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Archives of Business Research – Vol. 8, No. 8

Publication Date: August 25, 2020

DOI: 10.14738/abr.88.8793.

Naidoo, L., Naidoo, V., & Edoun, E. I. (2020). An Open Contracting Framework For Public Sector Procurement: A Structural Equation

Modelling (SEM) Methodology. Archives of Business Research, 8(8). 57-68.

An Open Contracting Framework For Public Sector Procurement: A

Structural Equation Modelling (SEM) Methodology

Lawson Naidoo

Business School

Tshwane University of Technology

Vinessa Naidoo

Business School

Tshwane University of Technology

Emmanuel I. Edoun

Business School

Tshwane University of Technology

ABSTRACT

The main purpose of this study was the development of a framework to

implement Open Contracting in South African public sector

procurement. The specific objective of this paper is to determine the

relationship between the principles of Open Contracting and the pillars

for Open Contracting. This was deemed important to provide some

insight to the possible components of the recommended framework for

the implementation of Open Contracting in public sector procurement.

This study followed a quantitative approach. A questionnaire via an

online survey was employed to collect the data from a convenience

sample of 377 procurement practitioners employed in the South

African public sector. Pearson chi-square test (ɑ = 0.05) was used to

test for association between any pair of categorical variables.

Cronbach’s alpha was applied to test for internal consistency

reliability. Structural equation modelling (SEM) was used to test the

measurement and structural models and simultaneously examine a

series of interrelated dependence relationships among the measured

variables. SEM was also used to test the hypotheses in this study. The

structural model also indicated a good model fit through the various

indices. Therefore, it can be concluded that there is a relationship

between Open Contracting principles and pillars for Open Contracting.

The findings relating to the research questions, therefore, provided

sufficient information to design an Open Contracting Framework to

facilitate the implementation of Open Contracting in public sector

procurement.

Key Words: Open Contracting, Public procurement, Structural Equation

Modelling (SEM)

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URL: http://dx.doi.org/10.14738/abr.88.8793 58

Naidoo, L., Naidoo, V., & Edoun, E. I. (2020). An Open Contracting Framework For Public Sector Procurement: A Structural Equation Modelling (SEM)

Methodology. Archives of Business Research, 8(8). 57-68.

INTRODUCTION

The actions taken by governments affect every citizen in their countries. How governments operate

and how they spend public funds have a direct impact on everyday lives and the future of

communities. For instance, it is estimated that 9.5 trillion US dollars are spent by governments all

over the world through procurement contracts (2). Citizens have a role to play in making sure that

public money is not lost, stolen or misused. Therefore, they need answers to questions such as:

• How much money was spent to build the new public school?

• How did the government decide which company will get the contract?

• Did the company deliver according to the contract?

To answer these questions, citizens need to access information about the full government

procurement process cycle from planning, through the procurement, contracting and

implementation processes and the final monitoring of the results. In other words, the procurement

process should be transparent.

The opening of data is a global phenomenon driven by the need to boost innovation, create

transparency and improve accountability (5). According to Marias et.al (6)), the implementation of

transparency and public participation initiatives are dependent on the accessibility of government

(procurement) information. Janssen (5) in agreement, summarised transparency as “... the ability

to see what is happening in the government by the public”.

Open Contracting (OC) is a relatively new approach, vital in improving the efficiency and

transparency of public procurement systems. It is useful in detecting fraud and corruption,

promoting a competitive business environment and ensuring improved delivery of goods and

services to citizens (9). Open Contracting will help communities understand how government

contracts are awarded, and inevitably expose any irregularities in the evaluation and award of

government contracts. In order to achieve transparency in the public procurement process, the

principles of Open Contracting should be included in all the stages of the procurement process. The

public sector in South Africa, however, is still having trouble in implementing an open and

transparent procurement system.

A preliminary review of national and international studies on Open Contracting in public sector

procurement revealed a scarcity of literature in this field, especially in the South African public

sector.

The open government initiative: Where did it start and what is it about?

The Open Government Partnership (OGP) is a multilateral initiative that aims to secure concrete

commitments from governments to promote transparency, empower citizens, fight corruption and

harness new technologies to strengthen governance. The OGP was formally launched on the 20th

of September, 2011. The eight founding governments, including South Africa, endorsed the Open

Government Declaration and announced their countries’ action plans (11).

What is Open Contracting?

Open Contracting is a growing global concept that aims to increase disclosure and public

participation at all stages of government contracting. It asserts that transparent contracting will

help to ensure that public resources are managed effectively and that citizens receive the services

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Archives of Business Research (ABR) Vol.8, Issue 8, August-2020

and goods they deserve (10). According to Sebola (13), “The purpose of public participation is to

ensure that stakeholders affected by public authority’s decision have a right to be consulted and

contribute to such decision”. Gatjen (3) eloquently summarises Open Contracting as “...the

proactive publication of government contracts”.

Public Procurement Practices

The practice of procurement in the public sector is when government does business with the

general public in an open, fair and transparent manner. Governments need to account to the public

that all bidders were given a fair opportunity and that business was awarded to the most

appropriate bidder at the best price in expediting taxpayer’s expenditure. In developing countries,

public procurement is increasingly recognised as essential in service delivery and it accounts for a

high proportion of total expenditure (1).

Corruption In Public Sector Procurement

It is well known that public sector procurement in South Africa is imperfect. There are constant

allegations of corruption and inefficiency. Service delivery protests are a sign that people feel that

they are not receiving the quantity or quality of services they need. An example of such lack of

services is schools opening at the beginning of the year without learner support materials (8).

Corruption is not unique to South Africa, but it is one of the country’s major challenges. One reason

why it continues is that, although the legal framework is strong, laws have not been adhered to or

been implemented to their full extent. Wrongdoers can, therefore, continue without being

accountable. According to Tamukamoyo (15), “There is widespread belief that the level of

corruption in South Africa has worsened significantly over the past few years”. Naidoo (7) further

highlighted a robust view in South Africa relating to high levels of corruption in government

procurement process.

Proposed Framework For The Implementation Of Open Contracting In Public Sector

Procurement

Based on the reviewed literature, the conceptual model is presented specifying two main

constructs under consideration in this study, namely, Open Contracting principles and pillars for

Open Contracting as presented in Figure i. These constructs together with some specific sub- constructs were identified, specified and then defined following a comprehensive and critical

literature review.