Reducing Corruption Risks and Practices in Public Procurement: Evidence from Bulgaria

Size: px
Start display at page:

Download "Reducing Corruption Risks and Practices in Public Procurement: Evidence from Bulgaria"

Transcription

1 GOVERNANCE MONITORING ASSOCIATION WORKING PAPER SERIES Reducing Corruption Risks and Practices in Public Procurement: Evidence from Bulgaria Konstantin Pashev GMAWP 2009/3 December 2009

2 Reducing Corruption Risks and Practices in Public Procurement: Evidence from Bulgaria Konstantin V. Pashev 1 Abstract: This paper looks at the drivers and deterrents of corruption in public procurement, drawing on the experience of Bulgaria. It discusses its sources, forms, incidence and cost to society, and provides evidence that Bulgaria s accession to the EU was associated with a shift of corruption up from the middle (expert) to the high (political) levels of public management with better structured political-business networks. In this context the paper discusses remedies at three levels of responsibilities: procurement legislation; procurement management and control; and the political environment which shapes public-private interface. It argues that the clues to reducing corruption in procurement are in improving control rather than further revising the legislation and discusses related policy implications. 1 Governance Monitoring Association; and New Bulgarian University, Sofia, kpashev@nbu.bg 1

3 Introduction With the EU enlargement and flow of structural and cohesion aid eastwards corruption risks in public procurement in the new member states have grown. This is not surprising. Public procurement is among the areas of private-public interface with lucrative opportunities for rentseeking. In the EU, public contracts account for 16 percent of GDP annually. Corruption risks and practices grow with the development of knowledge economy and network society as the purchase of hightechnology goods, services and construction works require higher management and oversight capacity. Finally, corruption risks in public procurement grow in time of crisis due to the collapse in private consumption and stepped up anti-crisis public sector spending (Kaufmann, 2009). On the other hand, higher corruption risks in the new member states of the EU are attributed as well to the relatively new and fast-growing procurement market, where some of the anti-corruption safeguards have not yet reached effective levels of enforcement. Procurement corruption entails fiscal losses, efficiency losses from distorted market competition, and welfare losses related to the deteriorated access to and quality of public goods and services. This paper draws evidence from Bulgaria to put corruption in public procurement in theoretical context and to discuss remedies. Bulgaria is a country, where major anti-corruption institutional checks and balances seem to have been put in place, but actual improvement in corruption levels and practices is slow to come. Institutional reforms have been the focus of the road to accession to the EU for more than a decade now; and have been supported by multilateral and bilateral donors. According to the majority of evaluation reports, capacity and integrity building projects have been well focused and far reaching. Most of the institutional safeguards and control mechanisms have been put in place. The Global Integrity Report 2008, 2 which assesses the performance of key-integrity promoting mechanisms rather than incidence of corruption, ranks Bulgaria second only to Australia. The Worldwide Governance Indicators rank Bulgaria as the third biggest improvement worldwide between 1996 and 2007, even though still lagging behind other EU members (Kaufmann, Kraay and Mastruzzi 2008). In general indices measuring the quality of governance institutions and practices seem to rank Bulgaria higher than indices that measure the level of corruption. There is of course positive impact on levels of corruption as well, but it seems to be mainly in corruption related to compliance and enforcement of business regulations and control (CSD, 2009). At the same time as survey evidence from public procurement, discussed below, shows this progress may be more than offset (as a cost to society) by the move of regulatory corruption practices from the low and mid-management level to grand corruption related to government contracts and EU funds, use and 2 2

4 acquisitions of state and municipal property, political shielding of companies against law enforcement, etc. On balance despite a decade of institutional reforms, corruption remains significant problem in Bulgaria. Moreover, it seems to have been deteriorating since accession to the EU, despite hopes for positive impact of accession on governance. National surveys rank corruption as the number one problem in Bulgaria in the two years after accession to the EU (CSD, 2009). Bulgaria ranks last among the EU countries by the Transparency International Corruption Perception Index. 3 In an unprecedented move in November 2008 the EU suspended EUR 220 million of PHARE aid and froze another EUR 115 million of ISPA projects in allegations of mismanagement and corruption in contract-awarding. 4 The PHARE program was suspended for failures to control and manage money spent on administrative reforms, including anti-corruption projects, while ISPA pre-accession funds were frozen for abuses of procurement procedures and conflicts of interest in multi-million road infrastructure projects. The paper begins by deriving the modus operandi of corruption in procurement from survey evidence on its most frequent appearances and practices in Bulgaria. Then it presents rough estimates of its cost to society. Finally it discusses relevant remedies at three levels of responsibilities: the procurement legislation, the control, and the broader context of the quality of the political competition. 1. Defining the problem: corruption risks and practices Corruption in public procurement is defined here as abuse of public contract awarding power for private gain. Public contracts include first and foremost delivery of public works, goods and services to budgetspending agencies. But public contractors are as well state-owned and municipal enterprises, schools, hospitals, public private partnerships and other entities that spend public funds. Furthermore, public contractors are private enterprises if they operate in the utility sectors of energy, water, public transport and postal services. This places corruption in public procurement mainly (but not exclusively) in the group of fiscal corruption. It is a abuse of office in the management of public expenditures, or misuse of monopoly power in the utility sectors. Irrespective of its form, it results in channeling a portion of current and capital expenditures in the government and utility sectors towards a supplier in exchange of a bribe or other undue gain. The bribe is possible and is function of the rent generated through buying goods, services and public works at terms, which are worse than 3 TI CPI is a composite index which reflects a number of surveys for each country, often referred to as a poll of the polls, with a scale from 1 (corrupt) to 10 (non-corrupt). After some improvement in from 3 to 3.9 Bulgaria s scores have stalled around 4 until accession in 2007 and has fallen down again to 3.6 in The index threshold of 5 is considered a division line between corrupt and non-corrupt countries. 4 The access to the EUR 115 m. has been restored in May

5 those on the competitive markets. If public and utility services were supplied on competitive markets, their suppliers would hardly manage to buy continuously inputs at higher than market prices (or lower quality) without losing competitive edge 5. None of them however are supplied through competition that is strong enough to lead to competitive bidding for inputs. Moreover, the remuneration of the procurement officer does not depend on the cost-effectiveness of the contract. Therefore, if the principles of competition in procurement were not enforced by adequate regulations and controls, the market itself would fail to put them into effect. Accordingly, the goal of procurement legislation is to remedy to some extent this market failure by enforcing rules of competitive bidding, transparency and accountability, thus bringing public contracts closer to the value-for-money terms of competitive market deals. The importance of competition, discretion and accountability as determinants of corruption has been well established and empirically tested in the literature. 6 I will come back to them in the discussion of drivers and remedies to corruption in procurement. Before that I will look at the way corruption in procurement works. There are three questions of the diagnostics of the problem which are important for the design of anticorruption policy: mechanisms of abuse, who gains and who loses, and whose responsibility it is. The management of public procurement has five stages, each of them with specific vulnerabilities and exposure to abuse: a) planning and advance information; b) preparing the tender documentation with the requirements to the product and supplier and the evaluation formula, and publication of the contract notice; c) collecting and evaluation of the bids; d) contracting; and e) implementation. Corruption practices are mostly concentrated on the second and the third phase: the tender documentation and the ranking of the bids. Results from business surveys in Bulgaria show that most abuses involve either provision of advantages to a specific bidder in the technical documentation, or bending the predefined evaluation criteria when ranking the bids to the benefit of the pre-defined winner (fig. 1). 5 The principal-agent kind of abuse of procurement power exists in the private sector as well, but it is limited by higher rates of competition and shareholders control. 6 The pioneering work is Rose-Ackerman 1975; 1978; Klitgaard For a review of the literature on economics of corruption see Rose Ackerman 2002; Mishra

6 Figure 1. Corruption practices, encountered by participants in public procurement procedures in Bulgaria (percent of responses, multiple choice) Undue advantage to a specific bidder in the terms of the procedure Manipulation of the preannounced assessment criteria Dividing the contract in separate smaller parts to avoid the thresholds Lack of full transparency on the results of the bidding I have not encountered corrupt practices Cancellation or termination of public tender procedures for no good reasons Compromising the terms of the contract relative to those in the bid 31,8 27,3 22,7 18,2 18,2 13,6 40,9 Direct awarding of the contract 9,1 0,0 5,0 10,015,020,025,030,035,040,045,0 Source: Pashev, Dyulgerov and Kaschiev 2006, p. 30 Even though such practices are explicitly ruled out by the legislation, often the contractor uses the technical requirements to the product, or the preliminary requirements to the expertise and capacity of the bidders to reduce their number and to direct the bidding to a preferred outcome. 7 There is also evidence of using the preliminary announcement of the procurement procedure to shorten the time of submitting the bids to unmanageable level for those who do not have the information in advance. The abuse of the evaluation criteria is also a common corruption practice. Moreover advantages built in the technical specification might be relatively easy to detect, especially if technical requirements are subject to ex-ante screening by overseeing agencies. The EU legislation provides two ways to determine the best bid: a) lowest price only; or b) economically most advantageous tender. The second one includes the price combined with other economic, technical and qualitative criteria, such as cost-effectiveness, running cost, after-sales maintenance cost, after sales technical support, as well as technical and functional merits of the product or the service. In this case the law requires a pre-defined formula with the evaluation criteria and their weights to be included in the technical documentation. Still often those requirements cannot prevent discretionary application of the criteria to the benefit of the 7 Except for the open procedure, the other procedures envisaged in the EU legislation are two-round selection procedures, where the capacity of the interested parties to deliver the contract is evaluated first by pre-defined criteria. In the second round, those that qualify are invited to submit their bids or to start negotiations. 5

7 briber. 8 This is true especially in regard to criteria, which evaluate the capacity of the supplier to deliver the product (for instance technical expertise, volume of sales in similar products or delivered projects, foresight capacity etc.). 9 If the technical and functional assessment is not done or completed independently of the opening of the price component (which is usually sealed separately), there is high probability of manipulation of the evaluation procedure to the benefit of the less competitive bidder. Even the price which is often the sole or the weightiest component in the evaluation formula is not enough corruption-proof. The price is only one component of the economic cost of the contract. Often low purchase price is more than offset by high costs of maintenance, consumables, technical support and other operation costs when those services cannot be provided by other suppliers. Another significant risk of abuse at the stage of evaluation is related to the termination of the procedure if the pre-defined winner has little chances to win. The Public Procurement Law (PPL) limits the cases in which the procedure can be terminated, but its clauses are not restrictive enough. They allow termination if all submitted tenders exceed the public funds available for this contract; or in case there is substantial change in circumstances including inability to finance the contract for reasons that the contracting authority would not be able to predict. Given the constant budget cuts such an argument can easily be applied, especially in time of global financial crisis. The problem with termination is that it can open the door to a negotiated procedure, or just discourage the competitive bidder to participate when the procedure is re-opened. There are substantial corruption risks as well at the phases of closing the deal and implementing the contract. These are mostly related to the deviation of the terms of the contract from the parameters of the winning offer, or deviation of the actual implementation from the contract. Before Bulgaria s accession to the EU, annexes to the contracts were often used to allow the supplier to step back from the terms of the winning offer. With the transposition of the EU directives the national legislation obliged the contractor to include in the contract all components of the winning bid and ruled out subsequent changes with few explicitly listed exceptions. There are high risks of corruption at the implementation stage. We do not have reliable evidence on the frequency of corruption practices there because they are not adequately captured either by the business surveys or by inspections. Actually, the EU procurement legislation is 8 The law allows not to indicate the weightings of each criterion, but only to rank them in descending order of importance. Even in case the criteria and their weights are specified, there might be no guidance on how exactly the evaluation scale of each criterion relates to the degree of fulfillment of the contractor s requirements, etc. Furthermore there is always room for subjective or corrupt evaluation on qualitative criteria. 9 As evidenced by a study of the Bulgarian Industrial Association (2005: 18) some of these may have fairly abstract content such as strategic vision on the future of the sector ; quality of writing of the bid, etc. 6

8 focused on the fair award of contracts. Article 1 of the Bulgarian PPL defines its regulatory scope as far as the award of the contract. It contains neither explicit provisions against deviations of the implementation from the terms of the contract nor any sanctions for such abuse. The assumption is that once the contract is signed any disputes between the parties fall under the commercial law. The latter, however would safeguard the public interest in case there is no risk of settlement of the disputes through a bribe at the expense of the consumers of public goods and services. At the contract implementation stage, the public interest cannot rely any more on appeals from other bidders. The safeguard of the public interest is exclusively in the hands of the contracting authority, institutional control and media and civil control. The risk of corruption is higher in public works and service contracts, where establishing the conformity of the output to the technical and functional parameters of the winning bid (and/or the contract) may require high professional integrity and expertise. In an implicit acknowledgment that the commercial law alone cannot guarantee the public interest at the stage of implementation of procurement contracts, the Bulgarian Public Financial Inspection (PFI) Law entrusts the PFI Agency with the authority of control on the implementation stage as well. This however may be hard to enforce under the PPL: it does not contain such provisions, while the control of the PFIA is limited to conformity with the law. There are some small recent changes in the PPL which seem to extend its coverage beyond the provision of article 1. They oblige the contracting authorities to work out their internal sets of rules for contract awarding including control on the implementation stage. The law requires also that the Public Procurement Agency (PPA) maintains black lists of suppliers against whom there is effective court ruling on failure to deliver procurement contracts. This list however would hardly include those who have deviated from their contractual obligations in return for a bribe: there would be no law suit against them. Therefore these changes have limited practical effect except for the important breakthrough in the philosophy of the law towards extending its coverage to the contract delivery stage as well. 2. Sources and drivers of corruption in procurement 2.1. Winners, losers and incentives The definition of corruption in procurement in the previous section is focused on the bribee and his benefit. It is equally important to define corruption in public procurement in terms of the costs and benefits for the briber. In general bribe is paid to get government benefit or to avoid costs (Rose-Ackerman 1996). It is essential however to see if the briber gets due or undue benefit. If the briber pays a bribe to get public service 7

9 which he is entitled to, he is rather a victim in the bribery act. In many occasions however, the briber gets undue benefit such as preferential access to services or jumping ahead of the line, or getting a document or an authorization to which he is not entitled. Alternatively, the briber pays to avoid costs related to law enforcement (e.g. tax evasion). In these cases s/he is an accomplice with a share in the rent. 10 Corruption in public procurement falls in the second category. It is what Shleifer and Vishney (1993) call corruption with theft. The deal is at the expense of the taxpayer and the consumers of public and utility goods and services. The briber is an accomplice rather than a victim. 11 There may be limited cases in public procurement where bidders pay bribe for contracts, which they are qualified to win even without kickbacks. Even when their bid is the most competitive one, they may pay bribes because they are not sure of the outcome, or to defend their competitive advantage against abuse of office to the benefit of other bribers. This is the less risky deal for the bribee: he would have the best price-for-quality contract, but will also cash out on the competitive advantage of the winner turning it into rent to be shared. In a competitive market however, the size of the rent to be shared in this case is limited. The rent might be much larger if the contract goes to a less competitive winner. This raises the risk of detection, but if control is not effective, the increase in the risk is not likely to offset the increase of the rent. Therefore bribe for awarding public contract to a supplier who has little chance to win without it would be more attractive for the parties to the deal. In this case the rent is shared between the briber and the bribee. We do not have reliable empirical evidence on the incidence of the rent. It depends on the information that the parties to the bribery have about the size of the rent; and on their bargaining power. The supplier is likely to have information advantage in regard to the real cost of the delivery and thus the size of the rent to be shared, while the public official is likely to have more bargaining power as s/he can accept an offer from other corrupt bidder, or even opt to go clean if the bribe does not justify the risk. The actual size and incidence of the rent would depend as well on the level of the competition and the level of corruption on the respective market. In complex advanced technology contracts and public works and services, where it is difficult to have reference market prices, the supplier may be in position to get hold of a larger portion of the rent than the procurement officer. 10 This commonsense distinction is sometimes overlooked in the literature and the design of policies. The victimization approach to measuring and fighting corruption is built on the assumption that all bribers are victims. In contrast the Penal code makes all bribers accomplices even when they might have no choice (e.g. corruption in healthcare). Obviously one-size-fits-all approach is far from optimal. Policy design and monitoring need to distinguish between corruption practices in which the briber is a net looser (a victim) and those in which s/he is also a beneficiary with a share in the rent. 11 See Rose Ackerman 1998: 26 for a list of services against a bribe in procurement 8

10 Despite his short-term gain however, the briber is a loser in the long term. Like in other negative externalities, his immediate private gain is less than the damage on the business environment in terms of market distortions and unfair competition. Unless bribe-led expansion helps him achieve monopoly or oligopoly position on the market, the corrupt business environment may turn into restraint for productivity-led growth when new political elites with new business partners come to power. 2.2 Levels of governance The menu of corruption practices outlined in the previous section may seem to imply that these are mainly abuses in the administration of procurement procedures. Technically, as far as the modus operandi presented above is concerned, this is true. Empirical evidence from Bulgaria however, shows that the sources and drivers of these practices and the clues to fighting them are higher in the hierarchy of government decision making. Victimization surveys in Bulgaria show impressive drop in selfconfessed corruption practices in Bulgaria between 2002 and Half of the participants in procurement procedures admit to have paid bribes in 2002 vis-à-vis one in ten confessions of bribes for public contract in Contrary to these results, the same respondents perceptions on corruption in public procurement remain high with 60% of them assessing it as widespread. 12 Such a discrepancy between personal experience and perceptions reflects partly the limitations of the victimization approach to measuring and explaining corruption. Victimization surveys try to measure what is believed to be the actual rather than the perceived level of corruption through asking respondents about their real experience with bribery. 13 They have two limitations. Firstly, extrapolating the crime victimization methodology to the issue of corruption, they implicitly assume that the briber is a victim in the transaction. This makes them not the best tool for diagnosing corruption when, like in public procurement, the briber is an accomplice. As already mentioned the briber may have share of the rent that exceeds the bribe. Together with the incrimination of the bribegiving, this explains why respondents are less likely to confess about a bribery in a face-to-face interview; and more likely to overrate the level of corruption (thus implicitly justifying their corrupt behavior without acknowledging it). Secondly, and more importantly, victimization surveys are better tailored to capture administrative (mass or petty) corruption rather than that on the top, where corruption in public procurement belongs. In this context the decline in its frequency of corrupt acts, as evidenced by victimization surveys in Bulgaria, may rather suggest that it 12 Data from the Corruption Monitoring System of the Center for the Study of Democracy based on surveys carried by Vitosha Research and presented in the annual corruption assessment reports. 13 On corruption victimization see Miller, 2006; Seligson

11 has migrated from the middle to the high management level i.e. out of the scope of monitoring through victimization surveys. Such an explanation is supported by two other survey observations. The rate of firms participation in public procurement procedures dropped from 43 percent of the sample in 2003 to 10 percent in At the same time the procurement market grew more than twice in value terms. Many bidders have obviously withdrawn from the fast-growing market. The decline in competition is confirmed also by Public Procurement Agency s hard data, according to which 45 percent of procurement contracts in value terms in 2008 are concentrated in the hands of 25 large suppliers (CSD 2009). Furthermore victimization survey data indicate a rise in the size of the bribe as a percentage of the value of the contract. 14 The combination of these four results falling frequency of bribing with growing size of the bribe commission ; falling participation rates, and bidders evaluations of high levels of corruption in procurement can be interpreted as evidence that random bribery for government contracts in Bulgaria has been replaced by more structured corruption networks tightly controlled by the high (political) level of public sector managers. Mid-level ad-hoc abuse of power has been crashed down, unfortunately not by the law, but by higher level well-established mechanism of channeling procurement money to business allies. This transformation of the profile of corruption in procurement in Bulgaria occurred in the years of considerable inflow of pre-accession ( ) and post-accession ( ) aid, and seems to have been largely driven by it. These arguments are not meant to imply that the territory of corruption in procurement is exclusively that of political decision making. Abuse of office related to public contracts may occur also in the lower levels of governance. Some procurement contracts may be awarded through abuse at the mid-management or expert level of responsibility: for instance at the stage of drafting the technical specification to the benefit of a designated winner. But the decline in bidding rates against the growth of the market in value terms and the high level of perceived corruption indicates that these are exceptions rather than common practices and would be more likely to occur in small rather than in large contracts. Moreover they may be indirect extension of grand corruption downwards, in which political bosses leave some discretion to the middle administrative management in the award of small contracts to buy off 14 These results are from the Corruption Monitoring Surveys (CMS) of Vitosha Research and CSD as presented in Pashev et al (2006:22-23). They differ from the World Bank Business Environment and Enterprise Performance Survey (BEEPS) results for Bulgaria, as presented by Anderson and Gray (2006) which found an increase in the frequency of bribes for government procurement between 2002 and 2005 and decline in the size of the bribe tax. While the former discrepancy is hard to explain, the latter obviously reflects conceptual differences. The CMS measures procurement bribes in percentage of the value of the contract (i.e. the bribe as a commission for awarding the contract, which implies undue benefit for the briber as well), while BEEPS measure it as percentage of net sales of the briber called the bribe tax a misnomer reflecting the victimization approach to corruption and ignoring the undue benefit to the briber. The bribe as a commission may have grown in absolute terms but slower than the company s revenues, thus resulting in a drop in the bribe as a tax. 10

12 their tacit collaboration in the big ones. Even in cases where bribery is an independent act at the expert or mid-management level, this does not release the agency manager from the responsibility for what happens at the lower levels of the administration of procurement, as s/he is the only one equipped with the instruments of internal control to prevent it. In brief, corruption in procurement reflects in most cases undue benefit at the political levels of responsibility, or control deficiencies at that level. The shift of corrupt decision-making up the ladder of governance responsibilities does not necessarily mean that corruption levels have grown. The literature is inconclusive on the impact of centralization of corruption on its overall levels. Shleifer and Vishny 1993 argue that competition in the provision of government goods will drive bribes down. This however is in effect for what they call corruption without theft, i.e. when the corrupt official charges a bribe over the price of the public good. In the case of corruption with theft, competitive pressures may increase theft from the government in the same time as it reduces bribes. In other words non-organized corruption in procurement may have worse welfare effect than organized structured corruption. Celentani and Ganuza (2002a, 2002b) compare organized and competitive corruption and find that corruption is lower when it is organized. This leads us to the issue of quantifying the level and cost of corruption in procurement. 3. Sizing the problem It is not easy to measure corruption in public procurement in terms of its prevalence and cost to society. As already mentioned its incidence is not well captured by victimization surveys because procurement corruption belongs to grand corruption. Perception surveys provide a mirror measure of grand corruption but have other limitations: e.g. success in detecting and punishing corruption may affect perception scores worse than doing nothing. 15 Acknowledging these challenges we estimate the size of the problem in two steps. First we evaluate the size of the risks and drivers of corruption in public procurement. Then using hard data from the financial inspections of public procurement we derive rough estimates of the fiscal loss to society. The procurement market in Bulgaria offers lucrative opportunities for rent seeking without having the respective safeguards fully established and operational yet. At 11 percent of GDP in 2008 it is below the EU average of 16 percent, but rapidly approaching it. In the last four years it more than doubled in value terms with an average annual growth of 31 percent (table 1). Large scale investment programs, supported by estimated EUR 7 billion of structural aid by 2013, and fuelled by anti- 15 It is not just a matter of measuring. Corruption monitoring through perceptions may also have adverse effect on anti-corruption policy as it encourages agencies to invest money in image washing (often disguised as PR campaigns for increasing the public trust in institutions which are financed under administrative-capacity building EU aid) rather than in fighting corruption. The rewards of putting corruption under control in terms of improved perception scores might be slower to come than the campaigns seeking direct effect on perceptions. For review on approaches to measuring corruption see Sampford et al (eds.)

13 crisis fiscal spending, are expected to boost public procurement. Even with the current (pre-crisis and pre-structural aid) annual growth the procurement market in Bulgaria is projected to reach EU average levels by Table 1 Public procurement market in Bulgaria (value of contracts in MEUR) EUR million 1678,3 2097,1 2880,5 3774,1 growth yoy 25,0% 37,4% 31,0% share in GDP 7,7% 8,3% 10,0% 11,1% Source: Author s calculations from Public Procurement Agency data At the same time, legal protection and control mechanisms are far from completed and fully functional. As argued in section 1, the contract implementation stage remains outside the scope of the law and institutional control. Procurement market in Bulgaria is dominated by public works (close to 50 percent of the value of all contracts) and service contracts (15-17 percent). Thus for about two thirds of the market control at implementation is crucial as the quality of works and services delivered, their conformity to the contract (winning bid) as well as reference market prices may be hard to establish. Figure 2. Shares of works, goods and services in public procurement in Bulgaria (value in percent) 100% 80% 60% 17,0 15,0 16,9 14,8 36,2 33,5 35,0 36,6 40% 20% 0% 46,8 51,5 48,1 48, w orks goods services Source: Public Procurement Agency Business surveys in Bulgaria show high levels of corruption in procurement. For 42 percent of the firms the share of corrupt procurement procedures in their sector is above 25 percent, with one in eight firms assessing the share of corrupt contracts above 75 percent. Corruption in public procurement is assessed as widespread by about 60 percent of the business respondents. 16 Apart from these survey data, the size of the problem can be also derived from hard data. The reports of the Public Financial Inspections 16 Vitosha Research data in Pashev et al (2006:24) 12

14 Agency (PFIA) show growing rate of violations of the public procurement legislation. Violations range from illegal direct contracting without a procedure, to various breaches of the award procedures. Almost one in five inspected contracts in 2008 (about 7 percent of the total contracted value) was found to be awarded without procedure in direct violation of the procurement legislation (table 2). The average size of these abuses of power have doubled between 2005 and 2008 to about EUR Other violations of the public procurement legislation are documented in 2008 in more than half of the inspected procedures (48 percent in value terms). Adding illegal direct acquisitions, the rate of detected abused to inspected procedures in is 7 in 10 procedures (55 percent in value terms). Small contracts seem to be of higher risk. The inspections found that 63 cents of each euro inspected in the award of small contracts 17 was misused in some way, while for the procedures above the thresholds of the PPL the rate of abused to inspected procedures in value terms is 43 percent (table 3). Table 2 Results of Public Procurement Inspections No MEUR No MEUR No MEUR Share of inspected to all procedures 60,3% 36,6% 9,9% 18,3% 7,2% 8,6% Share of detected illegal direct award of contracts to inspected 10,0% 8,2% 13,2% 2,9% 19,2% 7,2% Share of other abused procedures to inspected 25,1% 47,2% 50,8% 58,3% 51,8% 48,2% Share of abused (incl. non-conducted) to inspected procedures 35,2% 55,5% 64,0% 61,2% 71,0% 55,3% Source: Author s calculations based on PFIA annual reports is omitted as this is the year of a major restructuring from internal audit to inspection agency, which disrupted its normal operations By mid-2006 the Agency operated as Public Internal Financial Control Agency, responsible for the internal control and audit, after that these functions are transferred to the audited agencies, and the new PFIA is responsible for financial inspections. These hard and soft data allow rough bottom-up estimate of the fiscal cost of corruption in public procurement. In 2008 half of all inspected procedures (in number and in value terms alike) had breached the law with 2 breaches per abused procedure in average. The total value of abused procedures as established by the PFIA is EUR 157 million. If the illegal award of contract without procedure is added to these, the detected abuse of the public procurement legislation amounts to EUR 180 million in This is the value of detected abuses from the inspection of a small sample of the procurement market: 7.2 percent in number of procedures and 8.6 percent in value terms. In order to assess the rate of abuse on 17 contracts below the PPL thresholds, for which the Ordinance for Awarding of Small Procurement Contracts apply 13

15 the whole procurement market we need an assumption of the frequency of abuses in its non-inspected part. If PFIA inspections were optimally allocated to the high-risk procedures and areas, it would be correct to assume that the rate of detection in the inspected procedures would be higher than the rate of abuse in the non-inspected contracts. PFIA inspections are believed to be optimally targeted to high-risk procedures because they are assigned upon request by other control bodies (mainly the National Audit Office, the Public Procurement Agency), other state institutions and stakeholders. This is considered better guarantee for optimal selection than any system based on risk assessment. This however would be true, if PFIA had the capacity to process all signals, claims and requests by other institutions and stakeholders. Actually it There are two doubts in this regard. If this were true, the rate of detection should grow with the reduction of the share of inspected procedures. Actually the ratio of detected abuses to inspected procedures did improve twice between 2005 and 2008 from 35 percent to 71 percent. But there is not much improvement in value terms. Irrespective of whether they check 60% or 7% of the procedures, inspectors find abuses in about percent of the inspections in value terms. The rate of detection at least in value terms is not so sensitive to the size of the sample (i.e. the share of the inspected procedures). Therefore even if this scanty evidence is taken as a proof of improved efficiency of inspection over the short period, it is mainly in the number of abuses detected not in their value. This result indicates that inspections are primarily targeted to the small contract segment of the market. Valuewise the share of inspections there is higher in 2008: 22.7 percent of conducted procedures in value in the lower segment vs percent above the thresholds of the PPL (table 3). Table 3 Breakdown of inspections and violations by size of contract 2008 Indicator No MEUR Share inspected to conducted above the PPL thresholds 8,8% 15,5% Share abused to inspected above the PPL thresholds 51,5% 43,0% Share inspected to conducted below the PPL thresholds 6,8% 22,7% Share abused to inspected below the PPL thresholds 51,8% 63,0% Source: Author s calculation based on AOP data In conclusion, the rate of detection in the inspected contracts can be extrapolated to the rest of the procurement market as an overall rate 14

16 of abuse of procedures. Then the total value of violations of public contracts in 2008 is estimated at EUR 2089 million. This is the value of procedures with violations. The cost to society is equal to the rent these violations generate. If we make the conservative assumption that it is split in half between the briber and the bribee, we can estimate the size of the rent as double the size of the bribe. Survey estimates (CSD 2006:29) indicate an average bribe size of 7.5 percent of the deal, which makes a base estimate of the rent of about 15 percent. As already argued, corruption victimization surveys are likely to underestimate the size of the bribe in public procurement because the briber is not a victim and because they are not so good in measuring grand corruption. Furthermore, in many deals the briber s gain may be well in excess of the bribe he pays. In view of these limitations it might be more realistic to assume the average rent to be at least percent of the contract. Table 4 present a sensitivity analysis of the cost to the rate of abuse and the rent as a percentage of the contract. This would make an estimated direct fiscal cost to society of EUR million in 2008, i.e percent of GDP. Table 4. Cost to Society: Sensitivity Analysis Rate of abuse 55% Rent as percentage of contract 15% Value of total contracts (2008, meur) Base estimate of social cost (meur) GDP of Bulgaria (2008, meur) 34,118 Rate of abuse 40 % 50 % 60 % Rent as percentage of contract 7.5% 15% 25% Source: Author s calculations based on PFIA and AOP data For a number of reasons above estimates may be too conservative. First, they take into account only the registered procurement market. A portion of public purchases remains outside the register on which this estimate is based. Some of them like special procurement deliveries in the field of defense and security are not subject to registration. Others remain outside the register because of non-compliance to the procedure requirements; or may be not correctly reported due to mistakes. We do 15

17 not have reliable estimates of the shadow part of the procurement market, but if taken into account it would increase the total value of public contracting, and hence the estimate of the cost of corruption to society. Second, the estimate above does not include the fiscal cost of unnecessary public procurement. It assumes that all concluded contracts bring net benefit to society. This is why the cost is only the surcharge levied to the budget-spending agency to the benefit of the parties to the corrupt deal. In this case real demand for goods and services in the public sector generates corruption. In contrast, there are cases when corruption opportunities generate artificial demand for goods and services in the public sector. These deliveries have little or no benefit to society. Then the cost is well above the rent and may be equal to the whole cost of the deal. Third, the cost estimation does not include the fiscal costs of corrupt practices at the phase of contract implementation. As mentioned above, we do not have reliable estimates of the frequency of these types of abuses of office, as they remain outside the scope of institutional control and survey monitoring. In brief, if we could account for the: a)non-registered procurement market; b) for the fiscal cost of unjustified procurement spending; and c) for the losses from deviations from the contract fiscal cost of procurement corruption in Bulgaria in 2008 (by very conservative estimates) might be well above 1,5 percent of GDP. Finally there is also substantial economic cost of corruption in public procurement, which is not accounted for here due to lack of reliable data. First there are direct welfare losses from inflated prices of utility services due to corruption in procurement in the utility sectors. Irrespective of whether suppliers are publicly or privately operated, their natural monopoly position allows them to transfer the cost of the rent entirely to the firms and households which consume their services. This may has adverse effect on competitiveness especially in an energy-intensive economy as the Bulgarian one. Second, there are the indirect welfare losses due to market distortions and unfair competition. Bribers may use part of the rents from procurement to subsidize their other sales and crowd out more productive and innovative suppliers even from the nonprocurement market. Finally there is also the extra compliance cost of anti-corruption safeguards borne by compliant suppliers. These costs stem mainly from the excessive reliance on regulatory barriers to abuse of office, which increase the cost of participation in the tenders. 4. In search of remedies In general anti-corruption policies have three broad interrelated priority areas: prevention, detection and prosecution. These are pursued at three subordinate levels of institutional responsibility which will be 16

18 assessed here: the political system and the quality of political competition; the regulatory barriers to corruption in procurement; and the system of control and audit. The checks and barriers built in the legislative arrangements of public procurement are often regarded as the center-piece of anticorruption policies. But curbing corruption requires more than a good law. First it needs to be effectively enforced, and this depends not only on the design and structure of the law, but also on the capacity of the administrative and judicial control. Second, there are general anticorruption safeguards at the level of administration. They include internal institutional control mechanisms and the degree of integrity and independence of the contract awarding authority from political pressures. Last but not least, as argued above, the major sources and drivers of corruption in public procurement lie outside of the system of public procurement per se. They belong to the political system. I will first look at the legislative safeguards against corruption and then assess the need for strengthening the mechanisms institutional control. Finally, I will review the checks and balances in the political system Regulatory safeguards There is an extensive literature on procurement reform, including anti-corruption in government contracting. 18 According to the classic economic rationale, the opportunities for corruption are reduced through enhancing competition among suppliers and limiting the opportunities for discretion of public procurement managers. 19 Kelman (1990) however argues that limiting discretion may not always produce best results. The purpose of the rule wasn t to help people make decisions; it was an effort by principals to control the behavior of agents. Applied by honest people, these rules would typically produce bad results, but using the rule would prevent dishonest agents from producing disaster. In addition, all of the many rules imposing government oversight requirements on contractors (such data submission and audit rules) were justified, pretty much by definition, based on the danger that, without them, some would cheat the government. It was distrust both of government officials and of contractors that produced the fear of discretion in the traditional procurement system. (Kelman 2002: 12-13) The classic economic rationale of limiting discretion in procurement through enhancing competition and transparency is enshrined in the 18 See Rose-Ackerman (1978: ) for a model on corruption in contracting; Kelman 1990; 2002; for discussion on rules and discretion in procurement; Evenett and Hoeckman 2005 for a review of the literature on procurement reforms in developing and transition countries; Golden and Picci 2006, Matechak 2002; Wittig 2000; 19 Celentani and Ganuza (2001a) identify the effects that influence equilibrium corruption in awarding procurement contracts and show that contrary to conventional wisdom corruption may increase with competition 17

19 guiding principles of the EU procurement legislation as transposed in the Bulgarian PPL formulated in article 2 (1) as: a) transparency; b) free and fair competition; and c) equal treatment and non-discrimination. 20 In this framework the major anti-corruption instruments in the procurement legislation are oriented towards: guaranteeing equal access to information about the tender specifications and award procedure ensuring non-discriminatory technical specifications and rules of evaluation of tenders safeguards against the manipulation of the technical and qualitative criteria when evaluating the tenders; ruling out arbitrary cancellation of the procedure banning deviations of the contract from the terms of the winning tender, etc. At the same time, proportionality is another equally important principle of the EU legislation, which drives procurement reform in the opposite direction away from the excessive application of antidiscretionary safeguards. The principle of proportionality implies that the efficiency cost of anti-discretionary safeguards shall not exceed the benefits of improved fairness and reduced corruption risks. It is embodied in two additional principles, which even though not explicitly stated in the procurement legislation, seem to have driven its evolution in the recent years. I will formulate the first one as minimizing the transaction and compliance costs of the parties to the contract. The second one could be formulated as non-discrimination of the public sector in terms of consumer choice. As in any other public policy dilemma, there is a tradeoff between fairness and economic efficiency. The purpose of minimizing administrative discretion requires that the procurement procedures thresholds go down. But if suppliers participate in a tender for every small delivery the benefits of limited discretion may be offset by higher transaction and enforcement costs per unit of procurement. In line with the EU trends, in the last ten years the Bulgarian legislation introduced relaxed requirements for small public procurement contracts and raised more than three times the value thresholds above which the PPL procedures apply. Likewise public procurement legislation evolved towards larger choice of procedures. Competitive dialogue and negotiated procedures (introduced in Bulgaria in 2006) are less transparent and corruption-proof than the open and the restricted ones, but have efficiency advantages. They allow the contracting authority to seek the best deal in terms of value for money in complex contracts where they may not know the parameters of the optimal solution in advance. Similarly, framework 20 see also section 2 of the Preamble and article 2 of Directive 2004/18/EC. 18

The evolution of the EU anticorruption

The evolution of the EU anticorruption DEVELOPING AN EU COMPETENCE IN MEASURING CORRUPTION Policy Brief No. 27, November 2010 The evolution of the EU anticorruption agenda The problem of corruption has been occupying the minds of policy makers,

More information

Aim is to simplify and update EU public procurement rules

Aim is to simplify and update EU public procurement rules New EU Directives Richard Heath, Associate New EU Directives One of a package of 3 Directives Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession

More information

What is corruption? Corruption is the abuse of power for private gain (TI).

What is corruption? Corruption is the abuse of power for private gain (TI). Outline presentation What is corruption? Corruption in the water sector Costs and impacts of corruption Corruption and human rights Drivers and incentives of corruption What is corruption? Corruption is

More information

Community Directives relating to the coordination of procedures for the award of public contracts:

Community Directives relating to the coordination of procedures for the award of public contracts: Final version of 29/11/2007 COCOF 07/0037/03-EN EUROPEAN C0MMISSION GUIDELINES FOR DETERMINING FINANCIAL CORRECTIONS TO BE MADE TO EXPENDITURE CO- FINANCED BY THE STRUCTURAL FUNDS OR THE COHESION FUND

More information

Transparency, Accountability and Citizen s Engagement

Transparency, Accountability and Citizen s Engagement Distr.: General 13 February 2012 Original: English only Committee of Experts on Public Administration Eleventh session New York, 16-20 April 2011 Transparency, Accountability and Citizen s Engagement Conference

More information

Executive summary 2013:2

Executive summary 2013:2 Executive summary Why study corruption in Sweden? The fact that Sweden does well in international corruption surveys cannot be taken to imply that corruption does not exist or that corruption is not a

More information

Boris Divjak Director of U4 Anti-Corruption Resource Centre (Bergen, Norway) Transparency International School on Integrity, Vilnius 07 July 2015

Boris Divjak Director of U4 Anti-Corruption Resource Centre (Bergen, Norway) Transparency International School on Integrity, Vilnius 07 July 2015 Petty Corruption Hitting hardest the poorest Boris Divjak Director of U4 Anti-Corruption Resource Centre (Bergen, Norway) Transparency International School on Integrity, Vilnius 07 July 2015 Corruption

More information

Executive summary. Transparency International

Executive summary. Transparency International Executive summary Transparency International Every year, the world spends more than US $3 trillion on health services, most of which is financed by taxpayers. These large flows of funds are an attractive

More information

Red flags of institutionalised grand corruption in EU-regulated Polish public procurement 2

Red flags of institutionalised grand corruption in EU-regulated Polish public procurement 2 Mihály Fazekas 1 Red flags of institutionalised grand corruption in EU-regulated Polish public procurement 2 26/2/2016 1 University of Cambridge, Government Transparency Institute, mfazekas@govtransparency.eu

More information

A Painful Shift in Bulgarian Anti-Corruption Policies and Practice

A Painful Shift in Bulgarian Anti-Corruption Policies and Practice August 2006, No 10 A Painful Shift in Bulgarian Anti-Corruption Policies and Practice In its March 2006 annual corruption assessment report On the Eve of EU Accession: Anti-Corruption Reforms in Bulgaria

More information

Unit 4: Corruption through Data

Unit 4: Corruption through Data Unit 4: Corruption through Data Learning Objectives How do we Measure Corruption? After studying this unit, you should be able to: Understand why and how data on corruption help in good governance efforts;

More information

Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption

Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption Recommendation of the Council for Development Co-operation Actors on Managing the Risk of Corruption 2016 Please cite this publication as: OECD (2016), 2016 OECD Recommendation of the Council for Development

More information

STUDY OF PRIVATE SECTOR PERCEPTIONS OF CORRUPTION

STUDY OF PRIVATE SECTOR PERCEPTIONS OF CORRUPTION STUDY OF PRIVATE SECTOR PERCEPTIONS OF CORRUPTION This sur vey is made possible by the generous suppor t of Global Af fairs Canada. The Asia Foundation and the Sant Maral Foundation have implemented the

More information

ANNUAL SURVEY REPORT: REGIONAL OVERVIEW

ANNUAL SURVEY REPORT: REGIONAL OVERVIEW ANNUAL SURVEY REPORT: REGIONAL OVERVIEW 2nd Wave (Spring 2017) OPEN Neighbourhood Communicating for a stronger partnership: connecting with citizens across the Eastern Neighbourhood June 2017 TABLE OF

More information

Global Anti Bribery and Corruption Compliance Program Be transparent and keep it transparent

Global Anti Bribery and Corruption Compliance Program Be transparent and keep it transparent Global Anti Bribery and Corruption Compliance Program Be transparent and keep it transparent Page 1 of 13 Table of Contents 1 Why a Global Anti Bribery and Corruption Compliance Program?... 3 2 Our approach...

More information

The 2017 TRACE Matrix Bribery Risk Matrix

The 2017 TRACE Matrix Bribery Risk Matrix The 2017 TRACE Matrix Bribery Risk Matrix Methodology Report Corruption is notoriously difficult to measure. Even defining it can be a challenge, beyond the standard formula of using public position for

More information

GUIDING QUESTIONS. Introduction

GUIDING QUESTIONS. Introduction SWEDISH INTERNATIONAL DEVELOPMENT COOPERATION AGENCY (SIDA) WRITTEN SUBMISSION ON CONSULTATIONS ON STRENGTHENING WORLD BANK ENGAGEMENT ON GOVERNANCE AND ANTICORRUPTION Introduction Sweden supports the

More information

Measuring Corruption: Myths and Realities

Measuring Corruption: Myths and Realities Measuring Corruption: Myths and Realities Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi, TheWorld Bank Draft, May 1 st, 2006 There is renewed interest in the World Bank, and among aid donors and aid

More information

3 rd Meeting of the Open-Ended IWG on the Prevention of Corruption August 2012

3 rd Meeting of the Open-Ended IWG on the Prevention of Corruption August 2012 3 rd Meeting of the Open-Ended IWG on the Prevention of Corruption 27-29 August 2012 COORDINATING AMONG PUBLIC AND PRIVATE STAKEHOLDERS IN FIGHTING CORRUPTION: MALAYSIA S EXPERIENCE 1 Presented by: Chuah

More information

Community Development and CSR: Managing Expectations & Balancing Interests

Community Development and CSR: Managing Expectations & Balancing Interests Community Development and CSR: Managing Expectations & Balancing Interests The 8 th Risk Mitigation and CSR Seminar Canada-South Africa Chamber of Business Tuesday, October 16, 2012 Introduction OBJECTIVE:

More information

Bachelorproject 2 The Complexity of Compliance: Why do member states fail to comply with EU directives?

Bachelorproject 2 The Complexity of Compliance: Why do member states fail to comply with EU directives? Bachelorproject 2 The Complexity of Compliance: Why do member states fail to comply with EU directives? Authors: Garth Vissers & Simone Zwiers University of Utrecht, 2009 Introduction The European Union

More information

European competition policy facing a renaissance of protectionism - which strategy for the future?

European competition policy facing a renaissance of protectionism - which strategy for the future? SPEECH/07/301 Neelie Kroes European Commissioner for Competition Policy European competition policy facing a renaissance of protectionism - which strategy for the future? St Gallen International Competition

More information

PUBLIC PROCUREMENT AND CONCESSIONS REGULATIONS

PUBLIC PROCUREMENT AND CONCESSIONS REGULATIONS THE REPUBLIC OF LIBERIA PUBLIC PROCUREMENT AND CONCESSIONS COMMISSION PUBLIC PROCUREMENT AND CONCESSIONS ACT, 2005 PUBLIC PROCUREMENT AND CONCESSIONS REGULATIONS REPUBLIC OF LIBERIA REGULATIONS ACCOMPANYING

More information

Diversity of Cultural Expressions

Diversity of Cultural Expressions Diversity of Cultural Expressions 2 CP Distribution: limited CE/09/2 CP/210/7 Paris, 30 March 2009 Original: French CONFERENCE OF PARTIES TO THE CONVENTION ON THE PROTECTION AND PROMOTION OF THE DIVERSITY

More information

(ii) sufficient transparency, fair competition and adequate ex-ante publicity must be ensured;

(ii) sufficient transparency, fair competition and adequate ex-ante publicity must be ensured; DRAFT Annex Award of procurement contracts by beneficiaries established in the Russian Federation other than public entities as defined in point (k) of Article 2 of the Agreement and other legal entities

More information

New Directives on Public Procurement. Dr. Manfred Kraff, Deputy Director-General DG Budget, European Commission Portorož - Slovenia, 23rd April 2015

New Directives on Public Procurement. Dr. Manfred Kraff, Deputy Director-General DG Budget, European Commission Portorož - Slovenia, 23rd April 2015 New Directives on Public Procurement Dr. Manfred Kraff, Deputy Director-General DG Budget, European Commission Portorož - Slovenia, 23rd April 2015 AGENDA Ø Background Ø Legal Framework in Public Procurement

More information

Summary of the Results of the 2015 Integrity Survey of the State Audit Office of Hungary

Summary of the Results of the 2015 Integrity Survey of the State Audit Office of Hungary Summary of the Results of the 2015 Integrity Survey of the State Audit Office of Hungary Table of contents Foreword... 3 1. Objectives and Methodology of the Integrity Surveys of the State Audit Office

More information

Understanding the Governance Context Analytical Tools and their Utilization. December 10 Francesca Recanatini, WBI

Understanding the Governance Context Analytical Tools and their Utilization. December 10 Francesca Recanatini, WBI Understanding the Governance Context Analytical Tools and their Utilization December 10 Francesca Recanatini, WBI www.worldbank.org/wbi/governance Outline of the Session Introducing a working framework

More information

TRANSPARENCY INTERNATIONAL BOSNIA AND HERZEGOVINA CRINIS STUDY. Study of the Transparency of Political Party Financing in BiH

TRANSPARENCY INTERNATIONAL BOSNIA AND HERZEGOVINA CRINIS STUDY. Study of the Transparency of Political Party Financing in BiH TRANSPARENCY INTERNATIONAL BOSNIA AND HERZEGOVINA 2010 CRINIS STUDY Study of the Transparency of Political Party Financing in BiH CRINIS STUDY Study of the Transparency of Political Party Financing in

More information

Conference of the States Parties to the United Nations Convention against Corruption

Conference of the States Parties to the United Nations Convention against Corruption United Nations Conference of the States Parties to the United Nations Convention against Corruption Distr.: General 8 October 2010 Original: English Open-ended Intergovernmental Working Group on the Prevention

More information

ANNEX IV Procurement by grant Beneficiaries in the context of European Community external actions

ANNEX IV Procurement by grant Beneficiaries in the context of European Community external actions ANNEX IV Procurement by grant Beneficiaries in the context of European Community external actions 1. GENERAL PRINCIPLES If the implementation of an Action requires procurement by the Beneficiary, the contract

More information

Reforming African Customs: The Results of the Cameroonian Performance Contract Pilot 1. Africa Trade Policy Notes Note #13

Reforming African Customs: The Results of the Cameroonian Performance Contract Pilot 1. Africa Trade Policy Notes Note #13 Reforming African Customs: The Results of the Cameroonian Performance Contract Pilot 1 Africa Trade Policy Notes Note #13 Thomas Cantens, Gael Raballand, Nicholas Strychacz, and Tchapa Tchouawou January,

More information

Towards a more transparent and coherent party finance system across Europe

Towards a more transparent and coherent party finance system across Europe Towards a more transparent and coherent party finance system across Europe The theme of Party Finance is key to determine the transparency of a political system. As many cases in the past have demonstrated,

More information

S.I. 7 of 2014 PUBLIC PROCUREMENT ACT. (Act No. 33 of 2008) PUBLIC PROCUREMENT REGULATIONS, 2014 ARRANGEMENTS OF REGULATIONS PART 1 - PRELIMINARY

S.I. 7 of 2014 PUBLIC PROCUREMENT ACT. (Act No. 33 of 2008) PUBLIC PROCUREMENT REGULATIONS, 2014 ARRANGEMENTS OF REGULATIONS PART 1 - PRELIMINARY [27th January 2014] Supplement to Official Gazette 939 S.I. 7 of 2014 PUBLIC PROCUREMENT ACT (Act No. 33 of 2008) PUBLIC PROCUREMENT REGULATIONS, 2014 ARRANGEMENTS OF REGULATIONS PART 1 - PRELIMINARY 1.

More information

Strategies to Combat State Capture and Administrative Corruption in Transition Economies

Strategies to Combat State Capture and Administrative Corruption in Transition Economies Strategies to Combat State Capture and Administrative Corruption in Transition Economies Joel S. Hellman Lead Specialist Governance and Public Sector Reform Europe and Central Asia Region The World Bank

More information

ORDINANCE ON THE AWARD OF SPECIAL PUBLIC CONTRACTS. (Heading amended, SG 7/2007, in force from ) In force from 1 October 2004

ORDINANCE ON THE AWARD OF SPECIAL PUBLIC CONTRACTS. (Heading amended, SG 7/2007, in force from ) In force from 1 October 2004 ORDINANCE ON THE AWARD OF SPECIAL PUBLIC CONTRACTS (Heading amended, SG 7/2007, in force from 23.01.2007) In force from 1 October 2004 Adopted by Council of Ministers Decree No 233 of 3 September 2004

More information

The abuse of entrusted power by public officials in their

The abuse of entrusted power by public officials in their CIDOB Barcelona Centre for International Affairs 51 MARCH 2012 ISSN: 2013-4428 notes internacionals CIDOB CRACKING THE MYTH OF PETTY BRIBERY Eduardo Bohórquez, Transparency International, Mexico Deniz

More information

Monitoring of Election Campaign Finance in Armenia,

Monitoring of Election Campaign Finance in Armenia, Monitoring of Election Campaign Finance in Armenia, 2007-2008 Varuzhan Hoktanyan November 2008 1. Introduction Starting from 1995, eight national-level elections have been conducted in Armenia. Parliamentary

More information

AUTOMATED AND ELECTRIC VEHICLES BILL DELEGATED POWERS MEMORANDUM BY THE DEPARTMENT FOR TRANSPORT

AUTOMATED AND ELECTRIC VEHICLES BILL DELEGATED POWERS MEMORANDUM BY THE DEPARTMENT FOR TRANSPORT AUTOMATED AND ELECTRIC VEHICLES BILL DELEGATED POWERS MEMORANDUM BY THE DEPARTMENT FOR TRANSPORT Introduction 1. This Memorandum has been prepared for the Delegated Powers and Regulatory Reform Committee

More information

International Trade Union Confederation Statement to UNCTAD XIII

International Trade Union Confederation Statement to UNCTAD XIII International Trade Union Confederation Statement to UNCTAD XIII Introduction 1. The current economic crisis has caused an unprecedented loss of jobs and livelihoods in a short period of time. The poorest

More information

Premium Integrity Program. Anti-Corruption Compliance Program

Premium Integrity Program. Anti-Corruption Compliance Program Premium Integrity Program Anti-Corruption Compliance Program Publication date: October 2013 Contents Indice 1 Pirelli's approach to fighting corruption...4 2 The regulatory context...6 3 Premium Integrity

More information

2010 UK Bribery Act. A Briefing for NGOs

2010 UK Bribery Act. A Briefing for NGOs 2010 UK Bribery Act A Briefing for NGOs June 2010 2010 UK Bribery Act A Briefing for NGOs 1. Introduction On April 8 th 2010, a new Bribery Act received Royal Assent one of the last bills to pass into

More information

World Bank Corruption Surveys

World Bank Corruption Surveys World Bank Corruption Surveys In recent years, research and analysis have provided overwhelming evidence that corruption is a regressive tax on the poor. Corruption distorts public resource allocation

More information

Special Eurobarometer 470. Summary. Corruption

Special Eurobarometer 470. Summary. Corruption Corruption Survey requested by the European Commission, Directorate-General for Migration and Home Affairs and co-ordinated by the Directorate-General for Communication This document does not represent

More information

HIGHLIGHTS. There is a clear trend in the OECD area towards. which is reflected in the economic and innovative performance of certain OECD countries.

HIGHLIGHTS. There is a clear trend in the OECD area towards. which is reflected in the economic and innovative performance of certain OECD countries. HIGHLIGHTS The ability to create, distribute and exploit knowledge is increasingly central to competitive advantage, wealth creation and better standards of living. The STI Scoreboard 2001 presents the

More information

Corporate Governance Statement

Corporate Governance Statement Corporate Governance Statement INTRODUCTION The board of directors (the Board ) of Driver Group PLC (the Company ) recognises the importance of good corporate governance and has elected to adopt the QCA

More information

THE NEW LEGISLATIVE PACKAGE ON PUBLIC PROCUREMENT, CONCESSIONS FOR WORKS AND CONCESSIONS FOR SERVICES

THE NEW LEGISLATIVE PACKAGE ON PUBLIC PROCUREMENT, CONCESSIONS FOR WORKS AND CONCESSIONS FOR SERVICES THE NEW LEGISLATIVE PACKAGE ON PUBLIC PROCUREMENT, CONCESSIONS FOR WORKS AND CONCESSIONS FOR SERVICES 26 May 2016 The adoption by the European Union of Directive 2014/23/EU of the European Parliament and

More information

Checklist for ex-post control of public procurement

Checklist for ex-post control of public procurement Annex no. 4 Template of the checklist for Public Procurement Control for the Polish beneficiaries Checklist for ex-post control of public procurement Project title and project number: Contracting Authority:

More information

ANNUAL SURVEY REPORT: BELARUS

ANNUAL SURVEY REPORT: BELARUS ANNUAL SURVEY REPORT: BELARUS 2 nd Wave (Spring 2017) OPEN Neighbourhood Communicating for a stronger partnership: connecting with citizens across the Eastern Neighbourhood June 2017 1/44 TABLE OF CONTENTS

More information

Evidence from Randomized Evaluations of Governance Programs. Cristobal Marshall

Evidence from Randomized Evaluations of Governance Programs. Cristobal Marshall Evidence from Randomized Evaluations of Governance Programs Cristobal Marshall Policy Manager, J-PAL December 15, 2011 Today s Agenda A new evidence based agenda on Governance. A framework for analyzing

More information

Annex B. Application of Chapter Five and Relationship to other Chapters

Annex B. Application of Chapter Five and Relationship to other Chapters A. Purpose Annex 502.4 Procurement - Provisions for municipalities, municipal organizations, school boards and publicly-funded academic, health and social service entities This Annex establishes the provisions

More information

1. Introduction Purpose and scope of the guidelines

1. Introduction Purpose and scope of the guidelines EN ANNEX Guidelines for determining financial corrections to be made to expenditure financed by the Union under shared management, for non-compliance with the rules on public procurement 1 Table of Contents

More information

President's introduction

President's introduction Croatian Competition Agency Annual plan for 2014-2016 1 Contents President's introduction... 3 1. Competition and Croatian Competition Agency... 4 1.1. Competition policy... 4 1.2. Role of the Croatian

More information

11416/15 JdSS/mdc DG D 1 A

11416/15 JdSS/mdc DG D 1 A Council of the European Union Brussels, 7 August 2015 (OR. en) 11416/15 COVER NOTE From: date of receipt: 3 August 2015 To: No. Cion doc.: Subject: JAI 610 SCHENGEN 23 FRONT 161 SIRIS 53 COMIX 360 Secretary-General

More information

European Single Procurement Document ESPD (Scotland) Version 1.6

European Single Procurement Document ESPD (Scotland) Version 1.6 European Single Procurement Document ESPD (Scotland) Version 1.6 Reference: R3-52-G - 0-19/09/2016 The ESPD (Scotland) includes the following parts and sections: 1. Instructions 2. Part I. Information

More information

COMPETITION LAW REGULATION OF HUNGAROPHARMA GYÓGYSZERKERESKEDELMI ZÁRTKÖRŰEN MŰKÖDŐ RÉSZVÉNYTÁRSASÁG

COMPETITION LAW REGULATION OF HUNGAROPHARMA GYÓGYSZERKERESKEDELMI ZÁRTKÖRŰEN MŰKÖDŐ RÉSZVÉNYTÁRSASÁG COMPETITION LAW REGULATION OF HUNGAROPHARMA GYÓGYSZERKERESKEDELMI ZÁRTKÖRŰEN MŰKÖDŐ RÉSZVÉNYTÁRSASÁG EXTRACT FOR EXTERNAL USE Effective as of 15 January 2017 2 I. Preamble 1. The aim of this Regulation

More information

THE LABOR MARKET IN KOSOVO AND NEIGHBOURING COUNTRIES

THE LABOR MARKET IN KOSOVO AND NEIGHBOURING COUNTRIES International Journal of Economics, Commerce and Management United Kingdom Vol. III, Issue 12, December 2015 http://ijecm.co.uk/ ISSN 2348 0386 THE LABOR MARKET IN KOSOVO AND NEIGHBOURING COUNTRIES Artan

More information

There is a seemingly widespread view that inequality should not be a concern

There is a seemingly widespread view that inequality should not be a concern Chapter 11 Economic Growth and Poverty Reduction: Do Poor Countries Need to Worry about Inequality? Martin Ravallion There is a seemingly widespread view that inequality should not be a concern in countries

More information

China Thrives Despite Corruption

China Thrives Despite Corruption Far Eastern Economic Review April 2007 China Thrives Despite Corruption by Shaomin Li and Judy Jun Wu It is commonly believed that corruption distorts the allocation of resources by diverting much-needed

More information

The water services crisis is essentially a crisis of governance

The water services crisis is essentially a crisis of governance Water Governance: Applying Anti-Corruption in Water Capacity Building Workshop for Improving the Performance of Water Utilities in the African Region 6-8 December6, 2006 Nairobi, Kenya Dr. Håkan Tropp

More information

Anti-Corruption Compliance Programme

Anti-Corruption Compliance Programme Anti-Corruption Compliance Programme Contents Contents... 1 I The Prometeon Tyre Group's approach to fighting corruption... 3 The commitment to fight corruption:... 4 The commitment to comply with laws:...

More information

Be transparent and keep it transparent

Be transparent and keep it transparent Page 1 of 23 Be transparent and keep it transparent Anti-Corruption Compliance Program Date: February 2013 Page 2 of 23 Contents Welcome from our Chief Executive Officer... 3 Welcome from our CFO & GM

More information

Prevention of corruption in the sphere of public purchases: Interviews with experts

Prevention of corruption in the sphere of public purchases: Interviews with experts Article available at http://www.shs-conferences.org or http://dx.doi.org/10.1051/shsconf/20141000018 SHS Web of Conferences 10, 00018 (2014) DOI: 10.1051/shsconf/20141000018 C Owned by the authors, published

More information

ECONOMIC GROWTH* Chapt er. Key Concepts

ECONOMIC GROWTH* Chapt er. Key Concepts Chapt er 6 ECONOMIC GROWTH* Key Concepts The Basics of Economic Growth Economic growth is the expansion of production possibilities. The growth rate is the annual percentage change of a variable. The growth

More information

SUNTORY BEVERAGE AND FOOD EUROPE ANTI-BRIBERY AND CORRUPTION POLICY OCTOBER 2015 EDITION 001

SUNTORY BEVERAGE AND FOOD EUROPE ANTI-BRIBERY AND CORRUPTION POLICY OCTOBER 2015 EDITION 001 SUNTORY BEVERAGE AND FOOD EUROPE ANTI-BRIBERY AND CORRUPTION POLICY OCTOBER 2015 EDITION 001 1 TABLE OF CONTENTS 1. POLICY STATEMENT...3 2. ANTI-BRIBERY AND CORRUPTION LAWS...4 3. THE PENALTIES...4 4.

More information

Anti-Corruption Policy

Anti-Corruption Policy Anti-Corruption Policy Version: 1 Page 1 of 10 INTRODUCTION 1 Our Commitment Accolade Wines conducts all of its business in an honest and ethical manner. We take a zero-tolerance approach to bribery and

More information

Regional Anti-Corruption Action Plan for Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, the Russian Federation, Tajikistan and Ukraine.

Regional Anti-Corruption Action Plan for Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, the Russian Federation, Tajikistan and Ukraine. Anti-Corruption Network for Transition Economies OECD Directorate for Financial, Fiscal and Enterprise Affairs 2, rue André Pascal F-75775 Paris Cedex 16 (France) phone: (+33-1) 45249106, fax: (+33-1)

More information

Board and Committees Terms of Reference

Board and Committees Terms of Reference Board and Committees Terms of Reference December 2015 National Friendly Page 1 CONTENT Introduction Definitions & Abbreviations Terms of Reference for: The Board Audit Committee Investment Committee Nomination

More information

10 ANTI-CORRUPTION PRINCIPLES FOR STATE-OWNED ENTERPRISES. A multi-stakeholder initiative of Transparency International

10 ANTI-CORRUPTION PRINCIPLES FOR STATE-OWNED ENTERPRISES. A multi-stakeholder initiative of Transparency International 10 ANTI-CORRUPTION PRINCIPLES FOR STATE-OWNED ENTERPRISES A multi-stakeholder initiative of Transparency International Transparency International is a global movement with one vision: a world in which

More information

PUBLIC PRIVATE PARTNERSHIPS ACT

PUBLIC PRIVATE PARTNERSHIPS ACT LAWS OF KENYA PUBLIC PRIVATE PARTNERSHIPS ACT NO. 15 OF 2013 Revised Edition 2015 [2013] Published by the National Council for Law Reporting with the Authority of the Attorney-General www.kenyalaw.org

More information

Migrants and external voting

Migrants and external voting The Migration & Development Series On the occasion of International Migrants Day New York, 18 December 2008 Panel discussion on The Human Rights of Migrants Facilitating the Participation of Migrants in

More information

2. WHY IS COMBATING CORRUPTION SO IMPORTANT FOR COMPANIES AND INVESTORS?

2. WHY IS COMBATING CORRUPTION SO IMPORTANT FOR COMPANIES AND INVESTORS? ANTI-CORRUPTION 1. INTRODUCTION 2 2. WHY IS COMBATING CORRUPTION SO IMPORTANT FOR COMPANIES AND INVESTORS? 3 3. ADVICE FOR FUND MANAGERS 4 4. FURTHER RESOURCES 6 1. INTRODUCTION CDC defines corruption

More information

LAW FOR THE PUBLIC PROCUREMENT

LAW FOR THE PUBLIC PROCUREMENT LAW FOR THE PUBLIC PROCUREMENT Prom. SG. 28/6 Apr 2004, amend. SG. 53/22 Jun 2004, amend. SG. 31/8 Apr 2005, amend. SG. 34/19 Apr 2005, amend. SG. 105/29 Dec 2005, amend. SG. 18/28 Feb 2006, amend. SG.

More information

Register, 2014 Commerce, Community, and Ec. Dev.

Register, 2014 Commerce, Community, and Ec. Dev. 3 AAC is amended by adding a new chapter to read: Chapter 109. Procurement Alaska Energy Authority Managed Grants. Article 1. Roles and Responsibilities. (3 AAC 109109.010-3 AAC 109109.050) 2. Source Selection

More information

ANNEX IV Procurement by grant Beneficiaries in the context of European Union external actions 1

ANNEX IV Procurement by grant Beneficiaries in the context of European Union external actions 1 ANNEX IV Procurement by grant Beneficiaries in the context of European Union external actions 1 1. GENERAL PRINCIPLES If the implementation of an Action requires procurement by the Beneficiary(ies), the

More information

The gender dimension of corruption. 1. Introduction Content of the analysis and formulation of research questions... 3

The gender dimension of corruption. 1. Introduction Content of the analysis and formulation of research questions... 3 The gender dimension of corruption Table of contents 1. Introduction... 2 2. Analysis of available data on the proportion of women in corruption in terms of committing corruption offences... 3 2.1. Content

More information

Photo by photographer Batsaikhan.G

Photo by photographer Batsaikhan.G Survey on perceptions and knowledge of corruption 2017 1 2 Survey on perceptions and knowledge of corruption 2017 This survey is made possible by the generous support of Global Affairs Canada. The Asia

More information

REPORT 2016/094 INTERNAL AUDIT DIVISION. Audit of the operations in Western Sahara for the Office of the United Nations High Commissioner for Refugees

REPORT 2016/094 INTERNAL AUDIT DIVISION. Audit of the operations in Western Sahara for the Office of the United Nations High Commissioner for Refugees INTERNAL AUDIT DIVISION REPORT 2016/094 Audit of the operations in Western Sahara for the Office of the United Nations High Commissioner for Refugees Overall results relating to the effective management

More information

THE BUSINESS CLIMATE INDEX SURVEY 2008

THE BUSINESS CLIMATE INDEX SURVEY 2008 THE BUSINESS CLIMATE INDEX SURVEY 2008 Prepared by: The Steadman Group, Riverside Drive, P.O. Box 68230 00200 Nairobi, Tel: 44450190-6, October, 2008 1 Summary of Main Findings 1. Introduction In meeting

More information

Mihály Fazekas* - István János Tóth**

Mihály Fazekas* - István János Tóth** This project is co-funded by the Seventh Framework Programme for Research and Technological Development of the European Union Identifying red flags for corruption measurement in Poland Mihály Fazekas*

More information

3 How might lower EU migration affect the UK economy after Brexit? 1

3 How might lower EU migration affect the UK economy after Brexit? 1 3 How might lower EU migration affect the UK economy after Brexit? 1 Key points EU migrants have played an increasing role in the UK economy since enlargement of the EU in 24, with particularly large impacts

More information

The spectre of corruption

The spectre of corruption The spectre of corruption Every year the Nedbank & Old Mutual Budget Speech Competition invites economics students to submit essays on urgent topical issues. The winners are announced on the evening of

More information

DECISIONS ADOPTED JOINTLY BY THE EUROPEAN PARLIAMENT AND THE COUNCIL

DECISIONS ADOPTED JOINTLY BY THE EUROPEAN PARLIAMENT AND THE COUNCIL 3.7.2007 Official Journal of the European Union L 173/19 DECISIONS ADOPTED JOINTLY BY THE EUROPEAN PARLIAMENT AND THE COUNCIL DECISION No 779/2007/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20

More information

Strategy Approved by the Board of Directors 6th June 2016

Strategy Approved by the Board of Directors 6th June 2016 Strategy 2016-2020 Approved by the Board of Directors 6 th June 2016 1 - Introduction The Oslo Center for Peace and Human Rights was established in 2006, by former Norwegian Prime Minister Kjell Magne

More information

Preliminary Effects of Oversampling on the National Crime Victimization Survey

Preliminary Effects of Oversampling on the National Crime Victimization Survey Preliminary Effects of Oversampling on the National Crime Victimization Survey Katrina Washington, Barbara Blass and Karen King U.S. Census Bureau, Washington D.C. 20233 Note: This report is released to

More information

Industry Agenda. PACI Principles for Countering Corruption

Industry Agenda. PACI Principles for Countering Corruption Industry Agenda PACI Principles for Countering Corruption January 2014 World Economic Forum 2014 - All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any

More information

Good Governance for Medicines

Good Governance for Medicines Good Governance for Medicines A Framework for Good Governance in the Pharmaceutical Sector Good Governance Good Health What is Good Governance? Good governance is an essential factor for sustainable development

More information

NORTHERN IRELAND SOCIAL CARE COUNCIL

NORTHERN IRELAND SOCIAL CARE COUNCIL NORTHERN IRELAND SOCIAL CARE COUNCIL BRIBERY POLICY FINAL SEPTMBER 2012 1. INTRODUCTION The Bribery Act 2010 (the Act) introduces a new, clearer regime for tackling bribery that applies to all commercial

More information

Call for Research Proposals to Assess the Economic Impact of Refugees on host and/or regional economies

Call for Research Proposals to Assess the Economic Impact of Refugees on host and/or regional economies Call for Research Proposals to Assess the Economic Impact of Refugees on host and/or regional economies Background: There is very limited work to date on the economic impact of refugees on host and/or

More information

Combating Extortion and Bribery: ICC Rules of Conduct and Recommendations

Combating Extortion and Bribery: ICC Rules of Conduct and Recommendations International Chamber of Commerce The world business organization Commission on Anti-Corruption Combating Extortion and Bribery: ICC Rules of Conduct and Recommendations 2005 edition International Chamber

More information

GEORGIA. Ad Hoc Working Group on Creation of Institutional Machinery of Georgia on Gender Equality

GEORGIA. Ad Hoc Working Group on Creation of Institutional Machinery of Georgia on Gender Equality GEORGIA Report on Implementation of the Beijing Platform for Action (1995) and the Outcome of the Twenty-Third Special Session of the General Assembly (2000) Ad Hoc Working Group on Creation of Institutional

More information

Financial Crisis. How Firms in Eastern and Central Europe Fared through the Global Financial Crisis: Evidence from

Financial Crisis. How Firms in Eastern and Central Europe Fared through the Global Financial Crisis: Evidence from Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized World Bank Group Enterprise Note No. 2 21 Enterprise Surveys Enterprise Note Series Introduction

More information

POSITION PAPER. Corruption and the Eastern Partnership

POSITION PAPER. Corruption and the Eastern Partnership POSITION PAPER Corruption and the Eastern Partnership 1. Summary The Eastern Partnership is a unique platform to leverage anti-corruption reforms in Eastern Europe and Central Asia. The offer of closer

More information

Executive summary. Part I. Major trends in wages

Executive summary. Part I. Major trends in wages Executive summary Part I. Major trends in wages Lowest wage growth globally in 2017 since 2008 Global wage growth in 2017 was not only lower than in 2016, but fell to its lowest growth rate since 2008,

More information

National Analysis. Prepared by EKINT Hungary. Institutional Framework and Enforcement Mechanisms in the Area of Political Party Finance

National Analysis. Prepared by EKINT Hungary. Institutional Framework and Enforcement Mechanisms in the Area of Political Party Finance National Analysis Prepared by EKINT Hungary Institutional Framework and Enforcement Mechanisms in the Area of Political Party Finance Overall background Since 2010, most aspects of Hungary s constitutional

More information

DATED 1 December 2017 HOSTELWORLD GROUP PLC AUDIT COMMITTEE TERMS OF REFERENCE

DATED 1 December 2017 HOSTELWORLD GROUP PLC AUDIT COMMITTEE TERMS OF REFERENCE DATED 1 December 2017 HOSTELWORLD GROUP PLC AUDIT COMMITTEE TERMS OF REFERENCE HOSTELWORLD GROUP PLC (the "Company") AUDIT COMMITTEE - TERMS OF REFERENCE CONSTITUTION 1. The Committee has been established

More information

Information Notice. Information Notice. Reference: ComReg 17/49

Information Notice. Information Notice. Reference: ComReg 17/49 Information Notice Response to Department of Jobs, Enterprise and Innovation Consultation on Proposed European Directive Empowering National Competition Authorities to be more Effective Information Notice

More information

Anti-Bribery and Corruption Policy

Anti-Bribery and Corruption Policy Anti-Bribery and Corruption Policy 1. Introduction PRG demands the highest standards of integrity and ethical conduct in its business dealings. PRG will not tolerate any bribery or corrupt practices related

More information

Anti-bribery and Corruption Policy

Anti-bribery and Corruption Policy Anti-bribery and Corruption Policy This policy sets out Campbell & Kennedy Ltd's (Henceforth C&K) stance on the implementation and management of anti-bribery and corruption measures across the Companies

More information

ANNUAL SURVEY REPORT: ARMENIA

ANNUAL SURVEY REPORT: ARMENIA ANNUAL SURVEY REPORT: ARMENIA 2 nd Wave (Spring 2017) OPEN Neighbourhood Communicating for a stronger partnership: connecting with citizens across the Eastern Neighbourhood June 2017 ANNUAL SURVEY REPORT,

More information