Anti-corruption measures under the new Public Procurement Directives Prague 20.03.2014 Jaroslav Kračún European Commission Directorate General Internal Market and Services Directorate C - Public procurement

Introduction/Structure Public procurement was the subject of the Special chapter in the first EU Anti-Corruption report, published on 3 February 2014. Public procurement was chosen as the first thematic chapter because it is of crucial importance for the Internal market covered by extensive EU legislation a "Hot spot" for corruption. Public procurement rules contribute to Preventing corruption Detecting corruption Redressing corruption. 02/01/2019

Public Procurement is of crucial economic importance 1/5 of EU GDP (= 2.3 trillion Euro) spent by European contracting entities on goods, works and services. Total value of calls for tenders above thresholds for the application of EU rules: approx. 425 Billion in 2011. Czech data: Total government and utilities expenditure on works, goods and services in public procurement estimated at 36.70 Billion in 2011. 02/01/2019

Public Procurement is covered by extensive legislation Classic Public Procurement and Utilities Directives, revision just entered into force. New Concessions Directive, also from March 2014. Remedies Directives for classic and utilities procurement to exercise judicial control over the procurement process. Defence Directive to regulate procurement in a high price and therefore corruption prone sector. Czech legislation: Public Procurement Act substantially amended in 2012, introducing additional transparency and safeguards, but again amended in 2013. 2013 Act regulating anonymous paper share and 2014 Civil code on property ownership regarding transparency of ownership for companies participating in public tenders. 02/01/2019

Public Procurement is a "Hot spot" for corruption High level of financial interests at stake The costs of corruption are difficult to quantify, but they are too high. There is a number of high-level corruption cases involving one or more countries Situation in Czech Republic: According to a 2013 Eurobarometer business survey, 77 % of respondents consider corruption widespread in public procurement at national level. 02/01/2019

Public Procurement rules to prevent corruption – Transparency I Rules for public procurement are there to guarantee transparent and non-discriminatory procedures and therefore, if followed, prevent corruption. Contracting entities should make use of Prior publication – to invite highest possible number of interested bidders for an open competition to get the best value for money without undue and distorting influence. Clear and open tender specifications – to get the works/products/services they want and to have a choice without being forced to accept overpriced or inadequate works/products/services. Equal treatment of bidders in all stages of the process – to get the best value for money. 02/01/2019

Public Procurement rules to prevent corruption– Transparency II Contracting entities should also make use of Objective evaluation of tenders with an appropriate methodology – to get the works/products/services they need without being influenced to accept overpriced or inadequate solutions. Concluding the contract as tendered – to get what they originally wanted for the most advantageous price. Executing the contract as concluded – to reach the aim envisaged with the tender without being forced to accept underperformance or additional costs. 02/01/2019

Public Procurement rules to prevent corruption – Examples I An example how these rules could be better applied: Czech IT Sector At least 45.8 % (EU average 14,3 %) of all contracts in the IT sector were concluded without a prior call for competition. Procedures without prior publication of a notice or direct awards, i.e. exceptions from the EU rules, are particularly prone to discriminatory practices and corruption. Measures: Proper calculation of the contract value in order not to stay under the threshold of the application of the EU public procurement rules Restricted use of exclusions from these rules. 02/01/2019

Public Procurement rules to prevent corruption–Transparency III Modernised and simplified public procurement directives and the new concessions directive are entering into force this month. The reform should ensure more effective procedures, guaranteeing purchases at the best price, tailored to the needs of contracting authorities and well integrating other policies, in particular environmental and social policies, with reduced administrative burden. The Member States will have 2 years to transpose these rules into their national legislation and 3 to 4,5 years to make e-procurement mandatory from now. 02/01/2019

Public Procurement rules to prevent corruption–Transparency IV The new directives enhance transparency: E-procurement is generalised and becomes mandatory. The setting of a legal framework for concession contracts enhances transparency in this area. A standard form self-declaration for bidders, the "European Single Procurement Document" is introduced, which makes it more difficult to exclude tenders in the selection phase. The directives provide for a basis to look at the post-award phase, which is particularly vulnerable to corruption, as the modification of contracts during their term without a new tender procedure is regulated. 02/01/2019

Public Procurement rules to prevent corruption New Directives strengthen the anti-corruption purpose: The exclusion grounds for bidders are strengthened and extended to situations where bidders: have entered into agreements have tried to influence or mislead the contracting authority have tried to obtain confidential information. The notion of "conflicts of interests" is defined on EU level and Member States and contracting authorities asked to take appropriate measures to effectively prevent, identify and remedy conflicts of interests. Member States will have to report on measures to prevent and detect procurement fraud, corruption and conflicts of interest and other serious irregularities. 02/01/2019

Public Procurement rules to prevent corruption – Examples II E-procurement, Portuguese programme: The portal allows downloading the entire bid documentation and specifications free of charge. It disseminates calls for tender, receives suppliers' queries and manages all aspects of information exchange online. A Contract Management Tool ensures uploading of public contracts, allows monitoring of concluded contracts and enables e-invoicing. The Information Management System helps collect, store and systemise statistics on the procurement process. Prevention of conflicts of interests, Croatian database: The database, which is run by an NGO and available free of charge to the public, gathers information related to the implementation of public procurement procedures, companies, assets and interests of officials. It allows cross-checks. 02/01/2019

Public Procurement rules to detect corruption – Red flags There are numerous possible red flags for indicating corruption. Some red flags are more relevant than others. Some red flags are an immediate alert, some require further investigations. Some only work in combination with other red flags, some stand alone. Commission services continue working on identifying the most relevant red flags for corruption in public procurement. 02/01/2019

Public Procurement rules to redress corruption Effective review procedures according to the rules of the Remedies Directives by independent and professional review bodies which can also prevent corruption Effective sanctioning of corruption in public procurement by an independent judiciary which knows the public procurement rules Effective follow-up of corrupt practices by annulling affected contracts ex-tunc? 02/01/2019

Thank you for your attention All information can be retrieved at our website: http://ec.europa.eu/internal_market/publicprocurement/index_en.htm Contact: jaroslav.kracun@ec.europa.eu 02/01/2019