Center for Good Governance Studies Red Flags and Effective Tools for Fighting Corruption In Public Procurement Dacian C. Dragos Center for Good Governance Studies Bucharest 2017

Public procurement in the EU TOOLS against CORRUPTION in Procurement Public procurement in the EU Public procurement - (one of) the driving force(s) of economic development and innovation Corruption 5 % of global GDP, adds up to 10 % of the total cost of doing business on a global basis adds up to 25 % of the cost of procurement contracts in developing countries. Sustainable PP: necessary condition: INTEGRITY

Corruption in PP Public procurement Specifics of PP in CEE countries TOOLS against CORRUPTION in Procurement Corruption in PP Public procurement the government activity most vulnerable to waste, fraud and corruption corruption may occur in all of its phases: preparation or planning, tendering execution Specifics of PP in CEE countries complex, unstable and unclear regulations large number of institutions overseeing the management excessive bureaucracy delayed payments Systemic/endemic character . Causes/explanations: communist legacy; cultural values; lack of genuine political will; lack of leadership and consistent, targeted action against corruption, as well as ongoing political changes; the implementation process.

Forms of corruption Specifications tailor-made for certain companies TOOLS against CORRUPTION in Procurement Forms of corruption Specifications tailor-made for certain companies Conflict of interests in the evaluation of bids Collusive bidding Unclear selection or evaluation criteria Involvement of bidders in the design of specifications Abuse of negotiated procedures Abuse of emergency grounds to justify use of non-competitive or fast-track procedures Amendments of the contract terms after conclusion of the contract

Issues: Comparative perspective: TOOLS against CORRUPTION in Procurement Issues: Comparative perspective: main red flags of corruption in public procurement stages where they occur the most effective anti-corruption tools challenges and best practices the experience of various EU jurisdictions and the US specific challenges faced by CEE countries

Anti-corruption tools – effectiveness? TOOLS against CORRUPTION in Procurement Anti-corruption tools – effectiveness? Incentives for public officials to resist corruption? Ethics regulations for officers and employees of procuring entities? Conflicts of interest Whistleblowers Self-reporting by highly motivated organizations? External pressures: social witnesses - NGOs, the press, citizens? Monitoring by the unsuccessful tenderers? Electronic procurement Institutionalized controlling mechanisms ex ante AGENCIES ex post - “blacklisting”, or debarment Overarching: TRANSPARENCY Ineffectiveness of the contract?

1st dimension: risks/red flags TOOLS against CORRUPTION in Procurement 1st dimension: risks/red flags Data base : invitation/participation notices, their publication, number of bids received, award of the contract (same tenderers), etc. A sample of public procurement contracts Stratification criteria: financing (EU financed contracts and nationally financed ones), types of contracts and domains (goods, services, and works/infrastructure), types of contracting authorities (central and local), etc. Corruption indicators Ratio of contracts which are affected by one or more corruption red flags Types of corruption practices Links between the value of the contract and red flags

2nd dimension: effective tools TOOLS against CORRUPTION in Procurement 2nd dimension: effective tools Ex ante control/ ex post control aspects monitored any indications that control is curbing corruption? costs associated with control? Do the benefits justify the costs? Ex ante – Ex post control - controversies Conflicts of interest significant form of corruption? broad or narrow concept? types of sanctions Electronic procurement which stages of the public procurement process are carried out online electronic procurement increase transparency? Perception Quotas of public procurement to be carried out online?

2nd dimension: effective tools (2) TOOLS against CORRUPTION in Procurement 2nd dimension: effective tools (2) 4. Debarment/blacklisting Effective? Drawbacks? More red tape? Self-cleaning? 5. Ineffectiveness of contract? 1. ”sacred cow” policy 2. extension of grounds for ineffectiveness? 6. Transparency 1. ex ante – ex post? Contracts? 2. commercial sensitive information

DACIAN C. DRAGOS Center for Good Governance Studies