It’s no secret that government agencies are always on the lookout for new technologies that can help improve efficiency during the purchasing process. While the pace of change in many procurement departments has historically been slow – think the gradual adoption of electronic bid submission technology – today’s purchasing managers are often expected to accomplish more with smaller budgets, and this expectation can prompt a more rapid shift toward new solutions that can also benefit vendors.
As efficiency in purchasing becomes more important to government agencies, technology solutions that streamline bidding and communication with vendors will be adopted by agencies of all sizes. But as powerful as modern electronic procurement tools are, even more advanced technology that will transform the way purchasing happens is already here – it’s called blockchain.
What is Blockchain?
Blockchain is the transaction technology that underpins the Bitcoin cryptocurrency. It is one version of what are called “distributed ledger” technologies, which allow people to transact with each other without a middleman and automatically record transactions in a publicly-viewable ledger. Because blockchain technology is decentralized and encrypted, no single entity has control over the ledger; anyone can view it and it is automatically updated, making blockchain-supported commerce transparent and essentially impervious to fraud.
So how can blockchain improve the procurement process for vendors and buying agencies alike? Below are three areas where blockchain could have an immediate impact.
By design, blockchain supports complete transparency, which positions it as the ideal technology to underpin the competitive bidding process. Using blockchain for bidding could allow governments to streamline procurement while also opening up the process to greater public scrutiny. Vendors could benefit by being able to view competitor bids and obtain other useful information about the agency bidding process.
Managing vendor compliance with blockchain could allow buying agencies to maintain a real-time compliance dashboard, indicating to what degree each of their vendors is compliant with a project’s requirements as deadlines approach. This would benefit vendors by empowering agencies to quickly let vendors know about the state of their compliance, providing vendors an opportunity to catch up before penalties are incurred.
Document management and legal affairs
Blockchain creates an irrefutable transaction history, which could support efficient and transparent document distribution while also generating important receipts for legal matters. By using blockchain to maintain an ongoing record of document exchanges, vendors and agencies protect themselves from instances of non-repudiation or miscommunication.
Just the Beginning
Public sector adoption of blockchain is in its infancy, but the technology is being explored by a handful of governments around the world, including in the U.S. Blockchain-powered applications are already being integrated into the operations of forward-thinking banks and finance companies, just as they continue to support all types of cryptocurrencies. While blockchain may not have fully entered the mainstream yet, ultimately there’s little doubt that blockchain will play an important part in facilitating commerce moving forward. Of course, if buying agencies are a little slow on the uptake, it may take some savvy vendors to encourage them to explore the technology, with the goal of improving the bid process for everyone involved.
Nathan Munn | BidNet.com