Public procurement is one of the highest risk areas for corruption. A public project contaminated with corruption is a recipe for disaster: ordinary citizens suffer from substandard facilities and services; competitive companies lose out when the bidding is rigged; and government money vanishes without making a difference. To rein in procurement corruption in, improving transparency and civic monitoring is vital. That’s why an “integrity pact” (IP)—a legally-binding contractual provision that commits all parties to comply with anticorruption best practices from the time the tender is designed to the completion of the project—can be such a useful tool.
An IP is more than a demonstration of commitment to avoid corruption practices on the part of its signatories. An IP contains obligations for bidders and government authorities, among other things, to refrain from offering or accepting bribes and to disclose all contract expenses and commissions; the IP also sets out sanctions for non-compliance, such as termination of the contract, liability for damages, or debarment from future public contracts. Perhaps most importantly, an IP creates a monitoring process where an Independent External Monitor—which can be an individual, a civil society organization, or a group with combined expertise and technical support—independently scrutinizes the deal for any anomaly or violation of the IP, and ensures proper implementation of the contract and the satisfaction of all stakeholders’ obligations. To execute these functions, the monitor is entrusted to examine government tender documents, bidders’ proposals, and evaluator’ assessment reports of the bids, to visit construction sites and contractor offices, and to facilitate exchange with the local communities and public hearings.
IPs have previously been used in public procurement projects in many countries, including Romania, Bulgaria, the Czech Republic, Slovenia, Portugal, Hungary, Latvia, Poland, Greece, Italy, India, and many others. It’s notable that many of the states that have embraced IPs are countries where governments have a long track record of corruption and abuse of power. IPs have at least three roles to play to help facilitate transparency and civic monitoring so as to safeguard the competitiveness and fairness of the procurement process:
- First, the independent external monitor can help detect practices designed to favor a particular company. In an ordinary procurement process, insiders can collude to ensure that a favored company (perhaps the one that has paid the largest bribe) gets the contract. During the bid preparation phase, bidding documents can be drafted in a way to favor particular bidder, often using subjective selection criteria and convoluted, unnecessarily complex terms to disguise this favoritism. Also, contractors may try to make the tender appear so complex and integrated that the government decides to use a single contract, rather than several smaller contracts, resulting in over-dependence on a single firm. Moreover, during contract implementation, the contractor’s site engineers often request “change orders”—that is, modifications to the contract—using various pretexts (such as changes of circumstances, cost, or the scope of work), with the result that the project becomes something much different from, and more expensive than, than the original job. These corrupt practices are made easier by the ability of the government officials and the company to withhold and block public access to key information. Independent scrutiny by IP monitors can redress this problem, especially if the monitor is equipped with the relevant technical expertise. The monitor can use its authority under the IP to require each bidder to disclose all payments made in relation to the contract, to demand authorities to explain the rationale for selection standards, and to determine whether the justifications proffered for change orders make sense. As soon as the monitor detects suspicious “red flags,” it can immediately notify the authorities.
- Second, IP monitors are in a better position to detect conflicts of interests, due to their familiarity with local business relationships and politics. Conflicts of interests in procurement can emerge if officials who award the contracts have previously worked for the winning contractor, or vice versa—especially if the regulatory framework does not impose meaningful restrictions on this “revolving door.” Government officials may also have indirect relationships with certain businesses; for example, a business may be owned by an official’s friend or family member. Citizen and NGO monitors from the area know the local context well, and may be able to identify potential conflicts of interests that more removed government watchdogs or international monitors might miss. The IP monitors can use this knowledge to seek disqualification of questionable contractors before the bidding process is over. Additionally, given their familiarity with local nuances, local civil society groups may have superior knowledge as to whether government’s preference scheme—such as a local content component of the project—has fairly selected the entities worthy of this preference.
- Third, IPs educate citizen monitors and the general public about public procurement. An IP is more than a legal contract; it is also a process. Given the highly technical and specialized nature of public procurement, meaningful deliberation and effective monitoring will not take place if citizens cannot understand how contracts are procured and implemented. In cases where civil society organizations undertake to be the independent external monitors, an extended line of accountability is created between the general public and the government, with the civil society groups acting as channels for the public to make inquiries and learn about the procurement process. Even though many participating individuals in the monitoring process are professionals (engineers, lawyers, or accountants), they may not initially be well-versed regarding the procurement process; being a party to an IP builds a platform for them to learn the structure and features of a tender “in a rigorous but accessible way.” This will encourage their repeated and continuous participation in IPs (though of course one must be careful to ensure that the monitoring responsibility doesn’t become too burdensome to the civil society monitors, who also have day jobs).
The high corruption risks in public procurement demand an independent and forceful monitoring mechanism. IPs, with their independent citizen-monitors, provide this oversight. So long as these civic monitors have a clear mandate, rights, and obligations, and the necessary expertise, they can ensure greater transparency and accountability in the procurement process.