Corruption in government procurement is a massive problem worldwide, especially in developing countries. In an ideal world, measures to combat procurement corruption would include structural changes that would open up monopolies, break cartels, and enact rational, uniform, and effective procurement laws. Sadly, the potential effectiveness of these measures is matched only by the near impossibility of their implementation any time soon. We should continue to push for comprehensive structural solutions to the procurement mess, of course. But in the meantime, are there other measures that can be implemented in countries struggling with widespread procurement corruption, which can at least help alleviate the problem?
One possible solution, heavily promoted by Transparency International (TI), is the use of so-called “Integrity Pacts” (IPs). An integrity pact is a voluntary agreement between a government agency and the bidders entering into a procurement contract, where both sides agree to refrain from corrupt practices. Bidders violating the pact could be blacklisted, placed under investigation, or have their contracts cancelled. Civil society actors monitor and arbitrate disputes in enforcement of IPs. The first IP was implemented in Ecuador for a refinery project in 1994; since then, TI has collaborated with government agencies to implement IPs in public contracts of more than 30 countries including Germany, Hungary, South Korea, Malaysia, Mexico, Argentina, Pakistan, China and India.
No one expects IPs to be a panacea—deeper structural reforms are still essential. But do IPs at least help? Or are they a distraction from more meaningful reforms? While a general answer may not be possible, we can learn from the past three decades of experience with IPs in different countries. One useful test case for the effectiveness of IPs is India. And the evidence is, on the whole, encouraging. Continue reading