International legal tools and anti-corruption efforts regarding public procurement

Total public procurement expenditure in Ukraine in the last three years amounted to 1.1 billion UAH and represented between 15% and 32% of GDP. While legislation on the regulation of public contracting is evolving progressively, there are continuing concerns (whether factually based, based on perceptions or merely anecdotal) about the levels of corruption in the public procurement system. In parallel with important reforms to adapt the Ukrainian public procurement system to EU standards[1], efforts are being made to tackle actual or potential corruption in public procurement (including the promotion of e-procurement and increasing oversight by civil society activists and NGOs).

Whether or not the Ukrainian situation is special or unique, it is clear that corruption issues arise, to a greater or lesser extent, in every national system of public procurement. Against that background, this article explores international instruments that can also assist the drive for improved transparency and anti-corruption initiatives in public procurement.

To be clear from the outset, the term “corruption” is used here to cover all means of “manipulation” in public procurement procedures; including efforts to influence a procedure, if necessary by bending or avoiding public procurement regulations.Manipulations in public procurement procedures are not necessarily correlated with corruption, but they often share the same symptoms and involve similar actions by those involved.

International experiences in regard to anti-corruption measures in public procurement provide a framework for shaping national public procurement legislation. Due to the volume of public funds spent on public procurement in all countries and the multiple negative effects of corruption in public procurement, several international organisations promote the implementation of appropriate safeguards in public procurement. These include measures to improve transparency and integrity or to otherwise directly tackle corruption-related issues.

An overview is provided here of core international instruments of this type from several international sources and consideration is also given to the position of Ukraine in regard to such measures, including whether Ukraine has agreed to be bound by some of these, of if they are non-mandatory in Ukraine. In particular, the focus here is on the following:

(1) European Union Public Procurement Directives (EU PP Directives);

(2) United Nations Convention against Corruption (UNCAC);

(3) United Nations Commission on International Trade Law (UNCITRAL) Model Law on Public Procurement;

(4) World Trade Organization Government Procurement Agreement (WTO GPA);

(5) The Council of Europe’ legal framework against corruption;

(6) World Bank/International Financial Institution Guidelines;

(7) Organisation for Economic Co-operation and Development (OECD) instruments;

(8) Transparency International (TI) tools.

A common factor across all these instruments is their emphasis on fundamental principles of transparency, competition and objective criteria in decision-making in the public procurement system. The EU PP Directives, the UNCAC, the UNCITRAL Model Law and the WTO GPA play the most important role from a legislative perspective. While the comprehensiveness of the rules framing an efficient procurement system varies significantly in these instruments, the same principles underpin all of the rules set out. In addition to these international texts on public procurement, the World Bank and other international financial institutions have developed their own guidelines on public procurement related to the large international procurement budgets which they manage. Other organisations, such as the OECD and TI, have developed specifically targeted tools for fighting corruption in public procurement.

(1) EU PUBLIC PROCUREMENT DIRECTIVES

Arguably, the EU has most developed public procurement system encompassing different countries worldwide. Nonetheless, the EU estimates that corruption in public procurement costs some 2 billion per year across the European Union[2]. The EU Public Procurement Directives cover the fundamental principles of procurement processes and transparency. Their main purpose is to remove barriers to trade which, in the context of public procurement, requires the elimination of any restrictive access to public contracts within the EU. EU Member States are thus required to apply these fundamental principles when awarding public contracts, particularly those concerning non-discrimination, equal treatment, competition and transparency. The legal regime, as established by the EU Directives, is also built upon various fundamental principles and the clarification of good practice, which have been developed by the Court of Justice of the European Union over the years. The current set of EU Directives is set out below:

EU Public Procurement Directives[3]

Directive 2014/24/EU of 26 February 2014 replacing Directive 2004/18/EC covers public works contracts, public supply contracts and public service contracts

Directive 2014/25/EU of 26 February 2014 replacing Directive 2004/17/EC covers the procurement procedures of entities operating in the water, energy, transport and postal services sectors

Directive 2014/23/EU of 26 February 2014 on the award of concession contracts

Directive 89/665/EEC of 21 December 1989 on remedies in the EU public sector

Directive 92/13/EEC of 25 February 1992 on remedies in the EU utilities sector

Directive 2009/81/EC of 13 July 2009 on defence and sensitive security procurement

Directive 2014/55/EU of 16 April 2014 on electronic invoicing in public procurement

It is important to note that, arising from recent EU reforms,  the so called “new” Directives (2014/24/EU and 2014/25/EU) have replaced or are in course of replacing the  “old” public procurement Directives (2004/17/EC and 2004/18/EC).

In December 2011 the European Commission proposed the revision of Directives 2004/17/EC (procurement in the water, energy, transport and postal services sectors) and 2004/18/EC (public works, supply and service contracts), as well as the adoption of a directive on concession contracts. The directives were voted by the European Parliament on 15 January 2014 and adopted by the Council on 11 February 2014. EU Member States have until April 2016 to transpose the new rules into their national law (except with regard to e-procurement, where the deadline is September 2018).

To achieve the goals of fairness, competition and value for money, effective and efficient procurement processes are required by the Directives. This includes incorporating adequate controls to promote competition and minimise the risk of fraud, corruption, waste, and the mismanagement of public funds. Hence, transparency is considered to be one of the most effective tools to deter corruption and ensure best value for money. Transparency in procurement relates to a variety of practices, such as: publishing procurement policies, advance publication of procurement plans, advertisement of tender notices, disclosure of evaluation criteria in solicitation documents, publication of contract awards and prices paid, establishing appropriate and timely complaint mechanisms and implementing financial and conflict of interest disclosure requirements for public procurement officials[4]. These are designed to achieve fair, equitable and non-discriminatory procedures. Moreover, transparency is enhanced through public procurement ‘governance’ measures, including the monitoring of EU Member States procurement systems and requirements for Member States to submit certain reports on the operations of their systems.

Ukraine and the EU Public Procurement Directives

Public procurement is addressed the Chapter 8 (Articles 148 to 153) and an associated Annex XXI of the EU-Ukraine Association Agreement. The intention of these provisions is to elaborate, prioritise and timetable the steps to be taken to achieve functioning systems in Ukraine which will be fully compatible with EU standards.

Specifically, Article 152 requires Ukraine to develop a comprehensive Road Map for the implementation of Chapter 8 of the Agreement. The Road Map is required to set out time schedules (in line with time schedules contained in Annex XXI) and milestones covering all reforms related to legislative approximation and institutional capacity building. The Road Map is to be put in place within six months of the entry into force of the Agreement[5] and is to be approved bilaterally by the Association Agreements Trade Committee which, thereafter, will monitor its effective implementation.

In regard to focused anti-corruption development in Ukraine, the Anti-Corruption Bureau was established in 2014 as the Ukrainian Government Anti-corruption agency to investigate corruption in Ukraine and prepare cases for prosecution. In April 2015 Ukrainian President Petro Poroshenko appointed ex-prosecutorial investigator Mr Artem Sytnyk as a Head of the Anti-Corruption Bureau. The agency is to employ 1,200 people[6] (ongoing process) in seven regional offices. The National Agency for the Prevention of Corruption works in parallel in Ukraine to prevent corruption by monitoring the lifestyles of Government officials.

Despite Mr Sytnyk’s recent appointment, it will still be at least half a year before the bureau is fully functional, according to Mr. Oleksandr Danyliuk, the President’s representative to the Cabinet of Ministers. This is because the same care that was taken in selecting Mr. Sytnyk will be needed in recruiting hundreds more employees[7]. Therefore, the full operational capacity of the Anti-Corruption Bureau must be awaited before its anti-corruption efforts in the public procurement sphere will materialise.

At the same time, with considerable EU funding coming to Ukraine to support various initiatives and reforms, including substantial budget support, specific EU funding conditions are in a position to advance and accelerate the requirements for EU transparency and integrity standards in the public procurement system in Ukraine.

(2) UNITED NATIONS CONVENTION AGAINST CORRUPTION[8]

The United Nations Convention against Corruption (UNCAC)[9] is the most comprehensive of all the anti-corruption conventions. It was adopted by the UN General Assembly on 31 October 2003 and entered into force 14 December 2005. As an agreement between 175[10] countries, it establishes common standards, policies, processes and practices to buttress anti-corruption efforts at the national level. It also facilitates international cooperation by harmonising the legal and institutional frameworks for law enforcement and establishing cooperation mechanisms.

The Convention spans a number of important topics – prevention, criminalisation, international cooperation and asset recovery – many of which reach beyond the topic of public procurement. But Chapter II of the UNCAC ‘Preventive measures’ includes a set of dedicated provisions (Articles 7 to 10 and 13) seeking to integrate sound procurement practices into a broader anti-corruption initiative. These articles, inter alia, address in detail questions related to transparency in the public sector such as codes of conduct for public officials, transparency in public procurement and public finances. The systems and measures States are required to introduce or consider may require new legislation or amendments to existing laws, in accordance with the fundamental principles of their legal systems.

To ensure legitimate procurement procedures and adequate public records, Article 9 of the UNCAC requires:

(a) the establishment of a sound procurement system;

(b) transparency in procurement;

(c) objective decision-making in procurement;

(d) domestic review (or bid challenge) systems;

(e) integrity of public officials; and

(f) soundness of public records and finance.

The provisions of Article 9 against corruption should not, however, be seen in isolation. The UNCITRAL Model Law, and the other provisions of the UNCAC itself, frame additional solutions for failing or corrupt procurement systems. Article 9 simply points to some of the more important of such anti-corruption tools[11].

The UNCAC and Ukraine

Ukraine signed the United Nations Convention against Corruption on 31 October 2003 and ratified it on 18 October 2006. Ukraine became a party to the UNCAC on 1 January 2010. According to Article 9 of the Constitution of Ukraine, the UNCAC became, upon ratification, an integral part of national legislation with overriding legal effect against any other contrary provision of domestic law.

Ukraine already underwent the first round of review and received recommendations by a panel of international experts on further progressing UNCAC implementation. The results of the first round of review are summarized in a Country Review Report of the implementation by Ukraine of Articles 15 – 42 of Chapter III “Criminalization and law enforcement” and Articles 44 – 50 of Chapter IV “International cooperation” of the UNCAC for the review cycle 2010 -2015. However, Ukraine has not yet been reviewed in regard to the Chapter II (relevant to public procurement) provisions of the UNCAC. This will happen sometime after the current 2010-2015 review cycle; thereby giving Ukraine the opportunity to address existing loopholes, fix systemic problems and act upon corruption concerns regarding the public procurement system in the specific context of the UNCAC provisions.

(3) UNCITRAL MODEL LAW ON PUBLIC PROCUREMENT

The UNCITRAL Model Law adopted on 1 July 2011 is, internationally speaking, one of the most commonly recognised public procurement codes[12]. One of the main purposes of the UNCITRAL Model Law is to serve as a template available to national governments seeking to introduce or reform national public procurement legislation.

The UNCITRAL Model Law reflects best practice in the area of public procurement from around the world and allows governments to adapt it to local circumstances. For these reasons, many countries have based their public procurement legislation on the UNCITRAL Model Law. UNCITRAL records that ALMOST 30 States have enacted legislation based on the Model Law[13], though this list probably understates the use of the text: first, because there is no obligation, unlike in the case of treaties or conventions, to notify the United Nations when the text is used, and, secondly, because the principles of the Model Law and its procedures have informed procurement reform even when the resulting legislation does not closely match the text itself.

The UNCITRAL Model Law is supplemented by a comprehensive tool — the Guide to Enactmentadopted ON 28 June 2012[14]. The purpose of this Guide is to provide background and explanatory information on policies in the UNCITRAL Model Law, to discuss objectives and to advise on options in the UNCITRAL Model Law. The Model Law, and its accompanying Guide to Enactment, has been used extensively as a benchmark for assessing procurement laws around the world.

According to the Preamble, the Model Law has the following main objectives:

 “(a) Maximizing economy and efficiency in procurement; (b) Fostering and encouraging participation in procurement proceedings by suppliers and contractors, especially where appropriate, participation by suppliers and contractors regardless of nationality, and thereby promoting international trade; (c) Promoting competition among suppliers and contractors for the supply of the goods, construction or services to be procured; (d) Providing for the fair and equitable treatment of all suppliers and contractors; (e) Promoting the integrity of, and fairness and public confidence in, the procurement process; and (f) Achieving transparency in the procedures relating to procurement”.

There is no hierarchy among these objectives in the Preamble. However, the Guide to Enactment comments that the objectives of the Model Law “are considered essential for fostering economy and efficiency in procurement and for curbing abuses,”; indicating that the latter two objectives are the ultimate ends, and the remainder in the Preamble can be considered as means to those ends. The Guide to Enactment continues that the statement of these objectives does not itself create substantive rights or obligations for procuring entities or for contractors or suppliers, and so it is in complying with the principles and procedures set out in the text that the achievement of the objectives is ensured.

The objectives are largely self-explanatory, though it is worth noting that “economy and efficiency” involve both achieving value for money in what is purchased and administrative efficiency in the process. In turn, the notion of “integrity” encompasses more than the prevention of corruption and abuse: it includes personnel involved in procurement acting ethically and fairly.

Other commonly cited procurement objectives are accountability and uniformity. Accountability means that compliance with the rules and regulations of the system are seen to be achieved (which can be considered, consequently, to be an aspect of transparency and integrity). Uniformity means the standardisation of procedures and processes, and ultimately, of outcome. The main means of achieving these objectives in the procurement process are, as the Guide notes, the application of the principles of transparency, competition and objectivity.

The UNCITRAL Model Law and Ukraine

The Law of Ukraine “On Procurement of Goods, Works and Services for Public Funds” adopted in 2000 was based on the UNCITRAL Model Law and reflected its principles and approaches. Ukrainian Public Procurement Law has changed considerably since then with an increasing focus on alignment with the EU Directives.

(4) WORLD TRADE ORGANISATION GOVERNMENT PROCUREMENT AGREEMENT (WTO GPA)

The WTO GPA is a plurilateral agreement within the WTO system which provides a framework for the conduct of international trade with governments. The GPA consists of 15 parties covering 43 WTO members (counting the European Union and its 28 Member States, all of which are covered by the Agreement, as one party). Another 28 WTO members and four international organisations participate in the GPA Committee as observers. Ten of these members with observer status are in the process of acceding to the Agreement[15].

The Agreement has two elements — general rules and obligations, and schedules of national entities in each member country whose procurement is subject to the Agreement. A large part of the general rules and obligations concern tendering procedures. The WTO GPA, based on its principal purpose of opening-up national public procurement markets, promotes transparency and competition in several ways. Since there is an obligation to provide for a framework that ensures non-discriminatory competition between suppliers, WTO GPA parties are therefore required to use objective criteria in decision-making. Its principal objective is, through non-discrimination obligations, to open up procurement to international competition and, in this context, it requires its parties to ensure the conformity of their laws and regulations with the WTO GPA obligations. It also promotes good governance and the achievement of value for money in national procurement systems.

The WTO Parties continue improving the GPA. The revised GPA which entered into force on 6 April 2014 clearly sets out that, no later than three years after the entry into force of the revised GPA and periodically thereafter, the parties shall undertake further negotiations to progressively reduce and eliminate discriminatory measures and to achieve the greatest possible extension of the Agreement’s coverage. In this spirit, the GPA parties have also agreed to undertake a number of work programmes which will influence the future evolution of the Agreement.

Generally speaking, the original and revised versions of the Agreement are based on the same principles, i.e. non-discrimination, transparency and procedural fairness. Nonetheless, the revised text improves on the GPA 1994 in a number of ways. The revised text introduces a specific new requirement for participating governments and their relevant procuring entities to avoid conflicts of interest and prevent corrupt practices. This signals a belief on the part of the parties that the GPA can play a part in promoting good governance. The revised Agreement is also seen as an important tool for promoting a transparent and relatively corruption-free environment in the economies that are in the process of acceding to the Agreement.

WTO GPA and Ukraine

Ukraine has been a member of the WTO since 16 May 2008. As a WTO member Ukraine has clearly stated its intention to liberalise its trade with the EU to the fullest extent possible in order to achieve EU membership in the future[16]. All WTO members are eligible to accede to the GPA. At present, ten WTO members are in the process of acceding including Ukraine. Joining the GPA would help Ukraine to widen international procurement possibilities and to fulfil its international obligations in its relations with both the WTO and the EU, since EU membership is a strategic priority for Ukraine.

A major step in the establishment of the legal framework for public procurement in Ukraine was the adoption of the new version of the Law of Ukraine on Public procurement (PPL)[17] in April 2014. In general, the public procurement rules in Ukraine largely cover the same provisions as set out in and required by the GPA.[18]

Ukraine has been an observer to the WTO Government Procurement Agreement since 25 February 2009. During 2013, the Ministry of Economic Development and Trade took part in initial negotiations for Ukraine’s accession. As a result of these negotiations, and in response to the observations of GPA member countries and the European Union[19], the Ministry revised the terms of its initial offer at the end of November 2013 to include, inter alia, a list of covered entities at central and regional level. During a meeting with representatives of the WTO, held from 27 to 30 October 2014 in Geneva, Ukraine submitted a revised second draft of proposals to the WTO Secretariat. After the last meeting in February 2015 Ukraine obtained a generally positive response and a draft Final proposal was submitted in early June. Ukraine’s accession to the WTO GPA is expected to be completed in 2015.

(5) THE COUNCIL OF EUROPE’S LEGAL FRAMEWORK AGAINST CORRUPTION

The Council of Europe (CoE) exists to uphold and further pluralist democracy, human rights and the rule of law and has taken a lead in fighting corruption as it poses a threat to the very foundations of these core values. As emphasised in the Criminal Law Convention, corruption threatens the rule of law, democracy and human rights, undermines good governance, fairness and social justice, distorts competition, hinders economic development and endangers the stability of democratic institutions and the moral foundations of society.

The approach of the Council of Europe in the fight against corruption has always been multidisciplinary and consists of three interrelated elements: the setting of European norms and standards, monitoring of compliance with the standards and capacity building offered to individual countries and regions, through technical co-operation programmes.

The Council of Europe has developed a number of multifaceted legal instruments (outlined below) dealing with matters such as the criminalisation of corruption in the public and private sectors, liability and compensation for damage caused by corruption, the conduct of public officials and the financing of political parties. These instruments are aimed at improving the capacity of States to fight corruption domestically as well as at an international level.

Council of Europe legal instruments against corruption

Criminal Law Convention on Corruption - Date of adoption: 27 January 1999; effective from 1 July 2002

Additional Protocol to the Criminal Law Convention on Corruption - Date of adoption: 15 May 2003; effective from 1 February 2005

Civil Law Convention on Corruption - Date of adoption: 4 November 1999; effective from 1 November 2003

Resolution (97) 24 Concerning Twenty Guiding Principles on the fight against Corruption - Date of adoption: 6 November 1997

Recommendation No. R (2000) on Codes of Conduct for Public Officials - Date of adoption: 11 May 2000

Explanatory Memorandum to the Draft Recommendation No. R (2000) on Codes of conduct for Public Officials - Date of adoption: 20 April 2000

Recommendation (2003) … on Common Rules against Corruption in the Funding of Political parties and electoral campaigns - Date of adoption: 8 April 2003

Recommendation (2014) … on the protection of whistle-blowers - Date of adoption: 30 April 2014

The Council of Europe is pursuing a comprehensive approach against corruption and money laundering by setting standards in the form of conventions and “soft law” instruments (recommendations and resolutions), and by monitoring their compliance with Council of Europe and global standards through its monitoring mechanisms: the Group of States against Corruption (GRECO) and the Committee of Experts on the Evaluation of Anti Money Laundering Measures and the Financing of Terrorism (MONEYVAL). This approach is often supported through the implementation of technical assistance and co-operation projects or/and programmes[20].

In using its triangular approach (standard-setting, monitoring, and technical assistance), the Council of Europe provides support, assistance and co-operation in reforms concerning economic crime, corruption and money laundering in many of its members States (some emerging from the former-communist block and some from post conflict areas). Thus the results and lessons learned have enriched Council of Europe expertise and equipped it with sustainable “know how”, tools and efficient networking facilities to support important reforms in the newly emerged democracies.

While most of the CoE instruments have a wider focus on corruption than on public procurement per se, they are also clearly relevant to public procurement. Of particular relevance are the Twenty Guiding Principles on the fight against Corruption and the CoE Codes of Conduct for Public Officials. The 20 guiding principles for the fight against corruption provide that CoE States should take effective measures for the prevention of corruption and, in this connection, raise public awareness and promote ethical behaviour (Principle 1). They should also ensure that the organisation, functioning and decision-making processes of public administrations take into account the need to combat corruption, in particular by ensuring as much transparency as is consistent with the need to achieve effectiveness (Principle 9). A further requirement is to ensure that rules relating to the rights and duties of public officials take into account the requirements of the fight against corruption and provide for appropriate and effective disciplinary measures and promote further specification of the behaviour expected from public officials by appropriate means, such as codes of conduct (Principle 10). CoE States must also ensure that appropriate auditing procedures apply to the activities of public administration and the public sector (Principle 11), endorse the role that audit procedures can play in preventing and detecting corruption outside public administrations (Principle 12) and require the system of public liability or accountability to take account of the consequences of corrupt behaviour of public officials (Principle 13). Moreover, and of particular importance here, CoE States are required to adopt appropriately transparent procedures for public procurement that promote fair competition and deter corruption (Principle 14).

The Council of Europe as part of its extensive anti-corruption activities has approved a model code of conduct for public (non-elected) officials. The Code is a useful resource and, in addition to general principles, covers a range of relevant issues including conflicts of interest and reporting requirements, political activity, gifts, reaction to improper offers, duties on leaving public service etc.

Ukraine and the Council of Europe Framework

On the 9 November 1995 Ukraine joined to the Council of Europe becoming the 37th member of organisation. In accordance with the Statute of the Council of Europe, Ukraine is represented in all Council of Europe bodies. Ukraine has also ratified the CoE treaties considered above.

(6) WORLD BANK/INTERNATIONAL FINANCIAL INSTITUTION GUIDELINES

Another source of guidance for anti-corruption efforts in public procurement (outlined below) is provided by the guidelines of the World Bank and other international financial institutions. Borrower nations must generally conform to these guidelines in order to qualify for financing. These institutions routinely impose minimum procurement rules to ensure transparency, competition and integrity in the projects they fund, in order to ensure that the institution’s donor money is well and properly spent.

A procuring entity which complies with the requirements set out in these guidelines will, therefore, generally comply with the requirements which are necessary in order to establish an appropriate system of procurement as set forth in Article 9 (1) of the UNCAC.

International Financial Institution Guidelines relevant to Public Procurement

World Bank:

Guidelines on the procurement of goods, works, and non-consulting services under IBRD loans and IDA credits & grants by World Bank borrowers, January 2011, revised July 2014[21]

EBRD:

The EBRD Public Procurement Assessment report: Review of laws and practice in the EBRD region, 2011

EBRD Core Principles for an Efficient Public Procurement Legal Framework, September 2009

Asian Development Bank:

Procurement guidelines, 2013[22]

Anticorruption and Integrity: Policies and Strategies, October 2010[23]

Anticorruption Policy, July 1998

Review of the Implementation of ADB’s Governance and Anticorruption Policies: Findings and Recommendations, February 2006

Frequently Asked Questions on Anticorruption and Integrity: A Guide for ADB Staff, December 2011

African Development Bank (AfDB):[24]

Rules and Procedures for Procurement of Goods and Works, 2008, revised July 2012

Rules and Procedures for the Use of Consultants, 2008, revised July 2012

Inter-American Development Bank (IADB):[25]

Policies for the Procurement of Goods and Works financed by the Inter-American Development Bank

GN-2349-9, March 2011

One of the main responsibilities of the World Bank‘s procurement sector is to help borrower countries improve their procurement systems. Sound public procurement policies and practices are also seen as essential to good governance. The European Bank for Reconstruction and Development (EBRD) Public Procurement Assessment Report[26] provides an evaluation of the public procurement legal frameworks and local procurement practice across the EBRD countries of operations, including the application of sustainability policies in public procurement practice. This was based on the EBRD Core Principles for an Efficient Public Procurement Legal Framework – accountability, integrity, transparency, competition, efficiency, economy, proportionality, uniformity, stability, flexibility, and enforceability.

Financial Institution rules and Ukraine

Ukraine is generally subject to specific rules applied via loans or donor funding by international financial institutions.

Moreover, in 2011, and again in 2013, the EBRD reviewed the Ukrainian procurement system on the basis of the set of core principles for public procurement developed by the Bank[27]. The results of the review were quantified into various scorings on the basis of questionnaires and interviews and comparison was then made with the scorings of other countries. The resultant assessment is relatively general and highlights issues of supervisory overlap and the lack of budgetary/financial coherence in the Ukrainian context. The EBRD assessment also highlighted the use of excessive requirements in the actual tenders which is related to the fact that the law in Ukraine does not distinguish between contracts of different sizes.

(7) OECD PROCUREMENT ASSESSMENT TOOLS AND PRINCIPLES FOR ENHANCING INTEGRITY IN PUBLIC PROCUREMENT

The OECD encourages sound governance and, in this regard, it encourages governments to reform their public procurement systems to enhance integrity in public procurement. In doing so, OECD has developed a number of important recommendations and publications (outlined below) which map corruption risks throughout the entire procurement cycle. These documents serve as an important tool to foster better practice in public procurement.

OECD Guidelines on Integrity in Public Procurement

OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, adopted in November 1997, entered into force in February 1999[28]

OECD Principles for Integrity in Public Procurement, 2009[29]

Policy Brief – Keeping Government Contracts Clean, October 2008[30]

Guidelines for fighting bid rigging in public procurement helping governments to obtain best value for money, 2009[31]

Integrity in Public Procurement: Good Practice from A to Z, 2007[32]

Bribery in Public Procurement: Methods, Actors and Counter-measures, 2007[33]

Fighting Corruption and Promoting Integrity in Public Procurement, 2005[34]

Apart from the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the most important OECD publications in this regard are:

  • the OECD Principles for Integrity in Public Procurement; Policy Brief – Keeping Government Contracts Clean;
  • OECD Guidelines for Fighting Bid Rigging;
  • Integrity in Public Procurement: Good Practice from A to Z;
  • Bribery in Public Procurement: Methods, Actors and Counter-measures; and
  • Fighting Corruption and Promoting Integrity in Public Procurement.[35]

In cooperation with the European Union, the OECD sponsors the work of a research organisation known as SIGMA (Support for Improvement in Governance and Management) which has developed a number of briefs and guidelines on the interpretation of the complex EU public procurement regime[36].

The OECD Principles for Integrity in Public Procurement set out to provide governments with guidance on the achievement of value for money, increased transparency and the prevention of corruption in public procurement. The Principles emphasise good governance throughout the entire procurement cycle; from needs assessment to tender evaluation and post-award contract management. Thus, the 10 Principles for Enhancing Integrity in Public Procurement are anchored around 4 pillars:

  • Transparency
  • Good management
  • Prevention of misconduct, compliance and monitoring
  • Accountability and control.

These Principles also support the implementation of international legal instruments developed within the framework of the OECD, as well as other organisations such as the United Nations, the World Trade Organisation and the European Union.

OECD Integrity initiatives and Ukraine

The Istanbul Anti-Corruption Action Plan (IAP), adopted in 2003, is the sub-regional initiative of the OECD Anti-Corruption Network for Eastern Europe and Central Asia (ACN). It targets such countries as Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Ukraine and Uzbekistan; other ACN countries participate in its implementation as well. The implementation of the Istanbul Action Plan involves systematic and regular peer review of the legal and institutional framework for fighting corruption in the targeted countries.

The third round of monitoring under the Istanbul Action Plan was endorsed by the participating countries in December 2012 and started for Ukraine in 2013. The Government of Ukraine submitted its responses to the country-specific questionnaire for the third round of monitoring in July-August 2013. The updated replies to the questionnaire were submitted by the Government of Ukraine in October 2014 and an on-site visit to Kyiv took place in November 2014.

The resultant OECD Report “Anti-Corruption Reforms in UKRAINE. Round 3 Monitoring of the Istanbul Anti-Corruption Action Plan“ was published in April 2015[37]. It provides a statistical and factual overview of public procurement development in Ukraine in the period 2010-2014. Key recommendations of the Report are that Ukraine should:

  • Continue reforming the public procurement system, based on a regular assessment of the application of the new Law on Public Procurement, in particular with a view to maximising the coverage of the Public Procurement Law and minimising the use of non-competitive procedures. At the same time, Ukraine should ensure that any changes to the Public Procurement Law are subject to public consultations.
  • Establish an e-procurement system covering all procurement procedures envisaged by the Public Procurement Law.
  • Ensure that entities participating in the public procurement process are required to implement internal anti-corruption programmes and introduce mandatory anti-corruption statements in tender submissions.
  • Ensure that the debarment system is fully operational. In particular, this envisages that legal entities or their officials who have been held liable for corruption offences or bid rigging are barred from participation in public procurement.
  • Arrange regular trainings for private sector participants and procuring entities on integrity in public procurement at central and local level, and for law enforcement and state control organisations – on public procurement procedures and the prevention of corruption.
  • Increase transparency of public procurement by ensuring the publication and free access to information on specific procurements on the Internet, including procurement contracts and the results of procurement by publicly owned companies.

(8) TRANSPARENCY INTERNATIONAL TOOLS TO BATTLE CORRUPTION

Transparency International (TI), the civil society organisation leading the global fight against corruption is also very active in the field of public procurement. Through close to 100 chapters worldwide and an international secretariat in Berlin, Germany, TI raises awareness of the damaging effects of corruption, and works with partners in government, business, and civil society to develop and implement effective measures to tackle it. TI has developed a number of important tools to assist in reducing corruption in government contracts.

In the view of TI, global principles and minimum standards of transparency, integrity and accountability must be in place to ensure public procurement is corruption free. Transparency International has elaborated the principles, standards and key steps (outlined below) needed to ensure a clean contracting process, and collects good practice examples of chapters’ work in this area.

Transparency International Anti-Corruption Tools

Handbook for Curbing Corruption in Public Procurement[38], 2006

The Anti-Corruption Plain Language Guide[39], 2009

Conflict of interest in public procurement[40], January 2013

Blacklisting in public procurement[41], February 2013

Curbing corruption in public procurement: a practical guide[42], July 2014

Integrity pacts in public procurement: an implementation guide[43], April 2014

Corruption Perceptions Index 2013[44]

This work closely aligns with the Open Contracting Partnership (OCP), of which Transparency International is a founding and active member. The OCP brings together key stakeholders, including governments, civil society, private business and academics, to promote global principles of disclosure and participation in public contracting. The OCP pushes for data standards, engages in global advocacy activities and conducts research. In addition it supports the wider Open Contracting Community, provides implementation support and tools for those working to ensure more open public contracting, and demonstrates how open contracting works at the national level.

TI’s integrity pacts, referred to above, are agreements entered into between the governmental procuring entity and all bidders in which all of the parties pledge not to engage in bribery or collude with competitors during the formation or administration of a contract. These pacts also require that a monitoring system is put in place to ensure compliance. TI has also produced various publications dealing with the challenge of overcoming corruption in the field of public procurement. The most comprehensive in this regard is the 2006 Handbook for Curbing Corruption in Public Procurement[45].

More recently, Transparency International has issued “Curbing corruption in public procurement: a practical guide”. This guide is a concise introduction for government officials and civil society to the problem and risks of corruption in public procurement. It outlines key principles and minimum standards, as well as good practice guidelines, which when respected can help curb corruption in the procurement process and minimise its harmful effects.

Transparency International in Ukraine

In Ukraine, representatives of Transparency International Ukraine are quite critical of progress to date on anti-corruption legislation; describing it as “a good shot, but still miles away from victory”[46]. In regard to public procurement specifically, TI Ukraine became involved since end-2014 as a data base administrator for the sub-threshold e-procurement pilot project “ProZorro” with a view to ensuring the transparency of the pilot project.

Another TI initiative “Transparent public finances” consisted of 15 projects focused on effective control of the spending of public money. In particular, Transparency International – Ukraine directs considerable efforts towards public procurement: monitoring the extent to which the State budget is effectively used via public tenders and providing a voice for civil society in setting rules and shaping legislation on public procurement.

TI services for citizens include:

(1) The provision of information on corruption in the State and highlighting its specific forms,

(2) methodological advice on how to deter corruption via workshops on how to detect corruption and implement anti-corruption mechanisms;

Services for NGOs cover education and training on conducting civic anti-corruption expertise, monitoring public officials lifestyle, advocacy campaigns and tools to influence the decisions of the authorities of different levels. For the business community, TI offers trainings on conflicts of interests and assistance to draft compliance programmes. Finally, for the State, TI provides:

(1) corruption risks analysis of draft laws;

(2) commentary on the effectiveness of national anti-corruption policy,

(3) monitoring and assessment of corruption risks in the implementation of major infrastructure projects,

(4) training on anti-corruption policy, anti-corruption legislation, conflict of interest, public procurement and

(5) support to local councils in implementing standards of openness and transparency of municipal procurement.

CONCLUSIONS

While public procurement is essentially about shopping for the State, designing, legislating and implementing an effective national public procurement system based on transparency, competition and integrity is not simple task. Public procurement regulation introduces procedural complexity into public contracting, legislation may change regularly and be difficult to apply in specific contractual situations, vested interests may oppose high standards in public procurement to avoid competition and transparency, officials applying public procurement procedures may be insufficiently trained or competent to do so and public authorities may persistently push for special treatment or exemption from the public contracting rules and, in some cases, there may be too many international rules to choose from. At the same time, a procurement system that lacks transparency and competition is the ideal breeding ground for corrupt behaviour and in overall terms will fail the public interest test of integrity. Accordingly, most important international codes on anti-corruption and public procurement rest heavily upon these fundamental principles, in order to discourage corruption.

National regulation succeeds in reducing the opportunities for corruption by applying recommended best procedural and transparency international requirements. However, detailed training and hand-holding initiatives, stream-lined control processes (e.g. internal and external audits) and active civil society over-sight are also needed to ensure the success of the legislation in practice.

In the case of systemic corruption, its eradication calls for a broader campaign and much will depend on the government’s willingness to reform, and on the attitudes of civil society. The situation may be exacerbated when, whatever the good intentions, regulators impose ever stricter regulations in the name of anti-corruption. This is an important risk in addressing anti-corruption issues in public procurement. In extreme cases, over-regulation can erode the ability to exercise discretion and can have a serious negative effect on public expenditure because it has the effect of forcing the government into inefficient and expensive purchasing. Care must be taken therefore to identify the issues in the procurement function that may be improved through regulation and transparency. The regulation needs to address the misuse of discretion and not seek to remove all discretion: purchasers need to be in position to make professional procurement decisions and regulation should not prevent the exercise of that judgement.

International experiences in regard to anti-corruption measures in public procurement provide a framework for shaping national public procurement legislation. While Ukraine pursues its EU integration course, with a key focus on applying the important EU Public Procurement Directives into Ukrainian law and practice, account should also be taken of complementary measures from other international instruments and sources that may help to clarify best practices further and/or offer further practical guidance to the public procurement practitioner.

[1] In line with the detailed commitments of Ukraine under the EU-Ukraine Association Agreement.

[2] European Commission Fact Sheet No. 10 Transparency and anti-corruption.

[3] Compendium of the Directives (on Ukrainian) is available at the Project’s website http://eupublicprocurement.org.ua/wp-content/uploads/2015/02/EU-PP-Directives-Compendium_UKR.pdf

[4] The main provisions of the directives that focus on transparency and anti-corruption measures are summarised in European Commission Fact Sheet No. 10 Transparency and anti-corruption– this is accessible athttp://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/reform/fact-sheets/fact-sheet-10-transparency_en.pdf

[5] The Association Agreement entered into force on 1 November 2014. Following decisions taken in 2014 to delay the entry into force of the trade provisions of the Agreement by one year, 1 January 2016 is the actual date of entry into force of the relevant provisions of the Agreement concerning public procurement.

[6] http://en.wikipedia.org/wiki/Anti-Corruption_Bureau

[7] http://ukrweekly.com/uwwp/anti-corruption-bureau-launched-with-young-investigator-in-charge/

[8] Source: Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption, 2013

[9] United Nations Convention against Corruption, UNODC, 2005. http://www.unodc.org/unodc/en/treaties/CAC/index.html

[10] Number of States parties to the convention as of April 2015.

[11] The full analysis of Article 9 and Article 8 (Codes of conduct for public officials) will be available within REPORT ON ANTI-CORRUPTION MEASURES IN PUBLIC PROCUREMENT: INTERNATIONAL BEST PRACTICES at the http://eupublicprocurement.org.ua/.

[12] http://www.uncitral.org/uncitral/uncitral_texts/procurement_infrastructure/2011Model.html

[13] Afghanistan, Albania, Azerbaijan, Bangladesh, Croatia, Estonia, Gambia, Ghana, Guyana, Kazakhstan, Kenya, Kyrgyzstan, Madagascar, Malawi, Mauritius, Moldova, Mongolia, Nepal, Nigeria, Poland, Romania, Rwanda, Slovakia, Tanzania, Uganda, Uzbekistan and Zambia. See http://www.uncitral.org/uncitral/en/uncitral_texts/procurement_infrastructure/1994Model_status.html.

[14] Guide to Enactment of the Model Law on Public Procurement, UNCITRAL, 2012. http://www.uncitral.org/uncitral/uncitral_texts/procurement_infrastructure/2011Model.html

[15] http://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm

[16] “Ukraine’s joining the WTO Government Procurement Agreement” by Mrs Natalya Shymko (on English) http://www.ebrd.com/downloads/research/law/lit113f.pdf

[17]Law of Ukraine on Public Procurement (PPL) “On the Implementation of Public Procurement” (No. 1197-VII dd. April 10, 2014)

[18] Ibid. 17

[19] Most of comments/requests of the EU as well as the USA and Japan concerned clarification of covered entities and the current list of exemptions from the PPL.

[20] http://www.coe.int/t/dghl/cooperation/economiccrime/corruption/default_en.asp

[21] http://siteresources.worldbank.org/INTPROCUREMENT/Resources/Procurement_GLs_English_Final_Jan2011_revised_July1-2014.pdf

[22] http://www.adb.org/sites/default/files/Guidelines-Procurement.pdf

[23] http://www.adb.org/documents/anticorruption-and-integrity-policies-and-strategies

[24] http://www.afdb.org/en/projects-and-operations/procurement/resources-for-borrowers/policies-procedures/

[25] http://idbdocs.iadb.org/wsdocs/getdocument.aspx?docnum=774392

[26] http://www.ebrd.com/downloads/legal/procurement/ppreport.pdf

[27] European Bank for Reconstruction and Development:PUBLIC PROCUREMENT ASSESSMENT – Review of laws and practice in the EBRD region, 2011.

[28] http://www.oecd.org/daf/anti-bribery/ConvCombatBribery_ENG.pdf

[29] http://www.oecd.org/corruption/ethics/48994520.pdf

[30] http://www.transparency.hu/uploads/docs/oecd.145.pdf

[31] http://www.oecd.org/competition/cartels/42851044.pdf

[32] http://www.oecd.org/development/effectiveness/38588964.pdf

[33] http://www.oecd.org/daf/anti-bribery/anti-briberyconvention/44956834.pdf

[34] http://wiki.bezkorupce.cz/_media/wiki/corrup_proc_oecd-rapport-2005-aase.pdf

[35] Relevant OECD materials available at http://www.oecd.org/gov/ethics/integrityinpublicprocurement.htm

[36] SIGMA research reports are available at http://www.oecd.org/site/sigma/publicationsdocuments/publicprocurementpublications.htm

[37] All monitoring reports are available on the ACN web-site at www.oecd.org/corruption/acn/istanbulactionplancountryreports.htm

The Third round monitoring Report on Ukraine accessible here http://www.oecd.org/daf/anti-bribery/Ukraine-Round-3-Monitoring-Report-ENG.pdf

[38] file:///C:/Users/234567/Downloads/curbing_corrup_publicprocurement_HNDBK_WEB.pdf

[39] http://www.transparency.org/whatwedo/pub/the_anti_corruption_plain_language_guide

[40] http://www.transparency.org/files/content/corruptionqas/Conflict_of_interest_in__public_procurement.pdf

[41] http://www.transparency.org/files/content/corruptionqas/Blacklisting__in__public__procurement.pdf

[42] http://www.transparency.org/whatwedo/pub/curbing_corruption_in_public_procurement_a_practical_guide

[43] http://www.transparency.org/whatwedo/pub/integrity_pacts_in_public_procurement_an_implementation_guide

[44] http://www.transparency.org/whatwedo/pub/cpi_2013

[45] Handbook for Curbing Corruption in Public Procurement, Transparency International, 2006. http://www.transparency.org/whatwedo/pub/handbook_for_curbing_corruption_in_public_procurement

[46] http://ti-ukraine.org/en/node/2742

Author: Anastasiia Kalina

The contents of this article are the sole responsibility of the Crown Agents and its Consortium partners and the opinions expressed in this article are not to be understood as in any way reflecting an official opinion of EUROPEAID, the European Union or any of its constituent or connected organisations.

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