Guest Post: How Not To Balance Efficiency and Integrity in Public Procurement–The Case of Italy

Today’s guest post is from Roberta De Paolis, a Ph.D. researcher in criminal Law at the Sant’Anna School of Advanced Studies.

In designing an effective public procurement system, a key challenge is striking the proper balance between ensuring efficiency and promoting integrity. But emergency situations make it hard to maintain an appropriate balance, as the response to the global Covid-19 pandemic has again demonstrated. When confronted with an urgent situation, governments often allow the need for speed to trump the interest in transparency and oversight, and thus grant public procurement authorities exemptions from the ordinary rules and monitoring procedures.

If one wants to find a good example of how not to address the challenge of striking the right balance between these competing interests, one need look no further than Italy. Rather than design a system that can ensure an appropriate degree of integrity without stifling efficiency, while at the same time building in adequate flexibility to handle urgent situations appropriately, the Italian public procurement system is characterized by a set of overly rigid, stifling baseline rules, from which the government has created a set of overly broad discretionary exceptions to address situations in which the application of the usual rules is untenable.

While the Italian bureaucracy has long been known for inefficiency, the move toward stifling hyper-regulation of public procurement accelerated in the wake of the “Mani Pulite” scandal of the mid-1990s. In reaction to that scandal, the Italian legislature increasingly restricted administrative discretion to prevent manipulation of the procurement processes. But these strict, complex rules proved untenable in a variety of situations, including emergencies, which led the Italian legislature to create an ever-expanding mishmash of exceptions, where the strict pro-competition and anticorruption rules would not apply. Indeed, Italy has developed a “culture of emergency” characterized by the systemic search for exceptional conditions and frequent, often arbitrary invocation of such exceptions. It is therefore unsurprising that, despite the seemingly strict procurement rules adopted post-Mani Pulite, procurement-related bribery scandals remain all too common Italy (see, for example, herehere, and here).

Italy’s response to the Covid-19 pandemic has followed this unfortunate pattern. In response to the urgent need to address the public health crisis and to relaunch the economy, the Italian legislature massively simplified the usual public procurement rules, including those related to transparency and integrity. For example, direct invitation to tenders for works up to 150,000 are permitted, as is the assignment of maintenance work based solely on project summaries. Additionally, public officials were not obligated to justify their discretionary choices. The government also waived measures designed to ensure no companies with ties to organized crime receive public contracts. So-called “legality protocols” and “integrity pacts”—agreements between contracting authorities and private companies providing specific transparency and integrity clauses as a condition for tendering participation—which previously had previously been mandatory became optional. The legislature exempted some major infrastructure projects from all normal procurement regulations, leaving them regulated only by the criminal law and mandatory European principles.  Overall, 54% of Italian tendering procedures will be exempted from competitiveness and anticorruption safeguards.

In addition, the drastic relaxation of the usual public procurement rules has been accompanied by a sort of depenalization process. The crime of “abuse of public office” has been scaled back, so that public officials are no longer punishable for abuse of public office when rules providing margins of discretion are involved. Such a reform is intended to address the so-called “defensive bureaucracy” problem—the imposition of superfluous requirements and the avoidance of prompt decisions because of the fear of being involved in criminal trials. But here again, Italy seems to have overreacted to a genuine problem by going too far in the other direction.

Speed and efficiency are important in public contracting, especially in emergencies. But promoting these values does not have to come at the expense of transparency and integrity. There are a number of things that governments can do to reduce opportunities for corruption in emergency public procurement, even while allowing for some relaxation of the usual rules:

  • First, rules and safeguards for emergency cases should be expressly provided and applied only when precisely defined urgency conditions are met and documented. Any derogations or loosening from best anticorruption practices should be limited in scope and duration.
  • Second, even when the procurement process is expedited, all public contracts should be promptly and openly published. These published contracts should include an explanation and justification for the accelerated process, extraordinary supplier selections, flexible prices, and contracts.
  • Third, citizens should have free access to information regarding the public officials responsible for making emergency procurement decisions, as well as information about how much discretion they have.
  • Fourth, the institutions that oversee tendering procedures should be strengthened. They should also be provided with specific tools and procedures to guarantee transparency and accountability throughout the emergency public procurement process. 
  • Finally, whistleblower protections should be reinforced, and complaint mechanisms broadly publicized and adequately resourced.

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