P R O F. L A U R E N C E F O L L I O T L A L L I O T

PUBLIC PROCUREMENT POLICIES AND PRACTICES

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PROCUREMENT SYSTEMS: THINKING OUTSIDE THE BOX

Agenda• Why regulate

procurement? • Understanding legal

procurement context and broader procurement issues

• Understanding International public procurement context

• Focus on Fraud and corruption

WHY REGULATE PUBLIC PROCUREMENT?

PUBLIC PURCHASING: A GROWING GLOBAL ACTIVITY

• World Total, around $ 4 000 Billions

• 2 000 Billions Euros for European Union (2011)

• $ 600 Billions US Federal Government (2011)

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1.1. WHY REGULATE PUBLIC PROCUREMENT ?

• An administrative function that exists in every country and goes beyond public purchasing:• Legal and economic objectives• Public sector reforms, Governance reforms• Financial reform• Social dimension• International perspective, Trade

IMPACTS ON ECONOMIC GROWTH ?

What?

• Public investment, infrastructures,

• Services• Goods• Trade, exports and

imports• Total, in general, 15 et 20

% of GDP• (18,3 % of EU GDP)

How?

• Stimulus package in developed countries

• Savings on public spending

• Development, Aid• Reshaping the

private sector• Sustainable

development

NEW REQUIREMENTS: WHY PUBLIC PROCUREMENT POLICIES MUST CHANGE

• Governance:• Accountability• Transparency, Information of civil society

• Competition, equal access• Performance

• Professionalization of procurement staff• Audit, controls

• Innovations:• E-procurement procedures• Framework contracts

• Integrity• Anti-corruption• Anti-collusion, debarment

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NEW (CONTRADICTORY ?) ISSUES

• Efficiency versus integrity?• Transparency versus confidentiality?• New financing ? (PPPs)• Access of foreign companies, competition,

Protectionnism?• SMEs, • Sustainable procurement, • Socio-economic policies in favor of disadvantaged

groups

I. UNDERSTANDING INTERNATIONAL CONTEXT AND PUBLIC PROCUREMENT

STANDARDS

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INTERNATIONAL INSTRUMENTS ADDRESSING PROCUREMENT • Binding instruments:• *UNCAC• *Government Procurement Agreement (WTO)• *Regional Procurement provisions: EU

Directives, WAEMU, COMESA• *Regional Trade agreement: e.g. NAFTA• *Bilateral treaties (BTA, BIT)

World Bank (& other MDBs) Guidelines• Soft Law instruments:

• UNCITRAL Model Law on procurement• OECD/DAC methodology• FIDIC

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COVERAGE ?

• Mainly procurement process : standardization of the administrative process/formation of the contract

• From a competition angle

• Contract administration and management remain domestically ruled• Exception Bank’s

SBDs/GCC, FIDIC, (UNCITRAL) Legislative Guide on PFI, future UNCITRAL work?

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A. UNITED NATIONS CONVENTION ON ANTI-CORRUPTION (UNCAC) ART. 9

• 148 State parties ; • Entry into force December 14 2005

“1. Each State Party shall, in accordance with the fundamental principles of its legal system, take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in preventing corruption. “ (…)

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B. GPA (WTO)

• Plurilateral (v. multilateral) Agreement between 43 WTO countries

• Treaty signed in 1994, Renegotiation in 2006, ratified in 2011

• Goal: promote international trade by opening the procurement markets to the member states,

• country by country approach

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GPA

Albania

Negotiating accession = 9

Georgia Jordan

Kyrgyz RepublicMoldova Oman Panama

Ukraine China

Observers = 13 countriesArgentina, Australia, Bahrain, Cameroon, Chile, Colombia, Croatia, India, Mongolia, New Zealand, Saudi Arabia, Sri Lanka, Turkey

Current members = 43 countries

Armenia, Canada, EU + (28 countries)

Hong Kong China, Iceland, Israel, Japan, Korea,

Liechtenstein, Netherlands with Aruba, Norway,

Singapore, Switzerland, Chinese Taipei, United

States

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HARMONIZATION AROUND THE GPA PROVISIONS?

• - Above thresholds (e.g.: $5,000,000 for construction contracts)

• - Open, selected tendering, restricted tendering

• - International Advertisement• - Time frame for bid preparation• - Challenge/complaint system

• - Award criterion: Most advantageous tender or/ price

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C. EU FRAMEWORKGOAL: BUILDING THE INTERNAL MARKET

- Directive 2004/18/EC (“classic Directive)

Directive 2004/17/EC (“utilities” Directive)

• Binding for their objectives: advertisement at the EU level (in 22 languages)

• Applying above thresholds: aligned with the GPA’s

• New Directives to be enacted soon

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54 COUNTRIES CONCERNED BY THE EU FRAMEWORK…

• - EU Procurement Directives providing a legal framework

(quite detailed) mandatory for 27 member states;

• +EEA Agreement= 3 countries: Norway, Liechtenstein and Iceland.•  • - Part of the “acquis communautaire” to be implemented by

acceding countries  

• 3 Candidates countries: Croatia, Turkey, Macedonia

• + 5 potential candidates: Albania, Bosnia and Herzegovina, Montenegro, Serbia as well as Kosovo under UN Security Council Resolution 1244/99.

• - Guidance for all countries looking for accession• Turkey started accession negotiations on 3 October 2005• + 16 EU neighbors

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D. SOFT LAW INSTRUMENTS:

• I. UNCITRAL Model Law on procurement• (United Nations Commission For International

Trade Law)• Agreed in 1994 revised in 2011• No binding provisions but recommendations• Drafted by an expert group and approved by

UNCITRAL Committee• II. OECD/DAC methodology for assessing

national procurement systems (MAPS)

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E. WORLD BANK PROCUREMENT GUIDELINES (2011)

• Designed to cover the big (above threshold) contract awarded by a Borrower-country under a Bank’s financed project

• GL for works, supplies, non-consultant services and GL specific for Consultants

• Open competition default method• Allow for domestic preferences• + SBDs• +General Conditions of Contract (GCC) to govern the

execution/administration of the contract

• Master Bidding Documents, Procurement of goods and User’s Guide (to cover the execution of the contract)

PRINCIPLES OF THE WB PROCUREMENT POLICIES

• Four main principles: • the need for economy and efficiency, • the interest in having all eligible bidders having equal

opportunity to compete,• the desire to encourage the development of domestic

industries, • the importance of the transparency of the procurement

process.

P R O F. L A U R E N C E F O L L I O T L A L L I O T

FRAUD, CORRUPTION AND CONFLICT OF INTERESTS IN PUBLIC

PROCUREMENT

CORRUPTION AND THE PUBLIC ADMINISTRATION: A NEW FOCUS

• During the 1990s, the governments of several important countries (Italy, Japan, Brazil, others) fell because of corruption.

• “Measures” of corruption became available.• Some governments and international institutions

started to react to corruption.• Various surveys indicated that political parties,

parliaments and some public institutions were the sectors more exposed to corruption.

• “Transparency International” and the “Corruption Perception Index”, (CPI), since 1995.

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CORRUPTION AND THE PUBLIC ADMINISTRATION: HOW ?

• Fighting corruption in the public sector• Budgeting and public expenditures• Public employment and management• Public sector innovation and e-government• Regional development• Regulatory policy• Risk management• Integrity in Public Procurement • ://www.oecd.org/gov/fightingcorruptioninthepublic

sector/integrityinpublicprocurement.htm

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PUBLIC PROCUREMENT: THE MOST VULNERABLE GOVERNMENT ACTIVITY TO CORRUPTION (OECD 2007).

HOW?

• Favoretism;• Restricted Authorizations and Licenses:i. Controls and inspections to small enterprises.ii. Bureaucratic obstacles to small entrepreneurs.iii. Differential costs between small and large

enterprise. Use of facilitatorsiv. Forced “charitable” contributions.

CORRUPTION AND OTHER OFFENCES

• “corrupt practice”• “fraudulent practice”• “collusive practice”• “coercive practice”• "obstructive

practice"

Paragraph 1.16 of the Procurement Guidelines and paragraph 1.19 of the Consultant Guidelines

Targets:-corruption,

-anti-competitive behavior -to protect Bank’s investigation.

CONFLICT OF INTERESTS PLAY IN TWO WAYS:

Passive = existing situation known or unknown by the entity/person but not used to produce any advantage

Active = conflict of interest is effectively used to produce directly or indirectly an advantage

CASE STUDY:

Two short-listed Firms A and B submit proposals in which they are associated with the same Firm C. C is a well-known firm in the privatization telecommunication sector. A is associated with C in the form of a joint venture; B is associated with C in the form of a sub-consultancy. The standard request for proposals indicates that the short-listed firms cannot associate between themselves but can associate with outside firms in order to complement their expertise.

• Question: What type of offence here ?• Can firm C participate in these two proposals?

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SANCTIONS

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WB LIST OF OFFENCES

• “corrupt practice”• “fraudulent practice”• “collusive practice”• “coercive practice”• "obstructive practice"

Paragraph 1.16 of the Procurement Guidelines and paragraph 1.19 of the Consultant Guidelines

Targets:-corruption, -anti-competitive behavior -”-”-to protect Bank’s investigation.

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DOMESTIC PROVISIONS

• Link contract/law ?• Where are the Corruption and fraud issues taken

care of? • Procurement Law?• Competition Law?• Criminal Law?• Civil service Law: disciplinary sanctions?• Anti-corruption Law?