The Role of CSO

in Public Procurement

to Improve
Public Procurement Outcomes
 About Transparency International
A global civil society organisation leading the fight against corruption and creating
change towards a world free of corruption.

• Coalition building: TI is a global network, with more than 113 locally

established national chapters and chapters-in-formation. They bring
together relevant players from government, civil society, business and the
media to promote transparency in elections, in public administration, in
procurement and in business. TI’s global network of chapters and contacts also
use advocacy campaigns to advocate for anti-corruption reforms.

• Politically non-partisan: Transparency International challenges the

inevitability of corruption, and offers hope to its victims. Since its founding
in 1993, TI has the skills, tools, experience, expertise and broad participation to
fight corruption on the ground, as well as through global and regional initiatives.
TI raises awareness and diminishes apathy and tolerance of corruption, and
devises and implements practical actions to address it.

• Non-involvement in individual cases: TI does not undertake investigations

of alleged corruption or expose individual cases, but at times will work in
coalition with organisations that do.
Collective Action guide for Businesses
 Importance Issues on Public Procurement
in Indonesia (background)

• Unhealthy competition cause business owners have to bribe,

mark up on price by suppliers
• Tender requirement is created by affiliated group of companies
in order for one of their companies to win the tender
• Entertainment, bribe to win the tender
• Winner of tenders take turn or won by the relatives, family
member, etc
• There is very urgent for establishment the Act on Public
Procurement
• According to the Corruption Eradication Commission (KPK),
30% of the procurement budget is lost into corruption; 70 % of
the corruption cases handled by the KPK are related to public
procurement.
 What is an Integrity Pact
• Formal Agreement between government agency and bidders
for public contracts
– Establishes rights and obligations between parties
– Provides for sanctions in case of violation
– Provides for Alternative Dispute Resolution
• Process occurring during all stages of procurement
– Increased Transparency
– External, independent monitoring
– Detection of risks/red flags, facilitating corrective measures
• Applicable to all sectors & types of contracts
What is the Integrity Pact for?
Objectives:
• enable companies to abstain from bribing
– others will not bribe
– government authority is taking measures to prevent
corruption/extortion
• enable governments to reduce high costs and distorting impact of
corruption

In addition, the IP seeks to contribute to

• build up public confidence on the procurement system
• improve investment climate
 Conditions Necessary for Success

• Political will of authority to reduce corruption and

promote integrity
• Maximum transparency via public access to relevant
information
• Third party independent monitoring to verify
fulfillment of obligations by the parties
• Multi-Stakeholder Involvement by Civil Society
Organizations, government and private companies
 Advantages of Integrity Pacts
• Feasible:
– IPs can be implemented without the need for legal
reforms within the existing ordinary authority of
contracting officials and bodies
• Collaborative:
– Built on trust and support among parties
• Preventive:
– Tackles corruption risks from the outset
• Inclusive:
– Involves Civil Society as an active contributor and as a
channel to increase legitimacy and public trust
 Possible risks of Integrity Pacts

• IPs may not rule out corruption 100%

– For IPs to be more effective, detection and
enforcement mechanisms by the relevant
agencies need to be effective too
• IPs may be misused as window dressing if not
properly implemented
– Appearance of integrity stands in contrast to
reality of corruption
 Progress & Challenges in Indonesia

• Since the IP has been promoted in Indonesia, there are “5 types

of Integrity Pact term” which are very confusing for the people :

1. Integrity Pact by Three Pillar Partnership (representative of

business, government and “other NGO”)  even the Politician and
Political Party have sign the IP too
2. Integrity Pact to reform the bureaucracy by State Ministry for State
Apparatus Reforms
3. IP in the Presidential Decree nr 80 / 2003
4. IP from TI Indonesia chapter itself.
5. IP signature for the new minister candidate of SBY cabinet

• IP term has been exploded and also inflated in this country

 Integrity Pact Program in Indonesia

• Nowadays supported by DFID & DANIDA , TI Indonesia

has been facilitate the Integrity Pact program in several
Pilot Project Areas such as :
1. Aceh Province (6 District) supported by DFID
2. West Sumatera (Solok District & Dharmasraya District ),
3. Semarang, Central Java
4. Banjar Baru, South Kalimantan Province
5. Balikpapan, East Kalimantan Province
6. Makassar, South Sulawesi Province
 Scope of Integrity Pact Program

• International & Regional Level :

 Share knowledge & experiences on public procurement works in the global

network (through email, quarterly, semester and annually meeting)

 Align & Coalition to promote more transparency & accountability of public

procurement

 Part of the ANSA coalition (Affiliated NGO for Social Accountability)

• National level :

 Promote & Advocacy : the New Draft of Public Procurement Act, including :

 Set up the position paper

 Academic draft preparation

 In cooperation with LKPP (NPPO) to set up a better public procurement

system
 Scope of Integrity Pact Program

• Provincial & District / City level :

 Ensuring the implementation of Freedom of Information Act (UU
14 / 2008) and Whistle Blower Protection Act (UU 13 / 2006) in
public procurement process
 CSO / IMO Empowerment consist of beneficiaries, religion /
cultural community etc, to monitor public procurement
 Promote & facilitate establishment the Complaint Handling
Mechanism (CHM)
 Promote & facilitate establishment of Conflict Resolution
Mechanism
 promote blacklisting, reward & punishment system
 Hand in hand & advocacy with local media (TV, local radio &
print media)
How to Adopt the IP ?

STEP & ACTION
1.
Promote the IP concept f
or head of district / major
2.
Policy and Local
Regulatory Assessment
3.
Planning and design of IP
process with input from all
stakeholders
Primary Challenge &
PROCESS
Responsibility Constraint
Not all the major
Formal & informal meeting committed to tackle
Major / head of District corruption in public
Obtain & decision to adopt the IP
procurement
Data gathering Not every district has
Appointed
Review all policies and additional local legal Policy
Head of Dept / Sector
in related with public procurement
Facilitate the action plan & implementation
with multi stake holders representative as Consistently to follow
Appointed IP team (from the up the action plan
local government official) participants
 Primary Challenge &
STEP & ACTION PROCESS
Responsibility Constraint

• Formal/informal meeting series

4.
Ensure there is proper
Appointed Integrity Pact
infrastructure for access to
information (who, where,
when, how, by whom)
• Define specific project & the
bidders in regard IP implementation
• Review ability of service functions
Team to support IP program
• SOP & system reform proposal if
necessarily
Freedom information
act not guarantee that
the people could
access the information
easily
Different perception &
commitment between
the major & the staffs

• Identify feedbacks &

5.
Facilitate workshop &
logistics: Explain the IP
fully, how it works and its
effects, public hearings,
etc.
recommendations
• Facilitate multi stakeholders
Complaint Handling
workshop on IP Mechanism (CHM),
Appointed Integrity Pact implementation whistle blower
protection are new term
Team • Explain the IP principles for the public although
such as : CHM, IMO, reward there is act on whistle
blower protection
& punishment, sanction,
whistle blower protection,
access the information
 Primary Challenge &
STEP & ACTION PROCESS
Responsibility Constraint

• Review the role, system & mechanism in

6. IP implementation Difficulties to set up the
Contribute to find and Appointed Integrity Pact • Agreement on IP implementation in system without
channel necessary Team guideline from the
selected projects central government
resources

• meeting series to develop the IP

program
7. Adapt the document as
Appointed Integrity Pact • Adapt HR policies &SOP follow the environment
Draft IP and Monitoring Team • Training program & local politic situation
Agreement
• Establishment the monitoring &
reporting system

• Facilitate multi stakeholders meeting on

Difficulties to select the
8. monitoring CSO / IMO, who
Select and support the Appointed Integrity Pact • Propose & adapt SOP on monitoring independently & not
Monitor, ensuring Team process if needed exclusive among all the
CSO
accountability • Criteria, requirements and selection
process the monitor

STEP & ACTION
9.
Get Monitoring Agreement
and Integrity Pact signed by
parties
10.
Supervise compliance with
the monitoring agreement
11.
Manage & monitoring
evaluation the IP
implementation with credibility
& independence
Primary Challenge &
PROCESS
Responsibility Constraint
• Explain the role of monitoring
system All stake holders
Appointed Integrity Pact
Team • Select the best actor as monitor agreeing the selected
IMO / CSO
• MoU & agreement on
monitoring
• IP sign & declaration
• Establishment the CHM (complaint
handling mechanism)
Appointed Integrity Pact Where & by whom the
Team • SOP & HR policies CHM in place
implementation
• Monitoring & reporting system
• Establishment the Monev
Appointed Integrity Pact
system Consistently to monitor
: Quarterly, semester,
Team & the Major • Review progress & annually
achievements  quarterly,
semester, annually
Civil Society Movement on
public Procurement
Civil Society Movement on
public Procurement
 When & where can IPs work best?
Project Cycle
Preparation Phase,
Design & Bid
Needs Assessment
Policy Making/ Identify Demand
Documents
Project Planning Preparation

Project Design
Procurement
Process
Contractor Selection,
Final Accounting,
Contract Award &
Audit
Project Implementation Signing

Operation
Contract Execution
 Elements – Parties & Roles
• Not to demand/accept bribes
• To disclose all relevant information
Commitments Public
• To guarantee protection of restricted information
Authority
• Use of Internet and Public Hearings
• Disclosure of assets

• Reviews and provides expert

feedback on all documents and
steps of procurement process Independent
Role • Monitors access to information Monitor Integrity
• Hears of eventual complaints by Organization Pact
bidders (IMO / CSO)
• Informs publically & to authorities
• Contributes to raise overall
confidence in the process

• Not to pay bribes, facilitation payments, etc. Bidders

Commitments • Not to collude with other bidders Contractors
• Disclose information on payments to middlemen
• Code of conduct & compliance program
 Elements – Enforcement Mechanisms
Sanctions

Public
Authority • Civil, criminal, administrative sanctions
• Loss of Contract
• Loss of bid security/performance bond
• Liability for Damages (to principal and
competitors)
Independent
• Debarment/Blacklisting
Monitor Integrity
Organization Pact
(IMO / CSO) Dispute Resolution

• Arbitration as alternative resolution

mechanism
Bidders • Often more expedite (foster) than Courts
Contractors • Increase ownership and empowerment
• Accessible to all parties
 Main activities to implement an IP
 Planning and design of IP process with input from all stakeholders
 Ensure there is proper infrastructure for access to information
 Facilitate logistics: public hearings, workshops, etc.
 Draft IP and Monitoring Agreement
 Select and support the Monitor, ensuring accountability
 Get Monitoring Agreement and Integrity Pact signed by parties
 Supervise compliance with the monitoring agreement
 Explain the IP fully, how it works and its effects
 Contribute to find and channel necessary resources
 Manage the IP implementation with credibility & independence
 Implementation Arrangements (1)
Memorandum of
Understanding

Civil Society
Organisation Authority
(NGO)

Monitoring IP
Contract Document

Monitor
Bidders

NGO undertakes most implementation activities

Implementation Arrangements (2)
Memorandum of
Understanding

Civil Society
Organisation Authority
(NGO)

IP
Document

Monitor
Monitoring
Contract Bidders

Authority undertakes most implementation activities

 Qualities of a good monitor
• Independence
– Objective monitoring with public good as guidance
• Knowledge
– Expertise adds value to the project
• Capacity
– Individual monitor or organization, depending on project
• Accountability
– Accountable to all parties and the public in varying degrees
• Commitment
– Strength of character and impeccable behaviour
 Selection Criteria for IP Projects

• Public Agency has many projects

– Projects with more relevant social or economic impact
– Projects that use combined funds
– Projects where risks of corruption threaten its viability
– Projects suffering from corruption in the past
– Complex Projects
– Projects that are sensitive in terms of public opinion
– Large scale projects that take a large part of the budget
 TI experience in IP implemention

• Applied in more than 15 countries around the World > 300

monitored IPs, mainly in Asia and Latin America

• 10+ years experience/ continuous improvement

• Reported results on contract savings (10%-60%), bidders

increased confidence, decreased complaints, impact on
procurement law.
 Broad sector/regional experience

Sectors and Areas of Work Countries

• Telecommunications • Argentina
• Public works • Colombia
• Transportation • Ecuador
• School supplies • Italy
• Office supplies • Latvia
• Utilities • Germany
• Services • South Korea
• Tourism • Mexico
• Police supplies • India
• Local government • Pakistan
• Finance • Paraguay
• Information systems • Indonesia
• Defence
 Some of the current Applications

• Argentina (public hearings)

• Italy, Indonesia, South Korea (local governments)
• Mexico (different types of contracts)
• Pakistan & India (MOUs)
• China, South Korea (sector policy)
• Germany (complex construction contracts)
• Colombia (evolution - Industry agreements)
 Thank You

Heni Yulianto
hyulianto@ti.or.id

Transparency International Indonesia

www.ti.or.id