ANTI-CORRUPTION AND PUBLIC PROCUREMENT

ANTI-CORRUPTION AND PUBLIC PROCUREMENT Rebuilding the Transatlantic Marketplace: Austria and Central Europe as Catalysts for Entrepreneurship and Innovation NYSBA, SEASONAL MEETING 2014 15 October 2014, Vienna, Austria

TOPICS I. Costs of Corruption in Public Procurement II. Tools to prevent Corruption in Public Procurement Overview Sound legal framework Further corruption prevention strategies Selected examples Integrity of public officials and bidder employees Exclusion, suspension and debarment III. Summery

COSTS OF CORRUPTION IN PUBLIC PROCUREMENT Financial impact Up to 20-25% of the contract s value may be lost to corruption Impact on health & safety Purchase/delivery of sub-standard products Dangerous accidents due to sub-standard construction (bridges, buildings) Impact on trust in government Corruption serves as role model for other pubic officials and companies Trust in government and political elite is diminished in general Impact on innovation Not best but most corrupt company wins public contract Innovative companies are discouraged from participating in public tenders Environmental impact Environmental impact of unnecessary infrastructure projects (tunnels, etc) Environmental minimum standards are not observed to maximize profit 3

TOOLS TO PREVENT CORRUPTION IN PUBLIC PROCUREMENT Sound legal framework based on international procurement codes UNCITRAL Model Law WTO Government Procurement Agreement United Nations Convention against Corruption (UNCAC) EU Public Procurement Directives Sound legislation alone is not sufficient to contain corruption in public procurement! Essential that legal framework be supported by other efforts 4

TOOLS TO PREVENT CORRUPTION IN PUBLIC PROCUREMENT Sound legal framework based on international procurement codes Collective action Political will to enforce the rules Professionalization of procurement work forces Effective review mechanism before court or independent agency Exclusion, suspension and debarment of corrupt contractors Integrity of public officials and bidder employees 5

TOOLS TO PREVENT CORRUPTION IN PUBLIC PROCUREMENT SELECTED EXAMPLE Integrity of public officials and bidder employees Procurement personnel is expected to maintain superior standards of integrity and moral values Article 8 United Nation Convention Against Corruption calls for implementation of codes of conduct for public officials Many different anti-corruption standards worldwide ICC Rules FCPA UK Bribery Act OECD Guidanc e Compliance programmes do often not meet special requirements regarding public procurement processes Only standard components 6

TOOLS TO PREVENT CORRUPTION IN PUBLIC PROCUREMENT SELECTED EXAMPLE Exclusion, suspension and debarment Excluding corrupt companies from public contract is an effective tool in the fight against corruption Companies do not want or can often not afford to loose the government as a business partner Various governments and international organizations have recently developed their own debarment systems, to exclude contractors that have committed certain crimes (bribery or fraud) World Bank Currently under revision United States European Union 2014 EU Public Procurement Directives explicitly recognizes the possibility of rehabilitation Company which has undergone so called self-cleaning measures after being convicted of corruption avoids being excluded from public tender procedures (in the future) 7

SUMMERY Corruption in public procurement costs billions of US$ every year Has direct impact on trust in governments Public contracts have remained highly prone to corruption Despite various efforts undertaken to curb corruption in public procurement Anti-corruption in public procurement is important to lawyers Lawyers may have an impact on any tool in the fight against corruption 8

SCHNITZER Rechtsanwalts GmbH Johannes S. Schnitzer T: +43 (1) 361 1 361-61 E: schnitzer@schnitzer-law.com W: schnitzer-law.com CONTACT Chambers Europe (2014) recommends Johannes S. Schnitzer as "leading individual" in public procurement/ppp The Legal 500 (2014) recommends SCHNITZER LAW as "leading firm" in public procurement Who's Who Legal (2014) recommends Johannes S. Schnitzer as "foremost legal practitioner" in public procurement 9