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Integrity Pacts: a collaborative tool for curbing corruption in public procurement – Approach, experience and Lessons Learned Conference on Safeguarding EU funds against fraud & corruption through the civil control mechanisms of Integrity Pacts Budapest, 17-18 February 2014 Susanne Kuehn - PowerPoint PPT Presentation
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Integrity Pacts: a collaborative tool for curbing corruption in public procurement –
Approach, experience and Lessons Learned
Conference on Safeguarding EU funds against fraud & corruption through the civil control mechanisms of Integrity Pacts
Budapest, 17-18 February 2014
Susanne Kuehn
Head of Public Sector Integrity Programme
Transparency International Secretariat
Corruption in public procurement
High corruption risk: public procurement amounts to 15 or more of GDP Loss of government/tax payers’ money through corruption in public
procurement is estimated to be 25% of value of a procurement contract Waste of financial resources: more expensive and inefficient projects Distortion of allocation: corruption can lead to decisions, which are
motivated by money not citizens’ needs Lack of trust in government and politics where politicians and civil
servants are seen to be corrupt
Clean, corruption-free public procurement can save millions of Euros
What is an Integrity Pact?
A Pact between contracting authority (government) and bidders (companies) & civil society in a monitoring role
Legal commitment = contract A set of sanctions in case of break of the pact 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• Reduce costs of contracting
Applicable throughout the entire contracting process and in all sectors
Why Integrity Pacts?
Help governments, businesses & civil society in public contracting – reduce corruption
Help enhance public trust in government contracting
Contribute to improving credibility of government procedures & administration
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 Levels the playing field (common, shared rules of the game) 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
The Authority’s Commitment
Not to demand or accept any advantage in exchange for an advantage in the contracting process
To make publicly available all necessary technical, legal and administrative information on the contract
Not to disclose confidential information to a bidder or contractor
All officials involved in the contracting process to disclose conflicts of interest in connection with the Contract,
To report any attempted or completed breaches of above commitments as well as any substantiated suspicion
Bidder’s / Contractor’s Commitment
Pledge (on behalf of CEO or CEO of the national subsidiary):
Not to offer any advantages to any official in exchange for any advantage in contracting process,
Not to collude with other parties interested in the Contract to impair transparency and fairness of the contracting process,
Not to accept any advantage, To disclose all payments made to agents and other
intermediaries (preferably by all bidders at the time of bidding, but at least by the awardee of the Contract).
Highly desirable: contractor provides proof of existence and application of code of conduct
Sanctions & Dispute Resolution
Violations by Authority: officials to suffer appropriate disciplinary, civil, criminal sanctions (e.g. removal, dismissal)
Violations by Bidder - some or all of the following: denial or cancellation of contract, forfeiture of the bid and/or performance bond, appropriate (liquidated = predetermined) damages to Authority and
the other bidders, debarment for future bidding for appropriate time
Disputes could / should be resolved through International or - where appropriate - national arbitration IP would define the venue and procedure
Monitoring
Civil Society (TI chapter?) should monitor all phases CSO may appoint external, independent Monitor Cost of Monitor often covered by Authority Monitor has full access to all documents and meetings Monitor should take suspicion
first to Authority head if no corrective action taken: to Public Prosecutor or the Public
Finally: a statement that procedure was clean, did not lead to any incidents what incidents, how these were dealt with, outcome
Qualities of a good monitor
Independence: objective monitoring with public good as guidance
Knowledge: expertise adds value to the project
Capacity: individual monitor or organization, depending on project
Accountability: accountable to all parties and the public in varying degrees
Commitment: strength of character and impeccable behaviour
How to select a Monitor
Selection process needs to provide for transparency and accountabilityPredetermined selection criteria and profile for
monitorDefinition of procedure (open vs. Intuitu
personea) Establish who is responsible for choosing
monitorAccess to information about the final decision
and the grounds for the decision
Key Stages:
Identify Capacity (Marketing & Right Opportunity) Obtaining/Sustaining Political Will Implementing Independent Monitoring
How to implement an IP
Transparency
A maximum of transparency: basis for successful design, setup and implementation of IP
Needed: public access to all the relevant information
Highly desirable: forum for civil society representatives to discuss official steps taken in context of the Contract
Internet: nearly ideal platform (also allows detailed controls)
Access to legitimately proprietary information should remain restricted.
Characteristics
Flexible but consistentFlexible but consistent: allows adaptation to local rules/culture while maintaining essential characteristics
Requires political will/commitment for success
Essential & highly desirable ElementsEssential & highly desirable Elements
Implementation Arrangement (1)
Civil Society Organisation (NGO)
Public Authority
BiddersMonitor
Monitoring Contract
Memorandum of Understanding
NGO undertakes most implementation activities
IP Document
Taken from : How to implement IPs in the Water Sector, a guide for government officials, by Juanita Olaya
Some of TI’s IP experience: > 300 IPs in 15+ countries
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 systems13 +
countries
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. Korea: positive changes in local investment climates, prosecution of
corrupt officials based on local IP’s
Competition. Ecuador: IP contribute to opening of market in mobile
telecommunications industry, 25% drop of prices
Results
Possible risks and challenges of IPs
IPs may not rule out corruption 100% Detection and enforcement mechanisms by the relevant
agencies need to be effective too IPs may be misused as window dressing if not
properly implemented Possible bidder reluctance
Can be addressed through information, training and clarification of IP
Conflicts of interest Can exist or arise between bidders – govt. officials –
monitor, and need to be managed
Defining Success
Contracting process characterized by Transparency, Accountability, No Corruption
The Project Completed on schedule Social, economic and development goals achieved
Trust & Reputation Trust in government and officials increased Reputation of participants improved
Detection of Corruption Sign of effective monitoring
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
The Contracting Process
• What to buy/sell• How much• For when
•Decision to invest• Choice of Method
Bidding documents
Announcement of open bid
Clarifications on Bidding Documents
• What is being bought/sold• Deadline to present offers• Where to find bidding documents• Others: budget line, agency, etc
Bid Closes
No OffersEvaluation
of OffersSelection of Contractor
Publication of decision
Contract
Contract implementation
Contract Oversight and control
Decision is Questioned