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Can Public Procurement Rules Increase Integrity in Europe?

Can Public Procurement Rules Increase Integrity in Europe?

On 27 November 2012 we stirred a roundtable debate among experts from the EU institutions, the private sector and civil society working in the field to discuss the EU’s current public procurement reforms and the question ‘Can public procurement rules increase integrity and citizens’ trust in Europe?’. Public procurement has turned out to be one of the six key corruption risk hot spots across Europe, as identified in our 2012 pan-European report on ”Money, Politics, Power: Corruption Risks in Europe“.

Jana Mittermaier, Director of the Transparency International EU Office, opened the event and welcomed the speakers by stating that “the existing 2004 EU Directive on public procurement was already a step in the right direction with a relatively rigorous procurement framework, but that our research across Europe indicates that more needs to be done.”

Considering that the total spending in the EU amounts to 2.2 trillion EUR of taxpayer’s money per year – as our keynote speaker and Acting Director for public procurement in the European Commission, Mr. Erik Nooteboom, stressed to kick-off the conference – clearly illustrates the importance of this topic for the EU and its citizens. It is against this background that the Commission took action in December 2011 with the primary goal to simplify the existing rules – rules governing an area that creates greater temptations and offers more opportunities for corruption than most others in the public sphere.

MEP Monica Macovei, anti-corruption champion and member of the Budgetary Control Committee in the European Parliament, therefore reiterated that “we need a strong policy at the Union level” to address the loss of taxpayers’ money year by year. She expressed concern about the fact that the governance chapter in the Commission’s legislative proposal has dropped out following strong resistance of EU member states. Monica has submitted amendements to IMCO Comittee Rapporteur Tarabella‘s draft report pushing, inter alia, for stronger rules where conflicts of interest are at stake (both Romania and Beligum’ legislation have criminalised such behaviour).

Sergejus Muravjovas from Transparency International Lithuania illustrated the realities in his country: despite the “relatively good system in place with detailed contract data being electronically available” for example (although in a scattered manner), the sheer “number of undisclosed bids and negotiations pose a serious problem.” Without effective oversight and monitoring opportunities, particularly in smaller EU member states where fewer bidding companies are available, especially when it comes to large scale projects, fighting corruption becomes more difficult.

In practice, the contract evaluation phase in the procurement cycle is, in Valentijn De Boe‘s (Senior Associate at the international law firm Allen & Overy LLP) view, the most vulnerable one (see for other risks in the procurement cycle TI’s Regional Policy Paper #1 on Increasing Integrity and EU Citizens’ Trust in Public Procurement). Information leaks during this phase increase the risk of undue influencing, which has the potential to jeopardise the tender and thus ultimately the quality of goods and services procured. Good practice could be the establishment of “Chinese walls” between those who evaluate the technical aspects of a bid and those who look into the financial details.

Matthias Morgner emphasised the important role of whistleblowers in detecting and reporting on mismanagement, misconduct and corruption in procurement. Transparency International has therefore long worked towards enhanced protection of those who have the courage to blow the whistle and is alsoo supporting the inclusion of provisions also with regards to the procurement reforms (see our report “Alternative to Silence” and TI’s Principles for whistleblowing legislation).

Introducing the debate panel on solutions for public procurement risks, Aliz Szloboda, our expert at Transparency International-Hungary, reported about TI’s Integrity Pact tool, designed as collective contracts between a procuring authority and bidders – who sign up on a voluntary basis – to establish that neither party will take or offer bribes, for instance, and generally abide by the rules governing procurement as well as by the highest ethical standards. With help of the Swiss Cooperation Agency, TI-Hungary is also launching a web based interactive tool that allows any individual to upload and access documents relating to the various stages of a public procurement procedure, with a view to ensuring transparency and public information.

The Executive Director of the Czech Chapter of Transparency International, David Ondracka advocated for full disclosure in procedures and for the adoption of price as the main criterion to determine the winning bid. His vast experience in fraud prevention and public procurement, advising businesses and governments on good governance, allowed him to share with the participants some insightful case examples of problems engendered by bad practices in public procurement amounting to the benefit of a few individuals or companies and to the detriment of society at large.

As an example of the active audience, we welcomed, for instance, the comment from Ms Anda Berenyi, Manager at the KPMG Office, putting the civil society and the private sector perspective in balance by stating that the price should, in her opinion, not be the main criterion particularly because the big players – such as KPMG and others – may not necessarily be the cheapest but can, in turn, guarantee quality.

We thank all speakers and participants for a fruitful debate! We at the Transparency International EU Office will continue to monitor the currently ongoing amendments and outcomes. Next steps: IMCO Committee adoption on 18 December 2012; adoption in Plenary expected in February/ March 2013.

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