Have you ever imagined a procurement process so transparent and secure that it virtually eliminates errors and fraud? Blockchain, often associated with cryptocurrencies, is now revolutionizing government procurement, offering a solution to challenges that have long plagued the system. Imagine a procurement process where every transaction is not only recorded but also securely stored in a tamper-resistant, distributed ledger accessible to all relevant parties. In this blog, we delve into the concept of blockchain technology, reflect on real-life cases to determine its feasibility for government procurement, share three key benefits of its use in public purchases, and provide an alternative in case introducing this type of technology into government transactional operations is not possible.

What is blockchain and how does it work?

Blockchain, at its core, is a decentralized and distributed ledger technology that ensures transparency, security, and immutability of data. The World Economic Forum (WEF) succinctly describes it as "peer-to-peer distributed networks that are cryptographically secure, append-only, tamper-resistant (extremely hard to change) and updateable only through distributed consensus." This definition emphasizes the tamper-resistant nature of blockchain, where once a block of data is added to the chain, it becomes virtually impossible to alter, providing a high level of trust in the information it contains.

Picture a digital ledger operated by a network of computers, not controlled by any single entity. Each transaction is securely recorded in blocks, forming an unalterable chain -blockchain. Smart contracts, akin to self-executing agreements, showcase blockchain's ability to automate processes, like instantly delivering a purchased digital product in e-commerce once payment is confirmed.

Is it possible to use blockchain technology in government procurement?

When it comes to government procurement, the challenges are numerous – from ensuring transparency to combating fraud. The quick answer would be YES. It is possible and recommended. 

For instance, in Europe, the city of Aragón, Spain, was the first European city to award a contract using blockchain technology. As the city authorities explained, "the algorithm will replace the assessments made by the contracting board personnel to decide the company responsible for supplying 35,000 reusable masks for the personnel of the Community of Aragón." This isn't the first time the city has innovated. Previously, Aragón had utilized the blockchain system to conduct bid submissions in 24 contract tenders.

Among the benefits the city acknowledges with the use of blockchain technology in government procurement are the following: 1) elimination of errors in bid assessments and potential disruptions to the process, 2) streamlining the process of awarding contracts, 3) cost and time reduction, and 4) professionalization of government personnel.

Another example of the use of blockchain technology in government procurement is Georgia. The Georgian government has implemented a blockchain-based platform for public procurement called “Procurements,” which allows for transparent bidding, contract management, and supplier verification. This has resulted in increased efficiency and reduced opportunities for corruption.

In the United States, there has also been ongoing discussion for some time about the use of blockchain technology to optimize government procurement. The General Services Administration (GSA) is exploring how blockchain can revolutionize the procurement systems, crucial tools for government agencies acquiring goods and services. GSA envisions blockchain enhancing transparency and security in procurement, while also slashing the time and cost linked to contract awards and administration.

Which are the benefits of using blockchain in government procurement?

Blockchain is a highly recommended technology for all types of transactions requiring traceability, security, and speed. As mentioned, the use of this technology brings significant benefits to government operations, especially those involving multiple transactions, such as government procurement. Below, we highlight 3 benefits of using blockchain technology in government procurement:

1. Enhancing Transparency and Accountability:

In traditional procurement systems, the lack of a centralized, incorruptible ledger often leads to discrepancies, errors, and potential fraud. Blockchain's decentralized nature ensures that every transaction is recorded in a tamper-resistant manner across a network of nodes. This transparency not only minimizes the risk of manipulation but also allows all relevant parties to access a real-time, immutable record of procurement activities. Consequently, citizens, vendors, and government officials can trust that the procurement process is conducted with integrity, fostering a heightened level of accountability throughout the supply chain.

3. Streamlining Processes and Reducing Costs:

One of the hallmark benefits of integrating blockchain technology into government procurement lies in the streamlined and cost-effective processes it enables. Traditional procurement involves complex workflows, extensive paperwork, and intermediary interventions, leading to delays and increased operational costs. Blockchain simplifies and automates these processes through smart contracts, which execute predefined terms when specific conditions are met. This automation not only accelerates the entire procurement lifecycle but also significantly reduces the need for intermediaries. Consequently, governments can allocate resources more efficiently, expedite decision-making, and cut down on unnecessary expenses, ultimately maximizing the value of public funds.

3. Mitigating Risks and Enhancing Security:

Blockchain's inherent cryptographic security measures make it a robust solution for mitigating risks in government procurement. The tamper-resistant nature of blockchain ensures that once data is recorded, it cannot be altered or deleted without consensus from the entire network. This immutability safeguards against fraudulent activities, unauthorized alterations, and cyber threats. Moreover, the decentralized architecture distributes the storage and verification of data across a network of nodes, making it resilient to single points of failure. This heightened security not only protects sensitive information but also builds trust among stakeholders. As governments handle vast amounts of data during procurement, the integration of blockchain technology provides a resilient shield against potential security breaches, fostering a secure and reliable procurement ecosystem.

In essence, utilizing blockchain technology in government procurement enables the recording of each transaction in a tamper-resistant manner across a network of nodes, minimizing the risk of manipulation and providing access to a real-time and immutable record of procurement activities. It facilitates the procurement process with integrity, streamlines and cost-effectively automates processes through smart contracts, accelerates the entire procurement process, reduces the need for intermediaries, allocates government resources efficiently, maximizes public value, safeguards against fraudulent activities, unauthorized alterations, and cyber threats. It also protects sensitive information, builds trust among stakeholders, and provides a resilient shield against potential security breaches.

So, a big HURRAH for blockchain! But what if we don't have access to this type of technology? What if we want our government transactions to be just as efficient, fast, secure, and innovative as if we were using blockchain but without it? Is it possible?

We need to understand that government transactions are complex, bureaucratic, sensitive, and require the highest degree of transparency possible. Any digital solution that adds an extra layer of transparency to the public sector, in any of its areas but especially in those related to public budget and intelligent use of public resources, is always recommended. While modern technologies make this easier, it's also a reality that introducing them to government operations quickly and easily is not always possible. Therefore, it's crucial to devise digital solutions that may not necessarily use blockchain technology but can offer the same benefits.

Glass Commerce, our flagship product, provides the benefits that blockchain technology offers but doesn't currently use blockchain technology (yet!). In this way, we offer governments a digital solution that allows them to conduct their small purchases easily, simply, quickly, and securely, just as if it had blockchain technology incorporated, but without the high costs associated with such technology.

Our government marketplace simplifies the way every government purchases by enabling government buyers to acquire products from verified small, local and diverse vendors. But it does it in the most blockchain-ish way possible!

• Uses Stripe, a platform that allows businesses and individuals to accept payments over the internet with a developer-friendly approach. It offers a simple integration process and provides a range of features such as fraud prevention, and real-time reporting, ensuring the integrity and immutability of data. 
• Records and enables tracking of all transactions made, easily accessible to both government buyers and verified vendors. All tracking is conducted through the tools provided by our main distributors (UPS, USPS, and Roadie), and transactions are processed through Stripe, which stores, records, and safeguards transactional information. All transactions are encrypted, ensuring the protection of each user's data.
• Eliminates the need for multiple intermediaries, as purchases can be easily conducted between the government buyer and the vendor without the involvement of others.
• Streamlines the public procurement process and reduces processing times. 

For us, it has always been crucial to create a product that is innovative and provides all the benefits that disruptive technologies offer today, but equally accessible. We understand that governments want to incorporate these technologies into their operations, but they also want to use public resources as efficiently as possible. Sometimes, this means not being able to access these technologies.

We will continue keeping these three mentioned benefits in mind to further optimize our product and make it the go-to choice for governments to carry out their small-scale purchases. Not just for its accessibility, but also for delivering all the advantages of blockchain or AI technologies.

This blog was written by Gisela Montes, GovTech Community Lead at Glass.