Fighting Corruption and Promoting Integrity in Public Procurement

302 Pages·2005·1.363 MB·English

by  OECD Organisation for Economic Co-operation and Development

Fighting Corruption and Promoting Integrity
in Public Procurement
Much is at stake in the global effort to tackle corruption in public procurement.
Corruption diverts public funds from worthwhile development projects, holds back economic Fighting Corruption
growth and undermines public trust in government.
Public procurement – the purchase of goods and services by governments and state-owned and Promoting
enterprises – accounts for about 15 per cent of GDP in OECD countries and is highly exposed
to corruption. Both public and private actors in the procurement process may be tempted to
divert goods and services or public funds for their personal use. Integrity in Public
To identify “weak links” in the public procurement process where the risk of corruption is
high, to explore the best ways of improving transparency and accountability and to identify Procurement
effective actions to prevent, detect and sanction corruption in this field, the OECD organised a
Global Forum on Governance event on “Fighting Corruption and Promoting Integrity in Public
Procurement”, hosted by the French Ministry of Economy, Finance and Industry in Paris in
November 2004.
This publication captures the main points of the Global Forum discussions and presents expert
analysis of the main issues and case studies from the varied experiences of countries and
specialised bodies, mainly in Europe, Asia and Latin America, that contributed to the event.
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Fighting Corruption
and Promoting
Integrity in Public
Procurement
ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENT
The OECD is a unique forum where the governments of 30 democracies work together to
address the economic, social and environmental challenges of globalisation. The OECD is also at
the forefront of efforts to understand and to help governments respond to new developments and
concerns, such as corporate governance, the information economy and the challenges of an
ageing population. The Organisation provides a setting where governments can compare policy
experiences, seek answers to common problems, identify good practice and work to co-ordinate
domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea,
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic,
Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of
the European Communities takes part in the work of the OECD.
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research on economic, social and environmental issues, as well as the conventions, guidelines and
standards agreed by its members.
This work is published on the responsibility of the Secretary-General of the OECD. The
opinions expressed and arguments employed herein do not necessarily reflect the official
views of the Organisation or of the governments of its member countries.
© OECD 2005
No reproduction, copy, transmission or translation of this publication may be made without written permission. Applications should be sent to
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français d'exploitation du droit de copie, 20, rue des Grands-Augustins, 75006 Paris, France ([email protected]).
Foreword
The OECD has been at the forefront of global efforts to fight corruption and enhance
integrity. Public procurement – the purchase of goods and services by governments – is
an area that warrants special attention in the fight against corruption. It typically accounts
for about 15% of GDP in OECD countries and is highly exposed to corruption. Both
public and private actors may be easily tempted to divert goods and services or money for
their personal use. The OECD Global Forum on Governance is helping to promote
greater understanding and catalyse further action to prevent, detect and sanction
corruption in the area of public procurement.
A Global Forum conference on “Fighting Corruption and Promoting Integrity in
Public Procurement” was hosted by the French Ministry of the Economy, Finance and
Industry and took place on 29 and 30 November 2004 in Paris. The OECD gratefully
acknowledges the hospitality of the Forum’s host and thanks all participants whose
energy, expertise, and experience made the event a stimulating exchange of ideas.
Participants hailed from both the public and private sector, as well as from non-
governmental organisations, trade unions, academic institutions, international and
intergovernmental organisations.
Committed to business and government integrity, transparency and accountability, the
OECD has developed various initiatives to fight corruption and promote integrity which
also extend to public procurement.
OECD’s core anti-bribery work is based on two groundbreaking instruments adopted
in 1997 by OECD Members and associated countries: the Convention on Combating
Bribery of Foreign Public Officials in International Business Transactions (“the
Convention”) and, the Revised Recommendation on Combating Bribery in International
Business in International Business Transactions (the “Revised Recommendation”). The
Convention was the first binding international instrument to impose criminal penalties on
those bribing foreign public officials in order to obtain business deals, and provides for
monitoring and evaluation through country peer reviews. The 1997 Revised
Recommendation complements the Convention by focusing on deterrence and prevention
of foreign bribery. Since the Convention’s entry into force in February 1999, the 36 Party
countries have been monitoring participating countries’ implementation and enforcement
of both the Convention and the Revised Recommendation.
Fighting corruption in public procurement in general as well as in aid-funded
procurement are also integral parts of the 1997 Revised Recommendation. The OECD’s
Development Assistance Committee (DAC) has been working with developing countries
over the last decade to strengthen procurement systems and fight corruption.
Integrity in public life is a prerequisite to public trust and a keystone of good
governance. The OECD supports governments in ensuring high standards of conduct in
the public service and has developed policy guidelines to help countries develop and
modernise their legal, regulatory, and procedural frameworks to promote integrity and
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FIGHTING CORRUPTION AND PROMOTING INTEGRITY IN PUBLIC PROCUREMENT – ISBN-92-64-01399-7 © OECD 2005
FOREWORD

prevent corruption. The 1998 OECD Recommendation on Improving Ethical Conduct in
the Public Service provides a set of management principles, including guidelines for
interaction between the public and private sectors. In the specific area of public
procurement, the 2003 OECD Recommendation on the Guidelines for Managing Conflict
of Interest in the Public Service provides an instrument for reviewing and modernising
countries’ conflict-of-interest policies. In addition, the OECD, together with the European
Commission, has carried out reviews of national public procurement systems in Central
and Eastern Europe to help countries modernise their public procurement laws.
The OECD has, as follow-up to this Global Forum event, initiated further work to
review risks in public procurement. The Working Group on Bribery in International
Business Transactions, the body responsible for ensuring enforcement of the OECD
Convention on Foreign Bribery, engaged in an effort to enhance understanding of the
methods and techniques used in cases of corruption in public procurement. The Public
Governance Committee started, via the expert meeting on Integrity in Public
Procurement, to collect good practices on effective transparency and accountability
mechanisms that promote integrity in public procurement from the definition of needs to
contract management.
This publication summarises the discussions and contributions to the OECD Global
Forum on Governance conference held in November 2004 and brings together the main
papers prepared for the event.
I wish to thank the authors of the papers, which greatly enriched the discussions. This
publication, a result of an OECD-wide effort, was managed by Nicola Ehlermann-Cache
of the Directorate for Financial and Enterprise Affairs (DAF). Chapters on Integrity,
Transparency and Accountability were prepared by János Bertók and Élodie Beth of the
Public Governance and Territorial Development Directorate (GOV). Bathylle Missika
contributed work of the Development Co-operation Directorate. Helen Green of the DAF
Anti-Corruption Division provided overall co-ordination and editing. Edward Smiley
(DAF) and Marie Murphy (GOV) provided technical advice and assistance in compiling
this publication.
This Global Forum event constitutes the beginning of even greater involvement of the
OECD in the international effort to combat corruption and promote integrity in public
procurement. I hope that the fruitful exchange and enthusiasm generated at this event
will spark increased efforts and improved co-operation, across a wide range of actors and
interests in this global endeavour.

Richard E. Hecklinger
Deputy Secretary-General
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FIGHTING CORRUPTION AND PROMOTING INTEGRITY IN PUBLIC PROCUREMENT – ISBN-92-64-01399-7 © OECD 2005
Table of Contents
Executive Summary.....................................................................................................................................9

Part I

PUBLIC PROCUREMENT: OECD PERSPECTIVES
Chapter 1 Fighting Corruption in International Business Transactions:
Major Considerations Regarding Public Procurement
by Mark Pieth.....................................................................................................................19
Chapter 2 Improving Integrity in Public Procurement:
The Role of Transparency and Accountability
by Robert A. Burton...........................................................................................................23
Chapter 3 Competition and Anti-Corruption Considerations in Public Procurement
by Frédéric Jenny...............................................................................................................29
Chapter 4 Development Assistance Cooperation:
How Building Procurement Capacities Can Help Improve Integrity
by Richard Manning...........................................................................................................37

Part II

PROMOTING INTEGRITY THROUGH EFFECTIVE TRANSPARENCY
AND ACCOUNTABILITY MECHANISMS
A. Improving Transparency in Public Procurement
Chapter 5 Main Findings of the Forum Workshop on “Improving Transparency in Public
Procurement”
by Élodie Beth....................................................................................................................45
Chapter 6 Grey Zones and Corruption in Public Procurement: Issues for Consideration
by Tina Søreide...................................................................................................................51
Chapter 7 Bulgaria, Czech Republic, Romania and Slovenia:
The Use Of Contacts and Informal Networks in Public Procurement
by Åse Grødeland PH.D......................................................................................................59
Chapter 8 Russia: Conflict of Interest and Related Corrupt Practices in Public Procurement
by Andrei Khramkin...........................................................................................................77
Chapter 9 The Role of Transparency in Preventing Corruption in Public Procurement:
Issues for Consideration
by János Bertók...................................................................................................................85
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EXECUTIVE SUMMARY

Chapter 10 Republic of Korea: The Potential of E-Procurement
by Kyung-Soo Choi.............................................................................................................93
Chapter 11 Mexico: Lessons Learned in Promoting Transparency
by Roberto Anaya...............................................................................................................97

B. Ensuring Accountability: Designing and Controlling Sound Procurement Procedures
Chapter 12 Main Findings of the Forum Workshop on “Designing and Controlling
Sound Procurement Procedures to Ensure Accountability”
by Élodie Beth...................................................................................................................103
Chapter 13 Linking Islands of Integrity to Promote Good Governance in Public Procurement:
Issues for Consideration
by Wayne A. Wittig..........................................................................................................109
Chapter 14 Ensuring Accountability in Public Procurement: Bridging Information Asymmetry
by Peter Trepte..................................................................................................................115
Chapter 15 A Comparative Analysis of Public Procurement Practices: A French Perspective
by Jacques Bayle and Jean-Pierre Jochum........................................................................119
Chapter 16 Latin America: Conditions for Effective Public Procurement Regulations
by Claudio Weber Abramo...............................................................................................125
Chapter 17 China: Legislating Anti-Corruption Measures in Government Procurement
by Yu An...........................................................................................................................135
Chapter 18 Hungary: Establishing Control Mechanisms in Contract Award Procedures
by András Nagy................................................................................................................139
Chapter 19 Poland: How the New Law on Public Procurement Implements the Anti-Corruption
Recommendations of the Supreme Chamber of Control
by Alina Hussein...............................................................................................................145

Part III

PREVENTION, DETECTION AND SANCTION OF CORRUPTION IN PUBLIC
PROCUREMENT
A. Identifying Risks in the Bidding Process
Chapter 20 Main Findings of the Forum Workshop on “Identifying Risks in the Bidding Process
to Prevent and Sanction Corruption in Public Procurement”
by Giorgio Sacerdoti........................................................................................................153
Chapter 21 Inventory of Mechanisms to Disguise Corruption in the Bidding Process
and Some Tools for Prevention and Detection
by Jean-Pierre Bueb and Nicola Ehlermann-Cache.........................................................161
Chapter 22 Argentina: Identifying Risks of Corruption in Public Procurement
by Nicolás Raigorodsky...................................................................................................175
Chapter 23 Latvia: Procurement Methods and Risks of Corruption in Public Procurement
by Diana Kurpniece..........................................................................................................181
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EXECUTIVE SUMMARY

Chapter 24 Mexico: Identifying Risks In The Bidding Process To Prevent Corruption
by Guillermo Haro...........................................................................................................189
Chapter 25 Asian Development Bank:
Action to Identify Risks in the Bidding Process to Prevent Corruption
by A. Michael Stevens.....................................................................................................195

B. Compliance with Anti-Corruption Laws through Access to Public Procurement:
Sanctioning or Voluntary Self-Regulation?
Chapter 26 Main Findings on the Forum Workshop on “Compliance with Anti-Corruption Laws
through Access to Public Procurement: Sanctioning or Voluntary Self-Regulation”
by Valérie Dervieux..........................................................................................................207
Chapter 27 Regulating Access to Public Procurement: Issues for Consideration
by Nicola Ehlermann-Cache.............................................................................................213
Chapter 28 The World Bank’s Sanctions Process
by Françoise Bentchikou...................................................................................................227
Chapter 29 Compliance with Anti-Corruption Laws Through Access to Public Procurement:
The Asian Development Bank Experience
by A. Michael Stevens.....................................................................................................245
Chapter 30 Exclusion of Tenderers in the European Union:
The Only Way Forward Against Procurement Fraud?
by Simone White..............................................................................................................251
Chapter 31 Italy’s Anti-Corruption Legislation:
Disqualification from Public Bidding as a Sanction
by Matteo Saccavini.........................................................................................................255
Chapter 32 The Challenges Facing Debarment and the European Union
Public Procurement Directive
by Kirstine Drew..............................................................................................................267
Chapter 33 Ensuring Compliance with Anticorruption Laws Through Sanctioning
or Voluntary Self-Regulation
by Michael H. Wiehen.....................................................................................................277
Chapter 34 The Korean Public Procurement Service Integrity Pact....................................................283

Annex I Agenda of the OECD Global Forum on Governance:
Fighting Corruption and Promoting Integrity in Public Procurement...............................295
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