Reforming Procurement Processes: It’s About More than Law

Last week’s post explained why some Latin American nations’ crackdown on corruption was doing more harm than good.  The law in these countries gives government no choice but to terminate a public contract whenever corruption is detected. Canceling a contract just after the winning bidder has been selected, before the winner has started work, is one thing.  It is quite another to bring the construction of a power plant or road to a screeching halt mid-way through the project. Mandatory termination in these cases can impose enormous costs on those who had nothing to do with the corruption, not least of which are taxpayers stuck with a half-built project.

The post was based a recent Inter-American Development Bank staff paper. The authors showed how costly mandatory termination laws have been in Peru and Colombia and described how several Latin governments were searching for alternatives to address corruption when it is found to have tainted a public contract now underway.  As policymakers do, let’s hope they consider more than just reforming their procurement law. For as Argentine lawyer and law professor Hector Mairal writes in a first-rate analysis of what ails Argentina’s procurement law, law is but one piece of the procurement equation. Continue reading

Open Contracting and the Withholding of Commercially Sensitive Information: the U.S. Experience

U.S. courts and federal agencies have grappled for more than 40 years with the question of what information in a government contract should be made public and what should be withheld as “commercially sensitive.” The anticorruption community now seeks an answer to that same question.  The Open Contracting Partnership, the leading advocate for the full disclosure of every contract let by every government, acknowledged in July there should be an exemption from disclosure for such information, and a Center for Global Development working group followed in October with draft principles for determining what is commercially sensitive.

Getting the correct answer is critical, particularly for developing nations, precisely the countries where advocates believe open contracting will make the greatest difference and where the push for open contracting laws is felt the most.  Too narrow an exemption, one that would result in the release of genuinely sensitive information, will discourage companies from bidding on public tenders.  On the other hand, if the exemption is too broad, contractors can use commercial sensitivity assertions to hide information showing whether a contract was awarded fairly and honestly and whether the public is getting value for its money.

Though far different than conditions in these countries, the American experience nonetheless offers lessons to those urging developing nations to embrace open contracting. The most important being that it counsels more caution than many open contracting advocates might at first think is warranted. Continue reading

Integrity Pacts: A Contractual Approach to Facilitate Civic Monitoring of Public Procurement

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:

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Will Mexico’s New President End Procurement Corruption?

 

Mexican President-elect Andres Manuel Lopez Obrador pledged Sunday in his victory speech night to eradicate corruption and to hold his friends and supporters accountable.  The Instituto Mexicano para la Competitividad (IMCO) has an easy way citizens can see whether he keeps his promise.

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An Amazing Database: DIGIWHIST Strikes Again

DIGIWHIST has struck again.  It has just released the latest version of its extraordinary data set covering political financing, disclosure of officials’ finances, conflict of interest, right to information, and public procurement in 34 European states plus the European Union.  With the laws on each subject along with an assessment of how thoroughly they address area, it is a real treat.

At least for the kind of people who read GAB (that means you, dear reader).

The database is part of an EU-funded digital whistleblowing project (DIGIWHIST).  The project’s aim is to improve trust in governments and the efficiency of public spending across Europe by providing civil society, investigative journalists, and civil servants with the information and tools they need to both increase transparency in public spending and enhance the accountability of public officials.  For those working in developing states, it is an invaluable resource, showing how different developed countries and those making the transition to a market economy deal with critical issues involving public integrity and transparency.  Thanks to the EU for supporting such a great project and congratulations to those whose hard work produced such a useful resource.

Guest Post: Afghanistan’s Radical–and So-Far-Surprisingly Successful–Public Procurement Reforms

Today’s guest post is co-authored by frequent GAB guest contributor Mark Pyman, Senior Fellow at the London Institute for Statecraft and former Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee, together with Sohail Kaakar of the Afghanistan National Procurement Authority.

Afghanistan may be one of the most corrupt countries in the world, but it is also where some of the world’s most innovative anticorruption solutions are being implemented. Case in point: Afghanistan’s reforms to its public procurement system.

In Afghanistan, government procurement accounts for 19% of GDP and almost 50% of the national budget. However, procurement corruption has long been endemic, with many figures taking large cuts from almost every contract, and many contracts being little more than money-extraction schemes. But in 2015—at a critical juncture, when Afghanistan’s government was faced with unprecedented public pressure due to insecurity, recession, withdrawal of international troops—the government adopted significant reforms to its procurement system in order to curb corruption and improve government performance. (The immediate catalyst for the reform was a particularly corrupt military fuel contract, but the reforms go well beyond addressing this one incident.)

After a brief review of alternatives, the Afghan government decided on a radical reform based on a single regulatory body and a centralized procurement system. Continue reading

Guest Post: Tackling Corruption in Afghanistan’s Education Sector

GAB is delighted to welcome back Mark Pyman, Senior Fellow at the London Institute for Statecraft, who also served as Commissioner of the Afghanistan Joint Independent Anti-Corruption Monitoring and Evaluation Committee until November 27, 2017.

One of the successes of the last fifteen years in Afghanistan has been the rise in the numbers of students attending school, especially girls. According to the Afghan Ministry of Education, more than 9.2 million children, 39% of them girls, are now enrolled in school (though these statistics continue to be disputed, with alternative enrollment estimates ranging between 6 and 10 million). Yet the Afghan government, the citizenry, and external observers are all well aware that the education system remains beset by endemic corruption. As one parent put it in a focus group discussion: “A suicide attack isn’t the most dangerous thing for us, because a few people will die…. It is the unprofessional and unknowledgeable teachers that are most dangerous for us because they kill the future of Afghanistan.”

A major new report from the Afghanistan Anti-Corruption Monitoring and Evaluation Committee (known as MEC), carried out at the request of the Minister of Education, evaluates the corruption vulnerabilities across the education system and how they need to be addressed. The study, conducted in cooperation with the Education Ministry, visited 138 schools in nine provinces, and conducted over 500 interviews with a range of stakeholders (including Ministry officials, provincial education officials, teachers, parents, students, and others), as well as 160 focus group discussions. These interviews and focus group discussions assessed a broad range of education corruption issues, including both corruption that arises at the level of schools and districts (such as students paying for advance copies of papers, or teachers using nepotistic influence to avoid having to turn up) and corruption in central government education policy and management (such as corruption in teacher appointments, school construction, and textbook procurement). Some of the report’s main findings are as follows: Continue reading