the new technology, the image of an iceberg is often used in order to highlight how, in both cases, what is immediately visible is only a fraction, a small part of the whole.
It seems legitimate, then, to ask what advantages could be gained from its implementation in public tenders. It is necessary to start from the main issues that affect the matter of public procurement.
Blockchain against corruption
A first concern – which, it should be noted in passing, has historically emerged in our country – is that of corruption that can lurk in the various phases that mark the public procedures and that, in the past, we have tried to contain through a reduction of the evaluation margins left to the contracting stations. Despite the fact that the latter perspective has shown all its limits and, as of today, is difficult to repropose, the concern about possible corruption is certainly (and constantly) current and, in the common perception, now seems almost inherent in the public procurement sector.
The new Tender Code has, purely by way of example, strengthened the rules on transparency and incompatibility, precisely in order to better address the dangers of undue influence on tender procedures. Further rules are dictated to ensure the traceability of the chain of payments relating to contracts awarded in compliance with selective procedures (Law no. 136/2010).
But, as we know, such rules have not always proved adequate for their preventive function. Therefore, can the new technology contribute – assisting or even replacing the legislative instruments – to prevent the episodes of corruption that afflict the sector?
The blockchain ideally offers a solution to the problem of trust in transactions, as it operates as a sort of digital ledger, or decentralized database (distributed ledger). Each transaction initiated within this database (organized in interconnected blocks, each of which also includes several transactions) must be recognized and verified by the network itself. Each block in this chain must first be verified and validated by blockchain participants, thus creating a network that ensures widespread traceability and verification of all transactions.
The servers of the participants in the blockchain (the nodes), then, also act as an archive of all the transactions that have involved it, forming a ‘history’ that cannot be modified (except for a new consent of the participants in the blockchain) and, therefore, immutable. The characteristics of blockchain technology therefore seem naturally oriented towards addressing the risks of corruption, thanks to the immodifiability of the data and the presence of widespread control over the individual steps of the procedure.
Precisely in order to increase the transparency of procurement processes, increase trust in public institutions and reduce the risk of corruption, the Mexican government is, for example, implementing a project for the application of blockchain to public procurement.
It should also be noted that, with reference to tender operations, in a ‘traditional’ procedure a control function on the regularity of operations and the integrity of administrative documentation is carried out by the competitors themselves who, for example, by participating in public sessions and exercising their right of access to documentation, can verify compliance with the numerous rules protecting the secrecy and immodifiability of bids, as well as (more generally) the par condicio competitorum.
However, a possible enlargement of the number of subjects involved in this control role, as well as expressing the democratic potential inherent in blockchain technology, can only ideally enhance and simplify even more this activity, also allowing to reduce the (admittedly overly complex) system of rules currently in force. This last aspect could also lead to a reduction in the time taken to carry out tender procedures. In the United States, for example, the General Services Administration (GSA) has begun to study blockchain to speed up the process of awarding contracts as part of the FASt Lane program, already designed to achieve an award within 34 days (!).
One of the most promising application perspectives of blockchain then concerns the verification of the requirements of competitors and, more generally, the reduction of information asymmetry between the public administration and economic operators. Precisely in view of the increase in trust that the blockchain is able to offer (one speaks of digital trust), it seems easy to hypothesize its use in order to make the mechanism of verification of competitors (and of the documentation presented by them) more efficient, as well as the market analyses carried out by contracting stations.
Currently, the system provides for the development of the Economic Operators Database (art. 81 of the Procurement Code), which in the future should replace the AVCPass system (on this point, see the opinion of the Council of State, April 27, 2018, no. 1126, rendered on the draft decree regulating this database). To this database – which should make available “data and documents relating to the requirements of a general, technical-professional and economic and financial nature necessary for the participation of economic operators in the procedures governed by the code and for the control during the execution of the contract of the permanence of these requirements” (art. 1 of the draft decree) – is added, for example, the Computerised Record Book, managed by ANAC (see ANAC resolution of June 6, 2018, in OJ no. 148 of June 28, 2018), in which, among other things, information relating to the SOAs, as well as the legality rating managed by the AGCM, converge.
Also in this context, the integration of blockchain in the system of public tenders should be carefully analyzed, as it could potentially play a central role in updating information, as well as in their validation and efficient management, also reducing the administrative burden on contracting stations and economic operators. Under this aspect, adequate interconnection between the various relevant databases and registers is also essential.
By means of technological upgrading, it would appear possible to envisage a faster and more reliable verification of data relating to competitors, more generally including their track record, in order to reduce the information asymmetry that often characterizes a sector, such as that of public tenders, in which public entities naturally averse to risk operate.
The Need for Regulation
In order to draw some conclusions, it should first be noted that blockchain – like, after all, any new technology – is, to a certain extent, neutral (Kobina Hughes, Blockchain, the greater good, and human and civil rights, 2017, where the use of blockchain is hypothesized not only in electoral procedures, but also for the purpose of contributing to the protection of human rights). It is, in fact, curious to note how one of the concerns linked to the use of blockchain technology is precisely that of its possible role as a catalyst for transnational criminal activities.
If we add to this technological neutrality the consideration that blockchain has developed and received significant attention only in recent times, we can understand how the opportunity to implement this tool in a matter, such as public procurement, permeated by delicate public and private interests, as well as its concrete modalities of use, must be evaluated with great care and attention.
In spite of the potentialities of blockchain, it seems necessary to regulate it: it is a well-known fact that technology cannot be abandoned to itself, but it needs an appropriate discipline, in order to avoid the risk of possible abuses. This regulatory intervention should not, however, eliminate the intrinsically democratic, neutral and decentralized features that are inherent in it. In this sense, an aspect with which we will have to measure ourselves concerns the correct identification of the nodes of (i.e. the participants in) the blockchain and the related discipline.
Moreover, the current unpredictability of all possible uses of the blockchain, if it opens up futuristic scenarios hitherto not even imagined, also brings with it a symmetrical concern: it is not possible at present to hypothesize all the vulnerabilities of this technology. And, in spite of the tendency of the data validated through this peer-to-peer mechanism to be unchangeable, it is not possible to preach (except for utopian ambitions) the complete unassailability of the network from potential external interventions or its immunity from technological failures.
It seems, therefore, indispensable a constant maintenance of the system, as well as the monitoring of its performances and its functioning. It is obviously an activity that requires specific competences and professionalism that will have to be purposely trained and recruited, thus generating interesting occasions and opportunities for the job market.