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Transcript of Www.transparency.org CURBING CORRUPTION IN PUBLIC CONTRACTING THE INTEGRITY PACT : overview Training...
![Page 1: Www.transparency.org CURBING CORRUPTION IN PUBLIC CONTRACTING THE INTEGRITY PACT : overview Training the Trainers Workshop Karachi, September 18-21, 2005.](https://reader035.fdocuments.us/reader035/viewer/2022062421/56649e685503460f94b65172/html5/thumbnails/1.jpg)
www.transparency.org
CURBING CORRUPTION IN PUBLIC CONTRACTINGTHE INTEGRITY PACT : overview Training the Trainers Workshop
Karachi, September 18-21, 2005
Juanita Olaya Programme Manager
Integrity Pact and Public Contracting ProgrammeTransparency International
the coalition against corruption
![Page 2: Www.transparency.org CURBING CORRUPTION IN PUBLIC CONTRACTING THE INTEGRITY PACT : overview Training the Trainers Workshop Karachi, September 18-21, 2005.](https://reader035.fdocuments.us/reader035/viewer/2022062421/56649e685503460f94b65172/html5/thumbnails/2.jpg)
Contents
• Corruption in Public Contracting
– Why so important?
– How it happens?
• TI’s Approach
• Strategies to Prevent Corruption in Public Contracting
• The Integrity Pact
– What it is
– Applications
– Results/ Benefits
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Public Contracting…why so important?
Good contracting will:
• Satisfy the needs of the people – better quality of life
• Be fair to businesses
• Save (waste of?) public funds
• Good policy – good governance – good government
• Save (create?) Government‘s credibility and legitimacy
Corruption in Pub. Contracting will:
• Increase poverty and inequality Provide
an unfair, unstable and risky competitive
advantage.
• Engender bad choices: encouraging
competition in bribery rather than in quality
or price.
• Undermine competition
• Distort and undermine development.
• Is a non-tariff barrier – for those who
cannot pay for it
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Why is Public Contracting so important?
• Experts estimate that corruption can add up to 25% to the costs of contracting.
• Mexico: On a yearly basis, the Federal Mexican government participates in more than 15,000 – 20,000 public procurement processes
• Mexico: On aggregated figures, US $2.3 billions (23,400 millions of pesos) are lost in petty corruption
• Households use 6.9% of their income just for bribes
• Households under one minimum wage use 13.9%
• Germany: 11 million EUR in bribes for a trash burner that was not needed in the city of Köln
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How Does Corruption Happen in Public Contracting ?
Contracting Decision
Contracting Process/Bid Evaluation
Contract Implementatio
nContract design
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How Does Corruption Happen in Public Contracting ?
Contracting Decision
Contracting Process/Bid Evaluation
Contract Implementatio
n
• Unnecessary• Tagged• Conflicts of interest
Contract design
• Tagged• Over-designed, under-designed• Documents are confusing
• Decision makers are biased• Selection procedures are non-transparent, or not objective• Clarifications are not shared with other bidders• Confidentiality durign the process• Award decisions are not made public or are not justified
• Poor quality, deffective, different specifications• Contract renegotiation•Claim non-existent damages• Supervisors are biased
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RISKS:
• Appear right from the earlier stages (design and planning)
• Remain after the contracting process is finished
• Include various forms: bid rigging, collusion, bribery, deception, unexposed conflicts of interest etc.
• Exacerbated by process opacity
• As relevant through sub-contracting, and the engagement of agents/intermediaries
• Can hide under the appearance of legality
Corruption in Public Contracting
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The risk petry dish
• Obscurity
• Unnecessary complexity
• The speed of crime and the speed of control: patience, contract enforcement, etc.
• Institutional environment
• Social norms: ( for example..)
– Law of silence
– Uncertainty – what will the others do? Is there a chance to get money out of it?
– Favours pay off: the reciprocity principle
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3 basic elements of TI’s approach:
PreventionCollaboration
Role of Civil Society
TI‘s Approach
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• Prevention:
– TI has demonstrated it is possible
– Control is necessary but can be expensive and may come too late
• Transparency:
– Facilitates monitoring
– Encourages accountability
– Helps/strengthens law enforcement – institution building
• Role for Civil Society
– Even in a highly technical matter
– Multifaceted: facilitator, independent monitor, etc.
TI‘s Approach
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Access to Information
Education
Standards (Laws, rules and norms)
Codes of Ethics
Corruption is neither natural nor unavoidable.
Prevention is more effective than control.
Preventing Corruption in Public Contracting
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CORRUPTION
INEFFICIENCYCAPACITY-ERROR
• Aprox 75% of respondants: Bribes do help solve the problems (Map of Corruption in Lithuania, 2002)
• Aprox in 67% (avg) of the cases the initiative or the reasons to payoff was indirectly mentioned, was heard from others or was decided by own initiative. (Map of Corruption in Lithuania, 2002)
• Only in 5% (avg) of the cases it was directly asked (Map of Corruption in Lithuania, 2002)
Preventing Corruption in Public Contracting
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Good rules (+ institutions) – minimum standards
Good practices: good rules are not enough (IP, monitoring, oversight)
Monitoring: an important ingredient for the accountability recipe
Transparency (Public hearings, info publication, etc.)
Access to information (Price comparisons)
Information and Knowledge Ethics payoff
Preventing Corruption in Public Contracting
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Preventing Corruption in
Public Contracting, what can I do?• Bring light into the process: GIVE ACCESS TO INFORMATION and BE
OPEN TO INFORMATION
• Follow the law
• Get help:
– Independent monitoring, auditing and control
– Role of Civil Society is key
– All institutions need to respond
• Think:
– Where/what are the stages, areas, sectors of highest risk and exposure to corruption in public contracting?
– How can they be addressed? How to give the positive aspects more potential?
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Anti-corruption measures in
multilateral agreements and organizations• 1996 OAS – Inter American Convention Against
Corruption.
• 1997 European Union – penalizes active and passive corruption.
• 1997 – OECD Convention – Forbids bribery of foreign officials, had forbidden tax deduction
• 1999. Council of Europe Criminal Law Convention on Corruption.
• 2000 – OECD - ECG Action Statement on Export Credit Insurance and Guarantees.
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Anti-corruption measures in
multilateral agreements and organizations
• 2003 – UN Convention. A valuable global framework now signed by a 100 countries and as of the day before yesterday ENFORCEABLE!. – Mandatory!
• 2003 – African Union Convention – mandatory: to maintain and strengthen procedures. – Mandatory!
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Strategies to Prevent Corruption
in Public Contracting: changing practices
With the use of public (civil society) participation:
•Integrity Pact
•Public Hearings ( Panama, Argentina)
•Price Comparisons (Colombia, Argentina, WTO..)
•Simple monitoring ( Bulgaria, Latvia )
•Procurement law reform ( Philippines)
•Risk maps – measurement (LAC)
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• Legal commitment • Level the playing field (common, shared, known rules of the game)
• Enables companies to abstain from bribing (and other corrupt practices) by assuring:• Competitors will also do so• Government officials won't demand it or expect it
• Enables Government to:• (officials) abstain from corrupt practices – protect themselves from
them • Reduce costs of contracting
• Applicable through the whole contracting process
The Integrity Pact
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• A process• And a legal document: structure
– Rights and Obligations to all parties
– Sanctions (evidence, process to issue them, liquidated damages)
– Arbitration Clause
– Others (monitoring system, access to information, asset disclosure, protected information, codes of conduct etc.)
– Role for Civil Society
The Integrity Pact
•No bribes and no facilitation payments•No collusion•Access to information and confidenctiality•Ethical declarations
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Helps bring existing norms into actual behavior, and non-existing norms into enforcement
LAW
RULE OF LAW
SOCIAL NORMS/ CULTURE/OBSERVED BEHAVIOR
LAW
SOCIAL NORMS
IP Concept
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Some of TI’s IP experience
Countries• Argentina
• Colombia
• Chile
• Ecuador
• Italy
• Latvia
• Germany
• Korea
• Mexico
• Nepal
• Pakistan
• Paraguay
• Peru
Sectors and Areas of Work• Telecommunications
• Public works
• Transportation
• School supplies
• Office supplies
• Utilities
• Services
• Tourism
• Police supplies
• Local government
• Finance
• Information systems 14 + countries
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• Savings.
– Colombia:reports savings ranging between 5% up to 60% of contract‘s official budgeted price
– Pakistan Karachi Dam: savings of more than half of initial budgeted price + spill-overs
• Trust. Bidders interviewed for case study said, they lost fairly.
– Could potentially save future judicial claims.
• Sanctions
– In some countries, companies have been blacklisted for violating the Pact. ( i.e. Italy, Korea)
Results
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• Increased use:
– World Bank guidelines
– DAC recommendations for best practice
– UN Habitat Tool Kit
– Business Associations references
• New Applications
– Considered in China, Japan, Nigeria, Russia
– Sector specific adaptations: arms trade, construction, oil, forestry sectors under way
Results
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Risks
• It‘s only another piece of paper !
• It‘s only another step in the bidding process !
• Appealing name !
• It‘s only about a contract !
• Not in my backyard!
• OOps! No body watched?
jolaya:jolaya:
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Key Stages:
• Identify Capacity• (Marketing & Id. Right Opportunity) • Obtaining/Sustaining Political Will • Implementing • Independent Monitoring
How to implement an Integrity Pact
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Some necessary Ingredients:
1. Political Will2. Facing resistance3. Partnerships4. Independent Monitoring – 5. Identify success
How to implement an Integrity Pact
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Is there a role for Civil Society
in Procurement?
• In trust building
• As an independent facilitator to the contracting process
• A final chance to directly address the loopholes of the contracting or procurement laws
• A source of support and sustainability for public policy
• A tool for conflict management and good policy implementation
• CSOs can contribute in bringing balance vs. powerful stakeholders.
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Why implement and IP?
• As Public Official
– Help increase credibility and legitimacy when honestly concerned about corruption and transparency problems
– Make work easier. The process has support from the outset . Reduces unnecessary trials.
– Saves public money
• As Private Bidder
– Makes bidding process easier
– Reduces transaction costs: corruption is not free of charge or cheap. Winning and loosing fairly is cheaper
– Corruption almost always bites back
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Why implement and IP?
• As NGO (Civil Society)
– Effective and efficient way to generate changes at different levels
• As anyone interested in governent change
– A way to start from facts and not from theory or law: changing actual behaviour.
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www.transparency.org
CURBING CORRUPTION IN PUBLIC CONTRACTINGTHE INTEGRITY PACT : overview Training the Trainers Workshop
Karachi, September 18-21, 2005
Juanita Olaya Programme Manager
Integrity Pact and Public Contracting ProgrammeTransparency International
the coalition against corruption
![Page 31: Www.transparency.org CURBING CORRUPTION IN PUBLIC CONTRACTING THE INTEGRITY PACT : overview Training the Trainers Workshop Karachi, September 18-21, 2005.](https://reader035.fdocuments.us/reader035/viewer/2022062421/56649e685503460f94b65172/html5/thumbnails/31.jpg)
Preventing Corruption in Public Contracting:
Minimum Standards in Procurement Rules (GCR 2005)
• Procurement should be defined as broadly and inclusively as possible. Scope of transparency and anti-corruption action should be
wide: from early contracting stages (planning, design) until contract execution.
• Transparency throughout the whole process is the best antidote.
• Open competitive bids is the rule. Exceptions are limited.
• Transparent process should allow monitoring on, before and after award decision.
• Sanctions for procurement corruption should be included as effective detterents (forfeiture of bid or performance bond, liability of damages, blacklisting.)
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• Debarment (Blacklisting) is a very effective deterrent ( see cases World Bank and some regions in Germany)
• Minimize discretionality. Some systems have given good results ( minimum cost and maximum quality, Pakistan case).
• Award decision should be collective.
• Award decision should be public. It is desirable that it states ground for determing winner ( and therefore why the losers lost).
• Awarded contract changes beyond a certain threshold should be reviewed by award comittee.
• Integrity Pact or at least an integrity pledge (no-bribery clauses) with significant sanctions is a good option.
Preventing Corruption in Public Contracting: Minimum Standards in Procurement Rules (GCR 2005)