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Is There a Solution to Make Public Procurements Free of Corruption?

Is There a Solution to Make Public Procurements Free of Corruption?

There is. The solution is an effective civil control mechanism, the so-called Integrity Pact (IP). This solution is at the centre of the large-scale international conference’s focus that Transparency International Hungary (TIH) has organized on February 17-18 2014. The conference was attended by approximately 50 professionals from over 12 countries.

The IP has already been used in 15 countries. In Hungary the IP was implemented in a water supply rehabilitation project in the town of Ózd as well as to safeguard the reconstruction of a nursery in the municipality of the 13th district of Budapest.

Alíz Szloboda, Head of Public Sector Programs at Transparency International Hungary is the one working together with the municipality and she is full of hope. According to her, the joint work will serve everybody’s satisfaction. That is, tax-payers, the municipality itself as well as the children. The reason for this is that the refurbishment of the nursery will be accomplished with high standards and at a reasonable price.

What is the Integrity Pact?

The Integrity Pact is a contract signed by the contracting authority, the bidders and an independent monitoring organization. The monitor assesses all data and documents related to the public procurement, as well as the actual implementation of the contract. The monitor represents the warranty that both bidders and contracting authorities pledge to behave in a transparent, fair way, without using unlawful means. Transparency International Hungary takes part in the Hungarian IP-s as monitor or consultant.

What is the IP good for?

–    It assures real competition in those public procurements where it is used.
–    It assures that the tender is really won by the bidder who made the best offer.
–    It assures that corruption does not make prices skyrocket.

What happened at the conference?

The conference focused on the reasons, as well as the possible ways to tackle corruption. According to participants, it is mostly due to bad regulations, the bad implementation of otherwise good rules, or the traditions of the single countries that corruption in public procurement flourishes. In many countries, finding illicit shortcuts has practically become an integral part of how society and economy function.

“The European Commission should urgently set up an effective action plan, in order for the Union to be able to tackle the risks identified in its Anti-Corruption Report.” – stated Ana Gomes, European Parliament MP from the Group of Progressive Alliance of Socialists and Democrats, at the conference.

József Péter Martin, executive director of Transparency International Hungary believes that there is no real competition in public procurement when it comes to many member states – in Hungary, for instance, more than half of public procurements are carried out with only one bidder. This is why it is pivotal to develop circumstances in which real competition can take place, to prevent corruption and set up effective controlling and sanctioning measures. The IP can become a tool to achieve all this.

What is the problem with public procurements?

The money spent in public procurements belongs to the tax payers or the European Union  – even if, ultimately, EU funds are also constituted mostly by the money of tax payers. We are talking about a lot of money: the value of public procurements in 2012 was 1,300 billion Hungarian Forints, the equivalent of 4.7 percent of Hungary’s GDP – the same sum which is spent on public healthcare.

Legislative background is often itself a fertile ground for corruption. Under a certain threshold, regulations allow it for the contractor who manages public funds to decide individually whom to involve in the bidding and whom to leave out. This way, nothing stops for instance relatives to enter the “competition”, because conflict of interest-issues are not regulated appropriately either. Besides, no sanctioning mechanisms are in place in the case where data related to public procurement are not made public and many public procurement procedures are declared a secret, impeding all of us from following what is happening, why and in what way.

Public procurements of bigger value are also problematic. According to the recently issued European Anti-Corruption Report’s section pertaining to Hungary, the practices related to public procurement in the country raise a wide array of problems: certain companies are winning a tellingly high number of public procurements on tenders co-financed by the European Union, and there is a practice of using inappropriate selection and evaluation methods to favor some bidders above others. According to the EU report, such problems are accentuated in the case of large-scale infrastructural investments.

The European Anti-Fraud Office (OLAF) is the main sponsor of the initiative and the conference itself, which is also supported by T-Systems Ltd. Based on the lessons learned at the conference, a handbook will be published about the use of Integrity Pacts, supported by the Hungarian Prime Minister’s Office.

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