Participation and Accountability in Public Procurement (MN0050)

Statement of public problem ● Opaque bid evaluation ● Public perception of unfair tendering ● Inequality in the access to information among government, civil society and private secors as well as population groups

Commitment definition • The legal framework is improved. • The public procurement system /www.tender.gov.mn/ is connected to the bidders’ systems to enable information exchange. • Accountability system for public procurement is strengthened and the Red Flag Indicator introduced. • Information collected on procurement contract progress and execution, and made public in line with international Open Contracting standards . The digital procurement system /www.tender.gov.mn/ will be upgraded to digitalize the bid formulation and selection processes and thus minimize the human factor.

Contribution to addressing public problem Public investment efficiency will be enhanced through integration of the norms of fairness, transparency and accountability in the observance of due process and its monitoring in public procurement. Open data on the procurement contract management will be conducive to introducing risk management systems, making knowledge-based decisions, and to public monitoring and independent analysis of public budget expenditures.

Relevance to OGP values • Increasing transparency • Strengthing public participation and engagement • Reducing corruption and conflict of interest

Additional information Budget: State budget and investment by international organizations Coherent with: • “Vision-2050” Long-term Development Policy; • “Mongolia Sustainable Development Vision-2030”; • Provision 3.1.15 of the Government of Mongolia’s Action Plan 2020-2024

Target definition Human factor adverse effects reduced in public procurement through pplication of advanced technologies; Participatory monitoring and evaluation reports undergo stakeholder reviews and are made open to the public.

Follow-up actions: Continuous monitoring and assessment, public information and communication activities

Milestones: Start date: End date: Strengthen legal environment 2021.11.01 2022.09.30 Compile and operationalize a digital data catalog 2021.11.01 2022.06.30 Link the procurement bidders systems to the KHUR integrated system, increase information exchange, improve operational coordination within the public sector domain 2021.11.01 2023.06.30 Collect management information on each and every contract concluded under the Law on Procurement of Goods, Works, Services with State and Local Funds, and make publicly accessible using the OCDS format. 2021.11.01 2022.06.30 Strengthen public procurement accountability systems, introduce the RED FLAG indicator and make it open to the public. 2022.02.01 2022.12.01 Clients and bidders are engaged in public consultations by conducting information and communication actvities on digital procurement systems and evaluating progress in oversight and control thereof. 2021.11.01 2023.06.30

Action Plan Review

Commitment 3. Public Engagement in Public Procurement

For a complete description of the commitment, see Commitment 3 in Mongolia’s 2021–2023 Action Plan.

Context and objectives:

According to GAN Integrity, Mongolia’s public procurement process faces high corruption risks of bribes, irregular payments, and conflicts of interest. [21] In recent years, the Independent Authority Against Corruption, journalists, and activists have reported many breaches of public procurement rules. [22] This commitment is led by the State Procurement Agency and is the only commitment in the action plan initiated by a government agency. [23] It builds on the previous action plan, which progressed efforts to open access to online procurement data. This commitment aligns with the OGP value of transparency, as it aims to include a clause supporting open data principles in the Bill to Amend the Law on Procurement of Goods, Works and Services with State and Local Funds. It aims to fully digitize the public procurement process and introduce a new measure to limit awarding bids to companies with high corruption risks. Consistent with the value of civic participation, it includes efforts to increase citizens’ engagement in evaluating procurement bids and hence improve public oversight of the process.

Potential for results: Substantial

To reduce misallocation of public funds, this commitment addresses gaps in citizen oversight of the public procurement process. Prior to this commitment, the contract transparency website publicly posted tenders online, accepted online bid proposal submissions, and listed entities that won tenders and copies of contracts. [24] Some paper-based bids were submitted manually and uploaded in a scanned non-machine-readable format. The process for awarding bids did not include citizens and was not sufficiently digitized to systematically cross-check bidders against criteria like those set by the Independent Authority Against Corruption. As a result, some companies won bids for which they were ineligible. No information was available on the contract transparency website regarding contract implementation. [25]

In order to address these issues, this commitment plans to systematize Mongolia’s public procurement process and widen opportunities for public oversight. In an interview with the IRM, the State Procurement Agency reported that it aims to stop accepting paper-based bids. With all bids available in a machine-readable format, it intends to introduce a system that automatically filters out bids using “red flag indicators” that signal noncompliance with criteria set by the Independent Authority Against Corruption. They would draw on data indicating corruption risks from government reports, beneficial ownership reports, public audits, and other data sources. This systematization of bid evaluation could help minimize misallocation of public procurement funds. Through this commitment, the State Procurement Agency also reported plans to form citizen-led groups to serve as their counterpart in evaluating procurement bids, which could improve the accountability of the procurement process (although this is not clearly delineated in the commitment text). Additionally, the commitment envisions uploading information on contract implementation to the contract transparency website, [26] in compliance with the Open Contracting Data Standard, [27] which could facilitate public and civil society monitoring of procurement projects. These measures would be supported by planned amendment of the procurement law, introducing clauses on transparency and open data principles.

Opportunities, challenges, and recommendations during implementation

The positive engagement of the State Procurement Agency in the open government process offers an opportunity to ambitiously implement this commitment’s initiatives. However, the State Procurement Agency has not identified civil society partners for implementation. Additionally, it may be difficult to fully eliminate paper-based bid submissions from the public procurement process, given continued internet access gaps in Mongolia. To support this commitment’s potential on the public procurement process, the IRM recommends the following:

Results Report

Commitment 3. Public engagement in procurement

Implementing Agency: State Procurement Agency of the Ministry of Finance

Context and Objectives

This commitment intended to digitize the public procurement process and introduce a red flag indicator to limit awarding bids to companies with high corruption risks. It also planned to raise public awareness of the online procurement system and evaluate its use in public oversight of government procurement. These efforts aimed to address the high corruption risks faced by Mongolia’s public procurement process. [25] The commitment built on the previous action plan, which progressed efforts to open access to online procurement data. Led by the State Procurement Agency, this was the only commitment in the action plan initiated by a government agency.

Early Results: Significant

This commitment achieved significant results on opening the public procurement process. Half of its milestones were completed, while the other half made substantial progress. It strengthened systematic publication of procurement data, which could be used to monitor any irregularities. It also improved the availability of Mongolia’s public procurement information by progressing the transition to digital bid submission and cataloging of data on tender.gov.mn. The Democracy Education Center particularly noted the State Procurement Agency’s strong leadership in the process of making procurement data accessible online, despite the issues inhibiting the overall coordination of action plan implementation. [26]

To strengthen the legal basis for digitizing and increasing public participation in procurement, the Ministry of Finance created a government-civil society working group to review existing regulations. The working group produced an amendment proposal on the Procurement of Goods, Works, and Services with State and Local Property Funds Law, [27] which parliament approved in June 2023. [28] The amendment introduced provisions intended to reduce human error in procurement, such as a mandate to create an electronic bidder database, transparency measures in the bid selection process, prevention of conflicts of interest, and creation of working groups to evaluate government tenders. [29]

Procurement data are made available for public access on the tender.gov.mn portal, where information of tender invitations, lists of bidders (including prohibited ones), contract winners, and delivery of contracts are published regularly. Previously, information on tenders and bidders was published on separate systems. [30] The integration means that verified bidders can now submit their bids online via the portal. The development of an electronic catalog of procurement data dating back to 2018 was also completed, although it had not been publicly launched by the end of the implementation period. [31]

In line with IRM recommendations, the design of the portal’s user interface and experience were significantly improved. For example, when looking up an invitation to tender, users can now search by categories such as date, name of tender, portfolio manager, and category of work as specified in the amended procurement law. [32] The Open Society Forum notes that the portal also hyperlinks to procurement data in the Open Contracting Data Standard format, although many return an error message when clicked. Information on the portal saw a significant increase by the end of the implementation period. As of July 2023, over 17,000 tender invitations were published on the integrated system—constituting all government tenders carried out during the action plan implementation period. Over 286,000 tender references had been downloaded, illustrating a high level of user engagement. [33]

The commitment also made progress on public accountability mechanisms. Its intended red flag indicator was under development by the end of the implementation period. To inform its development, during the integration of the tender and bidder systems, the State Procurement Agency collected data and solicited feedback on irregularities from bidders and citizens. [34] The agency also launched the opendata.tender.gov.mn portal to give citizens access to the application programming interface (API) of the tender.gov.mn portal, which means that tender data can now be reused for public monitoring purposes. [35] The Authority of Government Supervisory was created in early 2023 to oversee the handling of public complaints and carry out independent oversight of government budget use and public service delivery, including government contracting. The newly formed body was still in the process of developing a new draft monitoring and evaluation policy by the end of the action plan cycle. [36]

According to the Ministry of Finance, the commitment has helped mitigate corruption risk. Digitization of the procurement process allows relevant stakeholders to check and verify information such as social insurance, court decisions, bidder certification, equipment feasibility, labor safety measures, and the bidder’s track record. [37] Public checking of bid winner documentation has also begun. As of July 2023, 1,921 out of 34,443 documents submitted by 1,891 bidders that won government contracts had passed public checking. [38] Additionally, trained procurement officers conduct public consultations via a government hotline that has amassed over 25,000 minutes of recorded phone conversations as well as over 3,800 email inquiries—indicating an institutionalized approach toward making this practice sustainable. [39] This practice allows citizens to have a direct role in ensuring that government contracts are compliant with proper procedures. Findings of any irregularities can be used to reveal potential misconduct or human errors in the public procurement process. In parallel, journalists and civil society organizations have made use of the expanded procurement information in anti-corruption efforts. For instance, the Mongolian Data Club uncovered links between suppliers and 535 public officials and politicians. [40]

Looking Ahead

Public procurement is vulnerable to corruption risks, especially due to bribery and payment irregularity in the awarding of government contracts. [41] While digitizing the procurement process and introducing open data standards help mitigate the risks, these efforts need to be mainstreamed across government practices. For example, the government could aim for more ambitious reform by extending the scope of transparency and public oversight to include post-tender processes such as contract delivery, payment release, and evaluation of completed work.

The passing of the National Anti-Corruption Program in June 2023 [42] lends itself to building greater momentum toward this objective as it emphasizes the need for an anti-corruption strategy—including in public procurement—to align with international standards. [43] In their assessment of Mongolia’s public procurement systems, the Asian Development Bank noted a pressing need to update existing regulations around standard bidding documents at the central level, and regulate and monitor public procurement activities in both central and local governments. [44]