The market for procurement by the Chilean government, which runs about $7 billion annually, has been dramatically transformed in the course of less than a year. A government reform aimed at procuring all goods and services over the Internet—using a website that also provides the details of all contracts and bidding results—has affected all public institutions.
Some government offices began using the ChileCompra portal shortly after it was created in 2000 because it made for an easier procurement process at lower cost. The system became obligatory in September 2003 with passage of the Procurement Law and entered into force a year later with publication of the law's regulations.
The system's current inscription includes 84,000 providers and 655 public entities involved in procurement, including 123 municipalities that have gradually come on board. All ministries, central government public services, state enterprises and regional agencies were incorporated into the system during 2003, with municipalities joining slightly later. Remaining government offices have until the end of 2004 to enter the system, while the armed forces have until the end of 2005.
An added feature of ChileCompra is that is that any citizen has access to the details of all contracts for goods or services procured by the public sector. Any Chilean can learn about, follow up, and verify the proper use of procurement and contracting processes involving public resources.
“One of the most democratic reforms possible is to make hard information available to citizens about what is being done,” said Mario Waissbluth, executive director of management consultancy firm IGT, during a presentation about ChileCompra at a state reform seminar at IDB headquarters. The system, he added, fosters maximum transparency and market efficiency.
ChileCompra Director Tomás Campero explained that two-thirds of the services of the electronic commerce system are operated by a private firm under a contract that runs until 2007. Once the system is fully operational, the company will receive a $3 million payment annually paid from the national budget rather than by users.
ChileCompra's basic services will continue to be free of charge to users because charging for them would increase administrative costs, and because it is more efficient to recover operational costs with the savings generated by the system itself.
“In fact, ChileCompra is already paying for itself through savings of $3 million a year in notices in publications, and because the expenses of entities that use the system have declined by 7 percent, the equivalent of some $70 million,” Campero explained. He added, however, that some user fees will be introduced during 2005 for new value added services under private operation.
The state reform that facilitated ChileCompra is what is called “transversal,” which is a type of reform that affects all public distribution. Transversal reforms are slower and more difficult to put into effect than institutional reforms, which impact only a particular entity. However, transversal reforms can have a more powerful impact, and they often prompt greater resistance from political parties as well as the affected public institutions themselves. Waissbluth noted that reforms that create transparent systems for public procurement over the Internet—such as ChileCompra— can have a particularly strong impact in Latin America.
Other types of transversal reforms include public management systems that introduce “filters” to transform political appointments into competitive processes based more on technical criteria, as well as the establishment of agencies such as the US General Accounting Office or Holland's Rekenkamer, both of which independently evaluate the effectiveness of the executive and legislative branches and the efficiency of institutions, programs and laws.
A multilateral effort is under way to replicate worldwide Chile's efforts to save money and improve efficiency and transparency with its electronic government procurement (e-GP) website . The IDB has joined forces with the World Bank and the Asian Development Bank to harmonize their e-GP procedures with those of their borrowing member countries. The aim is to reduce transaction costs simplify operations, and make the overall process more transparent.
The three institutions launched a common website in May 2004 that provides information about advances and best practices in the field of e-GP. They currently are revising their policies and guidelines for countries that want to use the system for their loan and grant operations, credit lines, and programs associated with these institutions.
Through the shared e-GP , the multilateral development banks also offer support activities such as technical assistance and the transfer of know-how.