Reputation systems are an important part of the Internet experience – from buyers and sellers rating their experiences with each other on eBay providing value to all market participants, to Digg’s contributor rankings helping to determine what news is worthy of making the front page. So what would happen if the principles of these reputation systems were applied to the governance of public works?

This is the question asked by Lucio Picci, an Economics professor at the University of Bologna, in his paper Reputation-Based Governance of Public Works. It’s quite an interesting work – to quote the abstract:

I propose a governance model of public works that relies on an Internet-based “reputation system”. Reputation-based governance of public works is an application of a broader reputation-based governance model, and it inherits its general implications. In particular, it allows for the routine production of statistics that are useful for monitoring purposes, and it provides a coherent framework to limit rent-seeking and corruption.

The crux of the argument is developed from looking at the difference between public and private procurement practices in regards to construction, notably focusing on how the former are typically “limited” to open bidding processes. This is traditionally done to avoid corruption (and/or accusations of corruption), but it has it’s downsides – which is why in the private sector, fully open auctions are relatively rare. As for reasons why this is, to quote the paper again:

… when the good to be delivered is not a commodity, the buyer benefits from the seller’s reputation, signaling his ability to deliver high quality goods, and committing him to do so.

In turn, according to Ricci a distortion in the public sector procurement marketplace is created, and the seriousness of this distortion grows as the complexity of the needs increases. The reputation based governance model seeks to address this. It’s a very interesting idea, though it may be a little ambitious today (while conceptually easy to visualize, the central web application where the relevent actors make their opinions known is easier said then done – ask anyone tied to the health care industry). Reputation systems are often resisted by many people entrenched in the current system, and there’s always the concern that they will be gamed.

If one reaches the concluding sentences of Ricci’s work, the extent of the paper’s ambition becomes clearer:

The stated issue is about improving governance of public works. However, it is also about the creation of a conceptual and technological model for the systematic organization and collection of quantitative information about the working of a governance system. The two issues, in fact, are closely related.

Not an easy task, but certainly a worthy pursuit – who would have thought that eBay and Digg might help lead the way?