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Corruption in public procurement-By Gerald Mabveka

In any activity that involves the transfer of funds, there is a possibility that
corruption can take place. If there is one activity that has a lot of money bei
ng spent by governments, it is procurement. It is for this reason that â corruption p
racticeâ is mentioned in Malawiâ s Public Procurement Act of 2003. The act defines corru
t practice as â the offering, giving, receiving or soliciting of anything of value to
influence the action of a public official in the procurement process or in cont
ract execution.â On the other hand, procurement is â the acquisition by any means of go
ds, works or services.â Government procures goods, works and services through Procur
ement Entities (PEs). These are government institutions, departments, ministries
or parastatals that are involved in procurement of goods, works and services.
Two areas known by many procurement experts to be susceptible to corruption in p
ublic procurement are in health and education sectors. This is most likely becau
se of the relatively large amounts of money that these sectors have available fo
r their operations. However, it has to be pointed out that there are many sector
s that are also at high risk of corruption in public procurement. It is certain
that there are cases of corrupt procurement in statutory organizations and other
ministries apart from the two mentioned above.
There is a high level of understanding of the adverse effects of corruption and
yet corrupt practices continue. The effect of corruption in public procurement
are many. First, it affects the efficiency in the use of public funds including
donors resources. This simply means the available funds are not optimally used.
Secondly, the quality of goods, works and services that government procures is c
ompromised and government eventually receives substandard products. This transla
tes to poor quality services being offered by government institutions which affe
ct the quality of life of the general public.
Corruption in public procurement also affects the companies who are in the busin
ess of providing goods and services to the public service. The operating costs o
f companies increase as they either do not get business when some companies are
favoured or they have to compensate for the cost of bribing public officials. In
the end, there is little competitiveness on the market and some businesses are
forced to close. In the long run social and economic life of people gets adverse
ly affected as result since some employees may have to be laid off.
Public Procurement corruption could be defined as the acquisition of goods, serv
ices and works by public organisation through corrupt practices. It is done thro
ugh public procurement contracts.. A public procurement contract could be defin
ed as a binding agreement or business arrangement for the supply of goods, servi
ces or works at an agreed price. Contracting is the main way a government spends
its money. For instance, in Malawi, not less than 30% of funds allocated to hea
lth sector at district level have to be used for procurement of drugs. This is a
very large proportion of funds available for district assembly expenditure such
that if drugs are procured in a corrupt way, the government loses a lot. In a s
urvey on Governance and Corruption Baseline conducted in Malawi in 2006 by Mille
nnium Consulting Group Limited, it was established that on average, 6 percent of
a contract cost is paid as a bribe to officials in a procuring entities.
Corruption in public procurement takes a number of forms which include bribery a
nd deception (fraud) among others. Contracting processes includes; contract iden
tification ,definition of contract characteristics, contracting process (procure
ment method), contract award and contract implementation. Procurement experts ha
ve established that the risk of corruption in public contracting is most evident
during evaluation phase. Nonetheless, there are risks throughout the entire pro
curement process. For instance, costs of works can be undervalued in the initial
stages through use of false scope of works which increase soon after the contra
cts have been signed. In some circumstances procurement is planned with a presel
ected supplier in mind. In extreme cases the procured goods, services or works
are not relevant to the organisation.
Every stage of procurement has its own risks that have to be carefully understoo
d by procurement experts. Firstly, in the process of decision making for contrac
ting, a decision can be made with the sole aim of channelling benefits to an ind
ividual or organisation. For example, a procurement decision can be made in a go
vernment department to procure goods that are no longer saleable in a certain co
mpany simply to benefit that companyâ s owner and others in the government department
. Sometimes decisions are made to benefit the company where the decision maker h
as a stake.
Secondly, in the identification and definition of contract characteristics, the
technical specifications could be developed with a bias towards particular suppl
ier. In addition, a procuring entity could use a procurement method designed to
favour a pre-selected supplier(s). Sometimes the PE chooses not to involve relev
ant people in the development of specifications which can lead to poor specifica
tions that favour their pre-selected suppliers. This can lead to non objective e
valuation of bids because specifications are part of evaluation criteria.
Thirdly, the contracting process or the selected method of procurement can also
be used to facilitate public procurement corruption. For instance, a government
department can decide not to advertise its invitation to tender or to do so but
not provide sufficient time for bidders to respond to the advertisement. In the
case of shortlisted of suppliers being used as may happen in framework contracts
, those that are responsible may solicit bribes from suppliers who are on the sh
ortlist. Even before shortlisting, suppliers may offer bribes for them to be inc
luded on the shortlist. Sometimes bidders can collude with other prospective bid
ders to set unrealistic prices for the required goods, services or works with a
n objective of sharing the proceeds realised in the resultant contract.
Fourthly, contracts are normally awarded after all bids have been evaluated base
d on set criteria. Elements of corruption in procurement can occur where evaluat
ion criteria have not been stated or are not clear in the bid document. This lea
ds to an evaluation that has no basis and easy to manipulate to suit the presele
cted bidder. In some instances the set criteria in the bid documents are so subj
ective that it allows bias towards selected bidder in the evaluation process. El
ements of corruption also exist where procuring entities are unwilling to publis
h the contract awards, let alone disclosing the reasons why some bidders would h
ave failed to win the contracts.
Finally, public procurement corruption shows its ugly face in the course of cont
ract implementation. In some cases, there are issues of renegotiations that end
with a completely different contract. Usually, negotiations result in increase i
n the funds to be used for the contract probably with minimal added works being
done. Contractors deliberately under value the scope of work so that their bid
is selected because it carries the lowest cost among the possible competitors.
From the procuring entity, supervisors of the work can be influenced to write po
sitively about the work/services being offered even when it is substandard. For
goods, the inspection team who receive them can be influenced to accept goods th
at are of inferior quality when compared with the agreed specifications. Sometim
es the contractors collude with those responsible for verification of claims to
produce false or inflated claims or claims that do not reflect the prevailing pr
ices on the market. This can happen in contracts where the PE has to pay the con
tractor based on the work done plus an economic interest. This can also be obser
ved in a framework contracts whereby excess goods could be procured deliberately
.
Procurement corruption can be influenced by other additional factors. The first
one is size of the procurement. This can be linked to the bribe that has to be
paid for a specific procurement in that the larger the size of contract and ther
efore the more funds meant for procurement of goods, services or works the highe
r the risks of corrupt activities in the process of procuring the goods, service
s or works since the â benefitâ is also higher.. Some suppliers and those entrusted with
procurement usually legitimatised as a form of commission. This is calculated in
percentage of the total funds for that particular procurement eg. the popular 1
0 percent.
The second factor is the urgency of the wanted goods, services or works to be pr
ocured. It has been established that any procurements for emergencies carry the
highest risk of corruption. In an emergency, the procurement process does not fo
llow the normal procedure since the emphasis is delivery to mitigate the emergen
cy rather than to do so at the best possible cost. As a result, emergency procur
ements have more room for abuse. For instance, poor specifications may be used o
r a single supplier is considered for delivery. These activities, among others m
ay lead to excessive expenditure beyond what may be realistic.
The third factor is where there discretionary authority by some officials in pro
curement process. This discretionary authority can be used at all stages of the
procurement cycle such as in; the power to invitation, power of short-listing/pr
e-qualification, modifications of contract and bilateral negotiation of contract
s among others. There is a high probability that if the discretionary authority
is in the hands of a person of questionable integrity, corrupt practices would
occur in these areas. For instance, one would restrict the names of companies t
o be on the shortlist or those that have to be pre-qualified. Contract negotiat
ors can sometimes negotiate for pricing that includes a personal stake.
It is possible stop corruption in public procurement. It is not good enough to r
ely on law enforcement as a way of combating corruption since that only applies
after the damage has already been done and it is too late to have any meaningful
recovery. It is better that corrupt behaviour be prevented by giving the people
involved in procurement an opportunity to avoid it and the necessary incentives
to do so. The question is how this could be done. Procurement experts have sugg
ested a number of measures that have to be taken and these are centred on good r
ules, transparency and monitoring.
In case of good rules, governments ,donors and other financiers must always work
together to come up with procurement rules that cannott be manipulated for pers
onal advantage. There is a great need for regulatory and law enforcement bodies
have adequate capacity to enforce the laws, to provide opprtunities for practiti
oners to learn and adhere to the laws and to provide guidelines of procurement t
hat comply with international standards whilst at the same time being user frien
dly at national level. The rules have to promote access to information of the pr
ocurement process. The rules have to make it mandatory for procurement opportuni
ties to be accessible to all potential bidders, for the bid documents, procedure
s, evaluation and contract awards to be available for public scrutiny at the rel
evant stages and for contract awards to be published.In addition, the rules sho
uld ensure that different procurement functions and responsibilities are perform
ed by different people with prescribed competences.
Efficient management is probably the most effective way of preventing procuremen
t corruption. If procurement is conducted in a way that promotes transparency a
nd accountability, facilitates oversight and citizen participation, the probabil
ity of corrupt practices is reduced and this brings trust in government procur
ement decisions. Any procurement decision must be seen to be based on the needs
of the organisation not - an individual and decisions should not be left to in
dividual discretional authority.
Finally, there is always a need for monitoring of the procurement process. One w
ay of doing this is to regularly conduct procurement audit using independent bod
ies/institutions. The civil society can be part of the independent institutions
interested in the results of public procurement audits, for instance. The monito
ring function requires that there be a good reporting system for all procuremen
t activities.
The fight against corruption in procurement is impossible without ensuring adequ
ate training of procurement officers. Training of procurement officers is of par
amount importance as too many public procurement officers hide behind ignorance
when they are compromised..In the 2006 Governance and Corruption Baseline Survey
in Malawi, procurement officers were found to be some of the most corrupt publi
c service providers. In addition to lack of adequate training of procurement of
ficers, personal integrity is a major factor that contributes to corrupt practic
es. Determining personal integrity is almost impossible but introduction of ince
ntives for those carrying out procurement to expected standards is one way of pr
omoting behaviour change of procurement officials and organisations.
Procurement experst have suggested that the establishment of multidisciplinary a
nd evaluation teams and decision making committees goes a long way to deter the
tendency for corruption and leads to more objective and beneficial prcurement de
cisions public institutions. Multidisciplinary teams ensure the promotion of tra
nsparency and accountability in public procurement.
Public procurement corruption like any other form of corruption is evil and it n
egatively affects the poor citizens whilst benefiting the minority of the citize
ns wielding power. Those who benefit continue to exploit the already poor majori
ty thereby widening the gap further, between the rich and the poor. It is high t
ime public procurement was done for the good of the whole society not the select
ed few. It is not sustainable to continously exploit the poor.