Guidebook on anti-corruption in public procurement and the management of public finances

Guidebook on anti-corruption in public procurement

and the management of public nances

Good practices in ensuring

compliance with article9

of the United Nations

Conventionagainst Corruption

e designations employed and the presentation of material in the present publication do not imply the expression of

any opinion whatsoever on the part of the Secretariat of the UnitedNations concerning the legal status of any country,

territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.

Information on uniform resource locators and links to Internet sites contained in the present publication are provided

for the convenience of the reader and are correct at the time of issue. e United Nations takes no responsibility for

the continued accuracy of that information or for the content of any external website.

is publication has not been formally edited.

Publishing production: English, Publishing and Library Section, United Nations Oce at Vienna.

In collaboration with

UNITED NATIONS OFFICE ON DRUGS AND CRIME

Vienna

Guidebook on anti-corruption in public procurement and

themanagementofpublic finances

Good practices in ensuring compliance

with article 9 of the United Nations

Convention against Corruption

UNITED NATIONS

New York, 2013

iii

Acknowledgements

is publication was prepared by the Corruption and Economic Crime Branch of the United

Nations Oce on Drugs and Crime (UNODC) in partnership with the International Anti-

Corruption Academy (IACA).

is Guidebook is the result of collaborative eorts of several organizations and individuals, notably

members of the UNODC Technical Working Groups in India and Mexico of the project, “Public-

Private Partnership for Probity in Public Procurement”.

Besides project counterparts in India and Mexico, we would also like to thank the Competition

and State Procurement Agency of the Republic of Georgia, the Parliament of the Republic of

Austria and the City of Martin, Slovakia for sharing case examples, including good practices and

lessons learned, which are included in this Guidebook.

is project was carried out with the assistance of the law rm Schnitzer Law (Austria) and the

George Washington University (USA). We would like to thank in particular the lead author

Johannes S. Schnitzer (Schnitzer Law), contributing editor Professor Christopher R. Yukins

(George Washington University Law School), as well as research assistant Rosamond Xiang

(George Washington University Law School), for their assistance.

We would like to thank the following people for peer reviewing the paper: Caroline Nicholas

(UNCITRAL), Candice Welsch (UNODC), and Shannon Bullock (UNODC).

UNODC gratefully acknowledges the support of Siemens, which has funded this Guidebook as

part of the Siemens Integrity Initiative. e main objective of the Siemens Integrity Initiative is

to create fair market conditions for all market participants by ghting corruption and fraud

through collective action, education and training.

Executive summary

Implementing an eective public procurement system based on transparency, competition and

integrity is not simple. A procurement system that lacks transparency and competition is the ideal

breeding ground for corrupt behaviour and thus most important international codes on anti-

corruption and public procurement rest heavily upon these fundamental principles, in order to

discourage corruption.

e United Nations Convention against Corruption (UNCAC), which provides a framework for

shaping national public procurement legislation, is a lead example in this regard. UNCAC calls

for the establishment of appropriate systems of public procurement based on the fundamental

principles of transparency, competition and objective criteria in decision-making. It has been at

the heart of the United Nations Oce on Drugs and Crime’s (UNODC) continuing eorts to

improve procurement systems worldwide. Moreover, most recent reforms in public procurement,

around the world, reect the text and spirit of UNCAC. ese reforms are:

•

In keeping with the reforms called for by UNCAC, States have codied and published their

procurement rules, and have made their procurement processes more predictable and trans-

parent. ese reforms have made it easier for those in civil society and vendors to monitor

and participate in public procurement. Some States have gone a step further and have used

electronic procurement systems quite eectively, both to save money and to enhance

transparency.

•

Procurements that have been tainted by corruption are now subject to challenge, usually

before a court or an independent agency, on the simple premise that once corruption invades

a procurement process, the award is no longer based on best value to the community. is

tracks UNCAC’s explicit call for challenge systems in States parties.

•

Also in keeping with UNCAC, States have bolstered their rules regarding ethical behaviour

in contracting, for both public ocials and contractors.

•

True to UNCAC’s goals of making procurement systems more accountable, States have

sanctioned and debarred corrupt and fraudulent contractors.

•

States, with support from a broad array of international institutions, have invested in pro-

fessionalizing their procurement work forces.

UNCAC, which entered into force in 2005, played a signicant role in the further development

of the UNCITRAL Model Law on Public Procurement (UNCITRAL Model Law). e UNCITRAL

Model Law is being used as a template by numerous governments around the world for shaping

national public procurement legislation. UNCAC, with its far-reaching approach and the manda-

tory character of many of its provisions, has already proven to be of major impact in the ght

against corruption.

is Guidebook serves as a reference material for governments, international organizations, the

private sector, academia and civil society, by providing an overview of good practices in ensuring

compliance with article 9 of UNCAC, which requires establishing appropriate systems of public

procurement, as well as appropriate systems in the management of public nances.

e Guidebook starts with an overview of public procurement as a major risk area for corruption;

an overview of UNCAC and public procurement; and a review of the most common forms of

corruption in public procurement. Chapter I analyses the requirements of article 9 of UNCAC,

in terms of the objectives of public procurement. e ow of the entire public procurement cycle

(divided into the pre-tender, tender and post-tender stages) is discussed in chapter II, which maps

important corruption risks and identies examples of responses to these risks of corruption. It

also covers remedy systems in public procurement, as well as further corruption-prevention strat-

egies, such as electronic procurement. Chapter III analyses the requirements of article 9 of UNCAC,

in terms of the objectives of public nance systems. A series of good practice examples—two of

which won the United Nations Public Service Award (UNPSA)—are covered in the nal chapter,

chapter IV. Annex I briey introduces other standards and policies in the area of public procure-

ment, which have been sponsored by other international organizations. Annex II includes a checklist

for meeting minimum requirements set out by article 9 of UNCAC.

vii

Contents

Acknowledgements ........................................................ iii

Executive summary .........................................................v

Abbreviations and acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

Introduction ...............................................................1

I. Public procurement: requirements of article 9 (1) UNCAC ....................7

II. High-risk areas and key elements of successfulpublicprocurement .........13

III. Public finance and public records: requirements of articles 9 (2) and

(3) UNCAC ..........................................................29

IV. Case examples ......................................................37

Annexes

I. Other standards and policies available fromotherinternationalorganizations ..43

II. Checklist for meeting minimum requirementssetoutbyartcicle 9 ofUNCAC ..47

viii

Abbreviations and

acronyms

ADB Asian Development Bank

ECJ European Court of Justice

EU European Union

EU Directives European Union Public Procurement Directives

GDP Gross domestic product

IAS International Auditing Standards

IFRS International Financial Reporting Standards

IMF International Monetary Fund

IRMT International Records Management Trust

ISO International Organization for Standardization

OECD Organisation for Economic Co-operation and Development

PEFA Public Expenditure and Financial Accountability

PFM Public Finance Management

ROSC Reports on Observance Standards and Codes

SIGMA Support for Improvement in Governance and Management: A joint

initiative of OECD and the EU, principally nanced by the EU

TI Transparency International

UN United Nations

UNCAC United Nations Convention against Corruption

UNCITRAL United Nations Commission on International Trade Law

UNCITRAL Model Law e UNCITRAL Model Law on Public Procurement

UNODC United Nations Oce on Drug and Crime

UNPSA United Nations Public Service Award

WB World Bank

WTO World Trade Organization

WTO GPA World Trade Organization Government Procurement Agreement

Introduction

A. Public procurement as a major risk area for corruption

In order to carry out its functions, a government needs to purchase goods, services and works.

is government activity is referred to as public procurement (or as government procurement or

government contracts or public contracts). e procurement of copy paper, information techno-

logy (IT) equipment or medical devices, the provision of health services or consultancy services,

the construction of a road or an airport terminal, are just a few examples of government spending

on behalf of a public authority. In this context, it is important to keep in mind that a procuring

entity never spends its own money but instead taxpayers’ money. is is why governments are

under an obligation to purchase goods, services and works only from the rms which oer the

best value for money.

It is the sheer volume involved in public procurement that make it so vulnerable to corruption.

In fact, public procurement is estimated to account for 15-30 per cent of the gross domestic

product (GDP) of many countries. is means that thousands of billions of dollars are spent by

governments every year to purchase dierent kinds of goods, services and works. Although the

costs of corruption are dicult to measure, due to its clandestine nature, it is obvious that cor-

ruption in public procurement has an enormous negative impact on government spending. ese

costs arise in particular because corruption in public procurement undermines competition in the

market and impedes economic development. is leads to governments paying an articially high

price for goods, services and works because of market distortion. Various studies suggest that an

average of 10-25 per cent of a public contract’s value may be lost to corruption. Applying this

percentage to the total government spending for public contracts, it is clear that hundreds of

billions of dollars are lost to corruption in public procurement every year.

e volume and complexity of any particular procurement play an important role when it comes

to corruption. Larger procurements are oen most vulnerable, as bribes are frequently demanded

and paid as a percentage of the public contract’s value. Experience also shows that certain sectors

are particularly vulnerable to corruption. Many corruption scandals in recent years were in the

eld of public works contracts, such as infrastructure projects, the defence industry, the oil and

gas sector, and in the health-care sector, especially in pharmaceuticals and medical devices.

Despite its enormous negative impact and the various eorts undertaken to curb corruption in

the eld of government contracts, public contracts have remained highly prone to corruption

during the last decade; this is true both of developing and developed countries. Even in an envi-

ronment where the public and private sectors are aware of the enhanced enforcement of anti-

corruption laws, corruption opportunities and challenges continue to arise through private sector

contact with government ocials.

It is thus vital that anti-corruption initiatives and procurement reform work more closely together.

It seems that adopting anti-corruption laws and model procurement codes will only partially solve

the problem. More focus should be placed on supporting the rules by norms such as accountability

and integrity—in other words, the ideals of anti-corruption must be brought into the fabric of the

procurement community.

Introduction

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

B. Overview of UNCAC and public procurement

Introduction

Traditionally, procurement reform and anti-corruption initiatives have followed separate tracks,

although they share a common purpose: a sound government, supported by a robust and politically

legitimate procurement system. e United Nations Convention against Corruption (UNCAC),

how-

ever, seeks to integrate sound procurement practices into a broader anti-corruption initiative.

Policymakers craing a sound procurement system must balance a number of goals. Of those

goals, experience has shown that competition, transparency and integrity are probably the most

important. If a government’s procurement system reects all three elements, the system is much

more likely to achieve best value in procurement and to maintain political legitimacy. ese central

goals, moreover, complement one another. A fully transparent procurement system is far less likely

to have problems with integrity, as many more stakeholders can exercise oversight in a transparent

procurement system. e reverse is also true: a system with weak systems to enforce integrity will

probably have shoddy competition, and transparency is likely to erode as corruption drains the

procurement system of political legitimacy.

It is apparent that reform initiatives need to integrate these goals. In practice, however, too oen

competition and transparency have been dealt with as issues of procurement reform, while integrity

has been addressed separately, as part of anti-corruption initiatives. e goals are the same—a

strong, eective and politically legitimate government—but too oen the eorts have been divided.

UNCAC oers an opportunity to draw together these parallel tracks, of improving procurement

and ghting corruption.

UNCAC is the rst truly global agreement against corruption. As of early 2013, 167 countries

have agreed to become States parties to the Convention, which obliges them to implement man-

datory provisions in UNCAC. UNCAC’s procurement provisions complement the eorts of the

United Nations Commission on International Trade Law (UNCITRAL),

which in 2011 nalized

a substantial revision of the UNCITRAL Model Law on Public Procurement.

e Convention spans a number of important topics, many of which reach beyond the topic of

public procurement. e Convention addresses: prevention, criminalization, international coop-

eration and asset recovery:

•

Prevention: Corruption can be prosecuted aer the fact, but rst and foremost, it requires

prevention. An entire chapter of the Convention is dedicated to prevention, with measures

directed at both the public and private sectors. ese include model preventive policies,

such as the establishment of anti-corruption bodies and enhanced transparency in the

nancing of election campaigns and political parties. States must endeavour to ensure that

their public services are subject to safeguards that promote eciency, transparency and

recruitment based on merit. Once recruited, public servants should be subject to codes of

conduct, requirements for nancial and other disclosures, and appropriate disciplinary

measures. Transparency and accountability in matters of public nance must also be pro-

moted, and specic requirements are established for the prevention of corruption, in the

particularly critical areas of the public sector, and public procurement. ose who use public

services must expect a high standard of conduct from their public servants. Due to the

importance of preventing and combating corruption through the legal system, judicial and

prosecutorial integrity must be ensured. Preventing public corruption also requires an eort

from all members of society at large. For these reasons, the Convention calls on countries

to promote actively the involvement of non-governmental and community-based organiza-

tions, as well as other elements of civil society, and to raise public awareness of corruption

and what can be done about it. Article 5 of the Convention enjoins each State party to

establish and promote eective practices aimed at the prevention of corruption.

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

UNCITRAL Model Law on Public Procurement, UNCITRAL, 2011. http://www.uncitral.org/uncitral/uncitral_texts/pro

curement_infrastructure/2011Model.html

Introduction

•

Criminalization and law enforcement: e Convention requires countries to establish crim-

inal and other oences to cover a wide range of acts of corruption, if these are not already

crimes under domestic law. In some cases, States are legally obliged to establish oences;

in other cases, in order to take into account dierences in domestic law, they are required

to consider doing so. e Convention goes beyond previous instruments of this kind, crim-

inalizing not only basic forms of corruption such as bribery and the embezzlement of public

funds, but also trading in inuence and the concealment and laundering of the proceeds

of corruption. Oences committed in support of corruption, including money-laundering

and obstructing justice, are also dealt with. Convention oences also deal with the prob-

lematic areas of private-sector corruption. e Convention also provides for measures that

are needed for national authorities to investigate and prosecute corruption.

•

International cooperation: States parties agree to cooperate with one another in every aspect

of the ght against corruption, including prevention, investigation, and the prosecution of

oenders. Countries are bound by the Convention to render specic forms of mutual legal

assistance in gathering and transferring evidence for use in court and to extradite oenders.

Countries are also required to undertake measures which will support the tracing, freezing,

seizure and conscation of the proceeds of corruption.

•

Asset recovery: e Convention’s asset recovery provisions support the eorts of countries

to redress the worst eects of corruption while sending at the same time, a message to

corrupt ocials that there will be no place to hide their illicit assets. e Convention pro-

vides for the return of assets to countries of origin as a fundamental principle of this

Convention and sets out a framework for asset recovery.

UNCAC and other international texts on public procurement

An appropriate system of public procurement, as required under article 9 (1) of UNCAC, is con-

sidered to be a core component of any government programme. In particular, the volume of public

funds spent on public procurement and the multiple negative eects of corruption in public

procurement are reasons why, besides UNODC, several other international organizations promote

the implementation of appropriate systems of public procurement. In this regard, the UNCITRAL

Model Law, the World Trade Organization (WTO) Government Procurement Agreement (GPA)

and the European Union (EU) Public Procurement Directives (EU Directives)

are most important

from a legislative perspective, as they are the models most oen examined when draing pro-

curement legislation. A comparison of these international texts shows that while the comprehen-

siveness of the rules framing an ecient procurement system varies signicantly, the same

principles underpin the rules set out in all the texts. All the texts are designed to promote pro-

curement systems based on the cornerstone principles of transparency, competition and objectivity,

as required under article 9 (1) of UNCAC.

UNCAC had a signicant inuence in the draing of the UNCITRAL Model Law. For instance,

the Working Group responsible for revising the 1994 UNCITRAL Model Law took specic note

of article 9 of UNCAC, which calls for an independent domestic review mechanism and a mech-

anism for conicts of interest of public ocials responsible for procurement. e Working Group

decided to include provisions in the UNCITRAL Model Law to address these two UNCAC require-

ments. In this way, UNCAC played an important role in the further development of the UNCITRAL

Model Law, which is used as a template by numerous governments around the world in shaping

national public procurement legislation.

WTO Agreement on Government Procurement, World Trade Organization, 2012. http://www.wto.org/english/tratop_e/

gproc_e/gp_gpa_e.htm

EU Public Procurement Directives, European Union. http://ec.europa.eu/internal_market/publicprocurement/rules/

current/index_en.htm

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

C. Corruption and public procurement

Examples of corruption in public procurement and public finance

To understand UNCAC and its anti-corruption tools, it is important to understand the forms of

corruption that can arise in procurement. Historically, the most easily recognized form of corrup-

tion has been bribery—payments by private parties to sway procurement decisions made by public

ocials. ese types of bribes of public ocials are banned outright under UNCAC article 15.

ese bribes may not necessarily involve money, but could involve anything that gives an undue

advantage.

ere are, however, many related forms of corruption, which are also addressed by UNCAC. For

example, if a public ocial accepts an undue advantage in return for performing or failing to

perform an act in violation of laws, that will constitute an abuse of functions in violation of article

19. Similarly, if a public ocial trades in inuence to lend private parties an undue advantage,

that may violate the principles of article 18 on trading in inuence. Article 17 of UNCAC also

addresses embezzlement or misappropriation by a public ocial. If a payment is made by a private

party to a private party, for example a prime contractor in connection with the award of a sub-

contract to the paying party, the payment may constitute a bribe under article 21, or a kickback,

as it is known in some jurisdictions.

Conicts of interest pose special problems of corruption, which UNCAC seeks to address. Article 7 (4)

requires States parties to promote transparency and prevent conicts of interest in the public

sector. Article 8 calls for codes of conduct and asset declarations for public ocials, to bring structure

and clarity to ocials’ obligations as public servants. Article 10 calls for measures to enhance

transparency in public administration and article 12 for limits on post-government employment

(what in the United States is called the revolving door) for public ocials.

As many of the forms of corruption discussed in UNCAC stretch beyond bribery, so too do the

protective measures. Article 12, for example, calls for States parties to encourage private rms to

establish compliance systems, in order to establish internal codes of conduct as a buer against

corruption. Article 37 calls for these private entities to cooperate with any investigation, which is

an integral part of a successful compliance system.

The procurement cycle, procurement methods and associated corruption risks

To understand corruption in public procurement, it is important to understand the procurement

process. Public contracting processes broadly follow the same general steps. ere are generally

three phases of the public procurement process: the pre-tender stage, the tender stage and the

post-tender stage. Corruption risks exist throughout the entire procurement cycle:

•

Pre-tender stage: e pre-tender stage includes the decision on the scope of the governmental

need, i.e., deciding which goods, services or works are to be purchased. e procurement

ocials need to identify the relevant technical requirements to determine what exactly will

be sought from the private sector and when. e pre-tender stage also includes the structuring

of the contracting process. In this regard, procurement personnel generally follow a pre-

existing regulatory structure to determine how the process will work, including the timeframes

for bidding, the stages in the process, the number of bidders who are eligible, any applicable

restrictions or exceptions from normally applicable processes, and what transparent commu-

nications systems and opportunities are available between the procuring entity and the bidders.

e pre-tender stage will also involve budgeting.

•

Tender stage: e tender stage includes the invitation to tender, which is choosing which

oeror will become the contract partner by evaluating the actual tender and the tenderer,

and the award of a contract based on established terms and conditions for how the goods,

services or works are to be provided. It includes any conditions or limitations relating to

the award, including agents and subcontractors that may have connections to government

ocials.

Introduction

•

Post-tender stage: e post-tender stage (oen referred to as contract administration) refers

to the administration of the contract to ensure eective performance. Further interactions

of many kinds between the successful bidder and governmental authorities continue during

the course of contract performance, e.g., regarding benchmarks, changing orders, payment

schedules, licensing and permits.

e choice of the procurement procedure is a crucial factor in the procurement process. In par-

ticular, it determines the number of stages intervening between the decision to buy and the actual

purchase. It is important to understand how the choice of the procurement method can have an

impact on corruption in public procurement.

ere are dierent ways of categorizing procurement procedures, for instance distinguishing

between types of procedures with or without a public notice, procedures with one or several stages,

or procedures with or without negotiations. e choice of tender method regularly depends on

the estimated contract value, the estimated number of bidders and the complexity of the relevant

good, service or work (particularly if the procuring entity is able to specify its exact need).

Procurement methods under the most important international texts on public procurement, for

instance under the UNCITRAL Model Law, the World Trade Organization Government

Procurement Agreement (WTO GPA) or the EU Directives, dier from each other; however, a

possible general classication of the various procurement types would be the following:

•

Open procedure (sealed bidding): Open tendering is a formal single-stage procurement method

in which any interested company, without any pre-selection, may submit a bid; bids are

usually made against detailed government specications, and the award is usually made to

the bidder oering the lowest price. is method allows maximum transparency and com-

petition, for it generally requires a public notice advertising the contract opportunity,

exhaustive technical specications and contractual terms, a public opening of tenders and

the absence of the possibility to negotiate the contract. In general, a procuring entity must

use this procurement method unless the use of alternative methods is justied.

•

Restricted procedure: A restricted procedure is dierent from an open procedure in the sense

that only pre-selected qualied companies are allowed to submit a bid. ere are slight

variations in restricted procedures under dierent frameworks. ey may involve a restric-

tion of the bidding to those companies which pre-qualied following a public advertisement

and on the basis of disclosed minimum and/or selection criteria, as is done under the EU

Directives. A restricted procedure may also mean that a public advertisement of a contract

opportunity is not required, as interpreted in the UNCITRAL Model Law. is may happen,

for instance, if the subject matter of the procurement is available only from a limited number

of suppliers.

•

Negotiated procedure: A negotiated procedure is oen used for cases in which it is not feasible

(or not possible) to formulate exhaustive technical specications and contractual terms. It

is thus necessary to enter into a dialogue with the oerors to conclude the contract. A

negotiated procedure is also oen used for cases of failed tendering procedures (e.g., no

tenders or only non-responsive tenders were delivered). Another frequent reason for a nego-

tiated procedure is circumstances of urgency or a catastrophic event.

•

Single-source procurement (direct award or limited tendering): Single-source procurement oen

allows the procuring entity to choose the contracting partner without any form of trans-

parency or competition. is type of procurement constitutes a major departure from the

fundamental principles outlined above. Grounds for direct contracting may include, for

instance, the low estimated value of the contract, the fact that the goods, services at issue

are available only from a particular provider, urgent needs, a catastrophic event, the need

for additional supplies to be procured from an existing contractor, or special concern regard-

ing national defence or national security.

e type of procurement procedure chosen may have a direct impact on the corruption risk

involved in a public procurement. For this reason, the open tendering procedure is oen consid-

ered the method of rst resort (i.e., the default procurement method), and single-source tender-

ing—which poses perhaps the highest risk of corruption and favouritism—is typically allowed

only under exceptional circumstances. It has oen been the case that direct, single-source

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

contracting has been abused to facilitate corruption. ose concerned about corruption have

stressed that single-source procurement done in the name of extreme urgency should occur only

when, for good cause, there is too little time to use the regular procedures and where the urgent

event was truly unforeseeable by the procuring entity and not attributable to that entity. A pro-

curing entity must therefore plan ahead and cannot claim that a requirement was unforeseeable

simply because the procuring entity failed, for example, to gain the external and internal approvals

in due time, or that the minimum deadlines for bid submission cannot be met. In the context of

direct contracting, it is therefore essential that procurement legislation species in detail the

grounds under which single-source procurement may be used. ese grounds must then be strictly

interpreted, and the reasons for use documented in the procurement le.

Procurement is complex and in the case of infrastructure and other large-scale projects, it oen

takes years from project kick-o to completion. Because ocials exercise discretion at every stage

of the process, corrupt government ocials have ample opportunities to seek irregular payments

from prospective contractors. Ocials who receive a bribe or accept an undue advantage may

return the corrupt favour by restricting or eliminating competition; they may do so by splitting

contracts which should be aggregated, tailoring award criteria to a favoured company, approving

anti-competitive consortia which would otherwise violate anti-trust laws, accepting non-responsive

bids, hosting awed bid openings or staging discriminatory contract negotiations. On the private

sector side, temptations to shortcut the process, or to tilt it in some illegitimate way, similarly

abound. Once a contract is issued, the temptations do not stop, as contract administration similarly

involves numerous interactions between the public and private sectors that can lead to corrupt

payments. Bribes can be paid to overlook bad performance or non-performance.

It is important to note that the tendering (or bidding) stage in public procurement, in particular,

is highly regulated. International texts on procurement, especially the UNCITRAL Model Law,

the WTO GPA and the EU Directives, focus on this stage. Practice, however, shows that corruption

risks in the procurement cycle can be equally high before the tender process even begins (in the

pre-tender or planning stage) or once the contract has been awarded (in the post-tender stage).

For instance, it is oen the case that, as a result of corruption or political expedience, large-scale

infrastructure projects (roads, airports, sport stadiums) are initiated although there is no imme-

diate need for such projects. Also, a large number of scandals have stemmed from contractors’

failure to perform according to the contracted terms and conditions. For example, when the

contractor meets delivery requirements by using lower-quality materials, or when contractors have

falsely overstated the volumes of work done and have colluded public ocials to hide this under-

performance. With regard to the bidding stage, it is oen the case that corruption arises even

when policymakers have put in place a sound public procurement regime regulating the tender

phase. Unjustied exceptions from competitive procedures on the basis of national security inter-

ests or on grounds of urgency, in particular in the defence sector, are common examples.

Main actors

It is rarely the case that a single individual is responsible for corrupt behaviour. Indeed, corruption

in the eld of public procurement usually involves a series of actors.

e key actors facilitating corruption are the entity paying the bribe and the recipient of the bribe.

e briber is usually the legal entity competing for and delivering on contracts (e.g., the bidder,

including consortium partners, subcontractors or suppliers). e recipient of the bribe is usually

a procurement ocial with the procuring entity who is responsible for awarding and/or managing

the public contract. Frequently, bribes do not ow directly between the bidder and the procuring

personnel but instead through an agent, consultant or other intermediary.

Corruption—broadly understood here to mean a breakdown in the best-value procurement pro-

cess—may take place even when no procurement ocer is involved. A good example of this is

anti-competitive agreements, such as price xing between bidders. Similarly, politicians tainted by

corruption can attempt to inuence a decision to initiate a procurement procedure, or to award

a particular contract to a certain company.

CHAPTER I.

Public procurement: requirements of

article 9 (1) UNCAC

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

A. Introduction

To ensure legitimate procurement procedures and adequate public records, article 9 of UNCAC

requires: (a) the establishment of a sound procurement system; (b) transparency in procurement;

integrity of public ocials; and (f) soundness of public records and nance.

e protections of article 9 against corruption should not, however, be seen in isolation. As noted,

the UNCITRAL Model Law, and the other provisions of UNCAC itself, frame additional solutions

for failing or corrupt procurement systems. Article 9 simply points to many of the most important

of such anti-corruption tools.

As the discussion above noted, a sound procurement system must balance a number of goals. Of

these goals, experience has shown that competition, transparency and integrity are probably the

most important. With the aim of eciently preventing corruption in the area of government

contracts, article 9 (1) of UNCAC—as noted above—requires States parties to base their systems

of procurement on these fundamental principles. Specically, the Convention requires that the

appropriate systems of procurement its parties must establish are “based on transparency, com-

petition and objective criteria in decision-making that are eective, inter alia, in preventing

corruption”.

is chapter and chapter III below discuss the requirements of article 9 in detail.

B. Fundamental principles

is section addresses what the principles of transparency, competition and the use of objective

decision-making criteria actually mean in practice and how the Convention prescribes their

implementation.

Importantly, article 9 (1) of UNCAC allows parties to the Convention to “take into account appro-

priate threshold values in their application”, when applying the fundamental principles of trans-

parency, competition and objective criteria in decision-making.

Chapter II below will discuss in more detail the key elements of the successful procurement

planning needed to prevent corruption, as required under article 9 (1) of UNCAC, and based on

existing procurement regimes and good practices.

Transparency

Transparency is a key feature of a sound procurement system and generally involves: (a) publicity

of procurement opportunities and the disclosure of the rules to be followed; (b) undertaking

procurement processes publicly and visibly, according to prescribed rules and procedures that limit

the discretion of ocials; and (c) the provision of a system for monitoring and enforcing applicable

rules. Given that procuring entities frequently have a high degree of discretion in the procurement

process, it is also transparency which allows this exercise of discretion to be monitored.

Procurement systems depend on transparency to allow stakeholders (policymakers, ocials, com-

petitors and members of the public) to monitor the procurement process. at monitoring is a

crucial tool to ensure that the government agents in the procurement process—the procuring

ocials and the vendors themselves—pursue the government’s ends and not their own. Transparency

ensures that the rules are followed, and, conversely, to ensure that non-compliance can be both

identied and addressed. It is thus transparency that makes it more dicult to disguise and

maintain discriminatory procurement decisions. Importantly, transparency also facilitates the

achievement of the other objectives of a procurement system (in particular, non-discrimination),

and thus it must be addressed at all stages of the public procurement process.

Chapter I. Public procurement: requirements of article 9 (1) UNCAC

Competition

Competition in public procurement usually means that two or more bidders act independently

and engage in a contest for the opportunity to secure the procuring entity’s contract by oering

the most favourable terms. Competition is a key factor for governments (and their citizens) to

achieve best value-for-money. It leads, in particular, to lower prices and better quality of goods,

services and works. Competition furthermore serves as an important driver of innovation.

Importantly, real competition only ensues in the absence of collusive tendering, which represents

one of the most prominent examples of corruption in public procurement.

Potential suppliers to the government are likely to compete only when they are condent that they

have been provided with all necessary information and that their oers will be evaluated on the

basis of objective criteria in a non-discriminatory way and that decisions of the procurement entity

can be challenged before an independent body.

Objective criteria in decision-making

UNCAC stipulates objectivity in connection with criteria for decision-making as one of its

cornerstone principles.

Objectivity in decision-making in the context of public procurement refers to striving (as far as

possible) to reduce or eliminate biases, prejudices and subjective evaluations.

e principle of objective decision-making criteria in public procurement is closely linked with

the principle of non-discrimination and equal treatment for providers. e latter means that no

distinction should be made between providers of goods, services or works except where this is

justied based on relevant objective considerations.

e principle of objective decision-making criteria in public procurement is also closely linked

with the principle of integrity. Integrity, in particular, requires objectivity at all stages of the pro-

curement process, and ethical conduct by all parties involved, as well as an independent and

eective remedy system. Importantly, integrity and objectivity facilitate other objectives, such as

avoiding corruption, and objectivity demonstrates how the cornerstone principles of transparency,

competition and non-discrimination are applied in practice.

Objectivity can be safeguarded in many ways, for instance, through requirements to disclose all

criteria for participation and qualication of suppliers, rules on technical specications draed

with the express intention of ensuring that procuring entities do not discriminate against and

among foreign suppliers, and requirements guiding technical and price evaluations.

C. UNCAC’s suggestions on ensuring the principles

of transparency, competition and objective criteria

in decision-making

Introduction

In addition to setting out three fundamental principles, UNCAC then sets out how these principles

may be reected in the adoption of a procurement system. By way of examples, UNCAC outlines

several measures which can be used to promote these objectives in public procurement, including:

the public distribution of information relating to procurement procedures and contracts (article

9 (1) (a)), the disclosure of conditions for participation (article 9 (1) (b)), the use of objective and

pre-determined criteria for public procurement decisions (article 9 (1) (c)), an eective system of

domestic review (article 9 (1) (d)), and measures to regulate matters regarding personnel respon-

sible for procurement (article 9 (1) (e)).

e subsection below will focus on these measures set out in article 9 of UNCAC.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

Public distribution of information

Article 9 (1) (a) of UNCAC, calls for the “public distribution of information relating to procure-

ment procedures and contracts, including information on invitations to tender and relevant

pertinent information on the award of contracts, allowing potential tenderers sucient time to

prepare and submit their tenders”. is requirement for publicity is an essential tool to achieve

transparency. Transparency in procurement reveals what otherwise might have been concealed, and

it is considered to be a prerequisite for ensuring the accountability of government ocials.

UNCAC’s requirement on the public distribution of information focuses, in particular, on the

publication of contract opportunities. is will usually mean the public advertisement of a pro-

spective procurement, which will make potential contractors aware of a particular contract oppor-

tunity and will help to ensure that the contract being publicized is not directly awarded to a

favoured company without competition. Public advertisement will thus generally (depending on

the choice of the procurement procedure) also maximize competition and value for money. Article

9 (1) (a) also includes the obligation to make procurement legislation publicly available. While it

is not specically addressed, it would be consistent with the requirements of article 9 to require

the publishing of judicial decisions and administrative rulings.

Publication of conditions for participation

UNCAC, in article 9 (1) (b), calls for the “establishment, in advance, of conditions for participation,

including selection and award criteria and tendering rules, and their publication”.

is requirement is another essential tool to achieve transparency. Publicity of the procedures and

award conditions for each procurement procedure helps to ensure that companies submit bids

which best match the procuring entity’s needs. Publicity will also, in light of anti-corruption eorts,

allow for verication of whether the procedures and conditions for award are in line with appli-

cable procurement laws, and will allow for timely challenge or enforcement proceedings where

those laws have not been followed.

e requirement that the conditions for participation in a particular procurement procedure be

disclosed must include the selection and award criteria and tendering rules. Procuring entities

thus must lay down, in detail, all requirements as to contractor qualications such as personnel

and nancial capabilities and must spell out the criteria on which the winning contractor will be

selected and the contract will be awarded (i.e., whether the award will be based on lowest price

or on a combination of price and other non-price criteria). Tender rules will include, for instance,

the sequence of the procedure, the deadlines for requesting clarication and bid submission, as

well as the permissibility of subcontractors or consortia.

Use of objective and predetermined criteria for decision-making

Article 9 (1) (c) of UNCAC calls for the “use of objective and predetermined criteria for public

procurement decisions, in order to facilitate the subsequent verication of the correct application

of the rules or procedures”.

is requirement goes hand in hand with the requirements for public distribution of information

and for publication of conditions for participation (article 9 (1) (a)-(b)) which follow from the

principles calling for transparency and the use of objective criteria in decision-making.

Selection criteria are objective when the procuring entity’s discretion is limited and biases,

prejudices or subjective evaluations are reduced or eliminated. Criteria for awarding a contract must

be exhaustively specied in advance so that bidders can assess their chances of winning a tender;

if prospective bidders can make that assessment fairly and accurately, the government will be

presented with an optimal group of bidders. e requirement that there be predetermined criteria

for public procurement decisions also means that a procuring entity is, in principle, constrained

in making any drastic changes to contract requirements once those requirements have been dis-

closed (i.e., once the tender documents have been published). is avoids any favourable treatment

of a particular company in the course of the tender procedure.

Chapter I. Public procurement: requirements of article 9 (1) UNCAC

e predetermination of criteria for public procurement decisions is necessary so that those exer-

cising oversight (including, potentially, members of civil society) can verify if the rules laid down

in the tender documents or in the relevant procurement legislation have been followed. at said,

by narrowing procuring ocials’ discretion, these rules make it more dicult for the procuring

agency to adapt to—and capture—rapid advances in the marketplace.

Effective systems of domestic review

Article 9 (1) (d) of UNCAC requires that an appropriate system of procurement include an “eec-

tive system of domestic review, including an eective system of appeal, to ensure legal recourse

and remedies in the event that the rules or procedures established” in article 9 (1) of UNCAC are

not followed.

Eective enforcement in the area of public procurement is of utmost importance. e existence

of mechanisms to monitor compliance with applicable rules and to enforce them when necessary

is a key feature of an appropriate system of procurement contemplated by article 9.

UNCAC does not provide any further guidance as to when it considers a domestic remedy system

eective. For instance, it does not require particular remedies such as interim measures to maintain

the status quo during the challenge procedure, set asides or the annulment of procurement deci-

sions or damages. e Convention is also silent on time limits for launching a challenge procedure,

and on the necessary characteristics of the review body.

UNCAC does, however, require that an eective system of domestic review also include an eective

system of appeal. is means that the ocial decision of the review body of rst instance must

be subject to a formal appeal.

The responsibilities of public officials

Article 9 (1) (e) of UNCAC suggests that implementing States undertake “measures to regulate

matters regarding personnel responsible for procurement, such as declarations of interest in par-

ticular public procurements, screening procedures and training requirements” in the course of

establishing appropriate systems of procurement.

In general, this clause refers to ethics regulations for ocers and employees of procuring entities.

Such regulations usually require procurement personnel (i.e., public ocials) to pursue ethical,

fair and impartial procurement procedures in line with applicable legislation and tendering rules

for a particular procurement. Public ocials should promote and maintain the highest standards

of probity and integrity in all their dealings.

In this light, UNCAC suggests instituting screening procedures for public ocials. ese screening

procedures could be used to assess prospective employees during the appointment process.

Furthermore, it is suggested that entities address training requirements, and that public ocials

concerned with procurement should have to declare any interest they might have in a particular

procurement (e.g., so that a public ocial is prohibited from placing a contract with a rm in

which the public ocial holds personal interests, for instance, or with a company which employs

a member of a public ocial’s immediate family).

Importantly, article 8 of UNCAC regarding codes of conduct for public ocials has direct relevance

to public procurement, including procurement personnel. In its paragraph 5, it refers in particular

to “measures and systems requiring public ocials to make declarations to appropriate authorities

regarding, inter alia, outside activities, employment, investments, assets and substantial gis or

benets from which a conict of interest may result”.

In assessing ethics requirement for public ocials, including procurement ocials, policymakers

may wish to consider that ethics rules and screening procedures are almost always part of part

of a broader fabric of social norms, laws and mechanisms for ensuring social harmony. In that

light, the ethics rules craed to protect the procurement system should complement the broader

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

set of norms and rules, and may well draw upon other formal and informal mechanisms for

maintaining social order.

D. Assessment of the requirements of article 9(1) of UNCAC

As noted, UNCAC requires its States parties to establish appropriate systems of procurement based

on the fundamental principles of transparency, competition and objective criteria in

decision-making.

e rules applicable to establishing an appropriate system of public procurement outlined by article

9 (1) of UNCAC are highly focused. UNCAC is not very prescriptive in describing what rules a

procurement system should include in order to curb corruption. ere is little, for instance, on

estimation of the procurement value, methods of procurement and their conditions for use, public

procurement notices, the required content of tender documents, qualication of suppliers, rules

concerning the description of the subject matter of the procurement, abnormally low tenders,

acceptance of the successful tender, etc. Instead, article 9 relies chiey on fundamental

principles.

In fact, UNCAC allows parties to opt out the fundamental principles set forth in article 9 (1) for

smaller procurements which do not exceed a certain threshold. It is for each UNCAC party to

decide upon the appropriate value for such thresholds. is exception reects the transaction costs

which accompany anti-corruption measures—for some smaller procurements, those transaction

costs could be overwhelming—and perhaps suggests that larger procurements, if tainted by cor-

ruption, carry greater risks to the governing state’s perceived integrity.

It follows from the above that UNCAC allows a very high degree of exibility in connection with

appropriate systems of procurement as long as there is adherence to the principles of transparency,

competition and objective criteria in decision-making. Before implementing the measures pre-

scribed by article 9, States parties will need to analyse their existing public procurement laws and

procedures to assess whether they suce to meet UNCAC’s requirements, or whether further

reforms are necessary.

Checklist for meeting minimum requirements set out by article 9 (1) of UNCAC

Article 9 (1) of UNCAC sets the general parameters for shaping national legislation on procure-

ment. It outlines selected measures which can be used to comply with the Convention’s call for

appropriate systems of procurement “based on transparency, competition and objective criteria in

decision-making that are eective, inter alia, in preventing corruption”.

In order to assess the eectiveness of national public procurement legislation in curbing corrup-

tion, annex II provides a set of questions that will assist States parties in determining whether

their procurement system is in compliance with article 9 (1) of UNCAC.

CHAPTER II.

High-risk areas and key elements of

successfulpublicprocurement

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

A. Introduction

Article 9 (1) of UNCAC sets the general parameters for shaping national public procurement

legislation. It requires establishing appropriate systems of procurement based on the fundamental

principles of transparency, competition and objective criteria in decision-making. A good procure-

ment system distinguishes itself, rstly, by incorporating these principles eectively and, secondly,

by making sure that these principles are applied throughout the entire procurement process.

Experience shows that corruption is likely to creep into the procurement process if these conditions

are not met.

is chapter will map important corruption risks that may arise during the tender process, and

will highlight the most important features a system of procurement must have to minimize those

corruption risks. It will also focus on good practices in this regard. Given that the pre-tender

stage, the tender stage and the post-tender stage face specic corruption risks, this chapter will

focus on these three stages separately. In addition, it will cover the essential features that a robust

procurement system must have throughout the procurement cycle, such as conicts of interest

and an eective remedy system. is chapter also identies examples of good practices in respond-

ing to risks of corruption.

B. Risk mapping and prevention

Pre-tender stage

Needs assessment

Goods, services or works should only be procured by the government if there is an identied need

in the foreseeable future. Needs assessment will in particular involve a decision as to whether the

envisaged purchase is required at all, and whether the envisaged quantities and technical require-

ments and the time and location for contract performance, are justied. Corruption risks in this

stage of the process are particularly linked to: the approval of unnecessary, under- or overestimated,

low-quality or overly luxurious purchases; purchases that are not truly needed in the near future; or

goods that would be delivered only once they are no longer required. Needs assessments oen require

in-depth knowledge of the market. e gathering of information through past experience, market

studies, etc. is essential. If procuring entities do not have the necessary personnel and know-how to

assess the need, in-house procuring entities may hire external consultants.

Good practices to avoid these risks begin with the requirement that the needs assessment be

carried out by more than one member of the procurement team, particularly for high value pro-

jects. Diversifying the assessment team—indeed, almost any team called together to assist in the

procurement process—reduces the risk of individual corruption and strengthens the team’s under-

standing of the requirement and the market. Furthermore, the entire decision-making process

should be documented and transparent, e.g., by organizing consultations with the private sector

or by making feasibility studies available. Transparency International (TI) suggests using public

hearings or other consultation mechanisms in the needs assessment.

e expert opinions of external consultants performing the procurement feasibility assessment

might be biased, for instance due to political pressure. It is, therefore, essential that consultants

be independent and free of any conicts of interest. External consultants need to be contracted

in line with public procurement law, which will oen require a modied tender procedure for

intellectual services. Good practice oen involves the evaluation of the qualications of the apply-

ing consultant being carried out by a competent commission. Ethics provisions should be included

in consultancy contracts to promote the consultant’s integrity. Frequently, external consultants,

such as engineers, accountants and lawyers are subject to a professional code of conduct to pro-

mote the integrity of the consultant. A consultant who was involved in the preparation of a tender

procedure for a particular contract should not be allowed to bid for this contract unless he or she

has no competitive advantage. Good practice may also include involving potential bidders to assist

in connection with needs assessment, so as not to rely solely on the expertise of an external

consultant.

Chapter II. High-risk areas and key elements of successfulpublicprocurement

Example: A government official purchases vaccines against a particular virus without any

competitive tender procedure (justifying this by the urgency of the matter), though he knows

that by the time of delivery the virus will already have mutated and the vaccine will be of

no further use and a new type of vaccine will need to be purchased. This government official

received a bribe from the vaccine manufacturer, which wants to get rid of an outdated vaccine

by selling this product to the government.

Solution: The decision to launch a specific procurement procedure should be taken by more

than one official. The reason given for allowing direct award without any competition (in this

case urgency) should be documented and pre-approved by another public official or external

advisor. The decision should be available for public review and possible challenge, if the

decision was not appropriate.

Categories of procurement

Public procurement usually covers contracts concluded by a public procuring entity for pecuniary

interests which are goods (e.g., supplies or products), services or construction works contracts, or

any combination thereof. e contractual means is usually irrelevant, as a purchase, lease, rental

or hire purchase would all be covered by national procurement legislation.

Although this is an emerging issue in procurement doctrine, good practice suggests that conces-

sions (the award of a right to act in the government’s behalf, or using a public resource) should

also be awarded according to the fundamental principles of transparency, competition and objec-

tivity. A concession is an arrangement very similar to a regular goods, services or works contract

except for the fact that the consideration for the goods, services or works to be carried out usually

consists in the right to exploit these goods, services or works together with payment.

Example: A municipality, which is operating its own local bus service, intends to outsource

these services to a private company. In doing so, the municipality grants a private company

the right to exploit these transport services for payment (i.e., passengers must pay the

private bus operator for tickets). The private bus operator will assume the economic risk

arising from the provision and management of its transportation services, such as the risk

that only few people will use the concessionaire’s buses. The concession period is 20 years.

It is assumed that the annual revenues of the bus operator are around US$ 10 million.

Solution: The public procurement legislation of the hypothetical country requires that service

concessions be granted in accordance with the fundamental principles of public procurement

law, in particular with transparency, competition and objectivity in decision-making.

The municipality, aware of its responsibility for its citizens, publishes the contract opportu-

nity, thereby ensuring that the service concession is opened up to competition. It predeter-

mines all criteria for the decision in tender documents and grants the concession contract

to the best bidder.

Budgeting

Aer the needs assessment, comes the estimation of costs for the goods, services or works to be

purchased. Costs can be estimated on the basis of past procurements or can be based on sound

forecasting methods. Cost estimates must be realistic and should already take into account possible

variations of the contract over time. Procuring entities must ensure timely budget approval and

verify that funds are available. Complex projects, such as large-scale infrastructure projects or

complex information technology projects, are likely to require external specialist advice.

Good practice would suggest conducting in-depth market research to estimate the likely costs of

the procurement. Bid prices that are considerably higher than market prices may be an indicator

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

of collusion between bidders, also known as price xing. Concluding a contract with a company

that oered a considerably higher-than-market price could also indicate collusion between this

winning company and the responsible procurement ocer.

Electronic procurement has proved to be an eective tool in data collection and data management

at the stage of budgeting; for example, an integrated procurement and nance system may yield

rich data on past procurements in the same sector

Good practice also recommends careful consideration of how similar procurements may be aggre-

gated over a period of time. If too many requirements are aggregated too aggressively, potential

suppliers—especially smaller suppliers—may be forced from the market. At the same time, how-

ever, if requirements are split in order to keep procurements under the threshold for regulation,

corruption may ourish in this unregulated realm. In the budget planning stage, it is of particular

importance that skilled and dedicated project ocials be in a position to provide a realistic budget,

relying on sound external experience if necessary.

Example: A procuring entity procures an elevator for a public school for persons with mobility

disabilities. After contract completion it turns out that this elevator needs special mainte-

nance which can only be provided by the contractor and that the maintenance was not part

of the contract. Total costs for the elevator over its life-cycle multiply, because the contractor

charges unreasonably high fees for the maintenance services.

Solution: Good practice includes having budgets and costs of procurements realistically esti-

mated applying a holistic approach, taking into account projected lifetime costs of ownership.

Maintenance should have been part of the competition and accordingly included in the

tendered contract.

Structuring of the bidding process

(a) Tender documents

is stage involves the choice of a procurement method and development of the tender documents

or solicitation documents setting out the terms and conditions of a given procurement.

e tender documents are the key component of any tender procedure. e procuring entity shall

set out in the tender documents all requirements that submissions must meet in order to be

considered responsive and the manner in which those requirements are to be assessed. e tender

documents will include, in particular, the timeframes for bidding, the stages in the process, criteria

regarding eligibility of companies, technical specications, selection and award criteria, criteria for

the rejection of bids or the disqualication of a bidder, legal terms and conditions, as well as

means of communications between the procuring entity and bidders. All these criteria and con-

ditions must be objectively dened, available to all potential suppliers in understandable terms

and applied equally.

Procurement laws, in order to ensure that the competitive process is fully fair and transparent,

typically specify in detail the minimum content which tenders must include. Good practice sug-

gests not only setting out the minimum content of tender documents, but also any information,

useful to those oering tenders, which promotes transparency, competition and integrity.

(b) Procurement procedure

As a general principle, the procurement procedure chosen by the procuring entity should always

ensure the maximum practicable competition. For this reason, the open procedure (or sealed

bidding), is oen the default procedure under procurement legislation.

Chapter II. High-risk areas and key elements of successfulpublicprocurement

Other procedures, such as restricted procedures which restrict the competition to a few highly

qualied bidders, negotiated procedures or single-source procurement should only be allowed

under special circumstances. Grounds for use of these procedures should be dened in the law

and restrictively applied by the procuring entities. While negotiations allow the procuring agency

to respond more nimbly to innovations in the marketplace, negotiations also signicantly increase

the risk of corrupt behaviour. To discourage corruption, bidders participating in negotiations must

be treated equally and provided with the same information. e conduct and result of negotiations

should be documented in the procurement le. e use of non-competitive procedures should be

the exception, and any such procedures must be justied and documented.

Example: A procuring entity enters into (non-competitive) direct negotiations with a manu-

facturer who is already a contractual partner, for the delivery of complex software in the

airport sector. The entity argues that there is no other company providing the required

product and that a standard procurement procedure would be impractical. A couple of

months later, two software producers become aware of the contract award and inform the

procuring entity that they are also able to deliver the ordered software and on more favour-

able terms.

Solution: Good practice suggests that the procuring entity should have conducted an open

tender procedure with a prior public invitation to tender. It was likely that the procuring

entity was not aware that other suppliers, such as foreign companies, would have partici-

pated in the tender procedure, which would have enhanced price and quality competition for

the public contract.

Procuring entities must give suppliers a sucient period of time to prepare applications or tenders.

e response time period allowed should be taken into account, with consideration given to the

nature and complexity of the procurement. Time periods must be extended in case of material

changes or clarications of the tender documents. A reduction of the standard time period can

be considered only in exceptional cases, for instance if a notice of a planned procurement was

published or if tender documents were circulated electronically. Because rushed procurements

may be tainted by corruption or discriminatory favouritism, procurement laws and international

trade agreements, oen establish certain minimum time periods that the procuring entity must

allow for the presentation of applications or tenders.

Example: The solicitation documents in a restricted procedure require that candidates submit

various reference letters to prove their experience with similar projects (past performance).

One week before the deadline for presenting applications, the procuring entity announces

that reference letters must be signed by the respective former clients of the candidate and

that originals of each letter must be submitted (i.e., no copies will be accepted). Due to this

change, only one bidder was able to provide the requested documents in time. The only

company that manages to obtain the signed reference letters was informed of this new

requirement at the very beginning of the tender procedure.

Solution: Good practice suggests that tender documents must describe all significant

requirements. The requirement that signed reference letters be submitted represents a

material change or clarification of the tender documents. The procuring entity should have

been required to extend the deadline for submitting applications appropriately.

(d) Contractor qualication

Contractor qualication requirements must be reasonable in order to make competition possible;

if they are too restrictive, competition will fail.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

At the same time, qualication requirements must prevent fraudulent or incompetent companies

from participating. Bidders which, for example, lack adequate nancial resources or have been

convicted of particular criminal oences, such as corruption or fraud, or which are guilty of grave

professional misconduct should be excluded from a tender procedure. Procurement regimes oen

set out exhaustive lists of criteria that the procuring entity may use in the assessment of the

qualication of suppliers, as grounds for mandatory or discretionary exclusion. Good practice

includes making debarred companies ineligible to be awarded a government contract for a certain

period of time because they have been sanctioned under corruption legislation. Debarred com-

panies are thus automatically disqualied from bidding for a public contract or must (on a case-

by-case basis) be excluded from a particular tender procedure.

Good practice includes collecting declarations of integrity from potential bidders regarding their

eligibility—declarations which may be personally binding on the company principal(s) who

endorse them. A further good practice is the inclusion of an option that allows an economic

operator to provide the procuring entity with evidence that measures have been taken that show

its reliability despite the existence of a relevant ground for exclusion. ese are sometimes referred

to as self-cleaning measures. ese measures usually involve the proof that this economic operator

has taken concrete technical, organizational and personal measures that are appropriate to prevent

further criminal oences or misconduct.

(e) Minimum and selection criteria

Criteria for participating must be designed so as to avoid bias, be objective and relate to the

capacity to perform. ey must be predisclosed, relevant and appropriate with regard to the subject

matter of the procurement and are essential to ensure that the bidder has the legal, nancial and

technical capacity to perform. Criteria for participating may include past performance, which may

call for references. Minimum and selection criteria, which apply, for example, in a two-stage

procedure in order to pre-qualify candidates, should not lead to an unnecessary reduction of

competition. Good practice allows suppliers to freely partner with other companies to submit an

application or tender to full minimum or selection criteria (e.g., as a consortium or by using a

subcontractor). Procurement legislation and/or tender documents should regulate the require-

ments as to bidding via consortia and the use of subcontractors. roughout this process, pro-

curing agencies should recognize that while they may reduce performance risk, or reputational

risk, by tightening qualication requirements for bidders, the agencies run a concomitant risk that

tighter qualication requirements may, in eect, narrow the eld of available competitors and

potentially exclude useful solutions.

Example: A procuring entity initiated a tender procedure for the construction of a soccer

stadium. The tender documents indicated a maximum budget of US$10 million and required

that bidders have had annual revenues of US$50 million from the construction of soccer

stadiums during the past two years. Only one tenderer, which paid a bribe for this require-

ment to be included in the tender documents, meets this requirement.

Solution: Minimum requirements optimally should be objective, relate to the capacity to

perform and be appropriate with regard to the subject matter of the procurement. A mini-

mum revenue requirement of five times the estimated contract costs does not seem to be

appropriate and it restricts competition. It is also questionable whether a requirement

according to which revenues must have come only from the construction of soccer stadiums,

and not, for instance, from a rugby stadium, is justified. Good practice suggests lowering

the revenue requirement to an appropriate volume and taking revenues from the construction

of other sports facilities into consideration.

(f) Technical specications

Technical specications should be designed so as to avoid bias, especially so as not to favour any

particular bidders or particular products or services. ey must be predisclosed, relevant and

Chapter II. High-risk areas and key elements of successfulpublicprocurement

appropriate with regard to the subject matter of the procurement, objective and be based on the

actual needs of the government. Good practice suggests that procuring entities should call for a

particular good or service—a brand name—only where no other suciently precise description

can be used. e call for a particular good can also be followed by the wording “or equivalent”

with a description of the key characteristics being sought. Good practice requires, where appro-

priate, that technical specications be set out in terms of performance and functional requirements

rather than design or descriptive standards. External consultants for draing technical specica-

tions must be independent.

Example: A procuring entity, in an open tender procedure, puts the delivery of 180 laptops

out for tender. According to the technical specifications, the processor must be a “One Intel

Celeron 2.4 GHz with 400MHz FSB and 256KB L2 cache”. Only a few companies are able to

offer this particular processor although other processors exist which have the same perfor-

mance and functionality.

Solution: Good practice suggests defining technical specifications in terms of performance

and functional requirements or adding the wording “or equivalent” in order to guarantee

objectivity and allow maximum competition (e.g., “One Intel Celeron 2.4 GHz with 400MHz

FSB and 256KB L2 cache or equivalent”).

(g) Award criteria

To stem corruption and ensure appropriate competition, the award of a public contract should be

made only on the basis of predisclosed criteria. is may either be the lowest price or a combi-

nation of the price with other criteria, such as the most advantageous or best value tender. Award

criteria should be draed in an objective way to ensure fair, impartial and non-discriminatory

application. e weighting between criteria, and the manner of application for the criteria, must

be set out in the tender documents, and non-price related criteria, such as time for delivery and

extension of the minimum warranty period, should be quantiable, so that they can be assessed

objectively and transparently. Good practice suggests that subjective criteria, such as the viability

of a bidder’s proposed stang schedule, are best evaluated by a panel or commission, to reduce

the risk of individual corruption and to gain the benet of a consensus opinion.

Example: A procuring entity initiates a tender for the delivery of police cars. Tender docu-

ments state that besides the price, other criteria relating to environmental friendliness will

also be evaluated, but those solicitation materials do not provide any further explanation of

such. The environmental friendliness criterion is evaluated so as to favour a particular

tenderer.

Solution: Good practice requires that a procuring entity set out all award criteria and their

relative weighting in detail in the tender documents. For instance, the procuring entity might

state that the lowest price will be evaluated out of a maximum of 80 points and the envi-

ronmental friendliness out of 20 points. While the use of such fixed points has been criticized

by some as overly constrictive, as a practical matter the use of such predetermined points

to make the award helps to shelter the process from the corruption that can work its way

into a more open-ended, subjective procurement process.

In this hypothetical, the cars’ environmental friendliness could be divided into the subcriteria

of fuel use and CO

emissions, with the lowest fuel use in litres per 100km being awarded

15 points (the highest fuel use 0 points) and the lowest CO

emissions in grams per 100km

5 points (the highest CO

emission 0 points). Other scores would be calculated by linear

interpolation. The actual fuel use and CO

emissions could be assessed by an independent

and accredited testing laboratory.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

Tender stage

(a) Public notice

For the reasons described above, transparency and competition are of the essence in public pro-

curement. As a general rule, a procuring entity should therefore publish a public notice of its

intent to procure goods or services, so that potential bidders can become aware of any contract

opportunity with the government. Advertising a notice of intended procurement is one of the

cornerstone elements of an appropriate procurement system. A public procurement notice must

include certain minimum information so that potential bidders can assess whether a particular

procurement is of competitive interest to them. e notice should include, at the least, a short

description of the subject matter of the procurement, the deadline for bid submissions, where the

tender documents may be obtained, and the contact point for enquires. All prospective bidders

must receive the same information to ensure a level competitive eld. Good practice includes

advertising contract opportunities as broadly as possible—including internationally—so that a

broader group of suppliers may compete for the contract. Procurement methods without notice

should be the absolute exception.

(b) Requests for clarication

Procurements are inherently complicated, and solicitation documents may be unclear. Potential

candidates and bidders should therefore have the right to request clarication of tender documents.

e procuring entity should promptly reply to any request for information, and certainly in due

time before the deadline for submitting applications or the bids. Clarications of the solicitation

should typically be provided in writing, and should be circulated to each company which was

originally provided with the tender documents so as to ensure equal treatment. Good practice

suggests extending deadlines in the event that clarications are material, so that prospective bidders

can accommodate the new information.

Example: A procuring entity tenders a framework agreement with the duration of three years

for the delivery of knee implants for one of the largest hospitals in the country. The tender

documents specify that the maximum quantity of implants that will be competed among the

contract holders (the number subject to individual orders or so-called “call-offs”) during the

duration of the framework agreement is 3,000 implants, but the tender documents do not

specify any minimum purchase volumes or when it is likely that individual orders will take

place. A potential bidder requests clarification, indicating that it is not possible to calculate

a reliable price given the lack of a volume structure. The procuring entity proffers its clar-

ification only a week before tenders are due.

Solution: Good practice suggests that the procuring entity should specify the likely volume

structure (e.g., that it is intended to order 600 knee implants in the first year of the frame-

work agreement, 1,000 knee implants in the second and 1,400 knee implants in the last

year of the framework agreement) and that at least 50 per cent of the estimated volume

projected for each year will be ordered (competed). Because here the procuring entity has

issued this clarification only one week prior to the deadline for submitting a bid, good practice

suggests extending this deadline for another seven days to give bidders sufficient time for

calculating bids.

To ensure transparency, bids should be opened immediately aer the deadline for submitting bids

in a public bid opening session. All tenderers should be permitted to be present at the bid opening

session. Absent extraordinary circumstances, bids which were submitted aer the deadline nor-

mally need not be evaluated. In a traditional open tender, the procuring entity should be required

to announce the names of all bidders and the prices oered. Good practice requires that, for open

tenders at least, not only the price but all the other elements of a bid which are necessary for

applying the award criteria should be announced. To ensure transparency and accountability,

Chapter II. High-risk areas and key elements of successfulpublicprocurement

minutes should be draed and made available to all tenderers and other interested persons not

present at the bid opening.

A procuring entity should be allowed to refrain from a public bid opening only under very limited

circumstances (for instance, in a negotiated procedure where disclosing the names of the bidders

who submitted the rst bid could then lead to collusion between bidders before submitting the

nal oers).

Example: A procuring entity is tendering the supply of office chairs for a district court. The

award criteria are the price and the delivery time. The price is weighted as 80 per cent (=

80 points for the lowest price). With respect to the non-price related criteria, a bidder offering

a delivery time between 6 and 5 months gets 5 points; between 5 and 4 months 10 points;

between 4 and 3 months 15 points, and less than 3 months, 20 points. For a delivery time

of more than 6 months, no points are awarded. Two companies submitted bids. In the public

bid opening, only the names of bidders and prices are disclosed. The prices were almost

the same. One company offered a delivery time of 4.5 months (by ticking the appropriate

box in the tender documents) while the second bidder deliberately did not offer any delivery

time. No minutes were drawn up.

A corrupt government official, in return for receiving a bribe, ticks the box “less than 3

months” in the second bid after the bid was submitted. This was the decisive factor in win-

ning the tender and for the contract award. In fact, the office chairs were delivered 8 months

after contract conclusion.

Solution: Good practice requires that all elements of a bid which are relevant for applying

the award criteria and the evaluation of the successful bid be announced in the bid opening

session. Minutes must be drawn up containing all relevant details of bids and be handed

out to tenderers present at the opening of bids.

(d) Evaluation of tenderers and tenders

Tenders may be evaluated only on the basis of the predisclosed requirements and criteria.

e evaluation of bids should, as a general rule, be carried out not by a single individual but by

a committee with the relevant technical and economic experience. If the evaluation is done

by one individual only, the resulting decisions should be reviewed and approved by that individual’s

superior.

Non-responsive tenders must be rejected. Procuring entities should have the right to ask bidders

for clarication of their tender as long as this was done in a non-discriminatory and transparent

fashion. Changes to the bid aer the deadline for submitting the bid should, in general, be pro-

hibited. Procurement regimes sometimes provide for the opportunity to correct unintentional

errors of form or errors which do not involve any substantial change of the bid. A correction of

errors should be allowed only in exceptional cases given that allowing for corrections may risk

granting a particular bidder an illegitimate advantage. is could occur, for instance, in the case

of a company that submitted a bid which failed to comply with certain mandatory requirements

according to the tender documents, and which intends to bribe the responsible public ocial to

remedy this error aer the bid was submitted.

In general, it is strictly forbidden to negotiate the contract aer bid submission. Exceptions to this

rule apply only in those cases where the chosen procurement procedure allows for a dialogue

between the procuring entity and the bidder (e.g., a negotiated procedure). All decisions should

be documented, including the compilation of an evaluation report containing the result of the

evaluation of the tenderer and the tenders.

Example: A procuring entity is planning to award a contract for copy paper on the basis of

lowest price. According to the tender documents, the copy paper must be delivered to 20

different locations in total. The tender documents required bidders to offer a price for the

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

copy paper and a price for the transport of the copy paper to each of the 20 locations (the

overall price thus had 21 price components). The submission of an incomplete price offer

was specified in the tender documents as a ground for deeming a bid non-responsive.

One bidder did not offer a price for the transport of the copy paper. After bid submission,

this bidder bribed the responsible procurement officer to allow it to remedy this defect by

sending an amendment to the bid offering a price for the transportation of the copy paper.

The bidder who submitted the amended price after the deadline for bid submission was

awarded the contract because he offered the lowest overall price.

Solution: Good practice requires that non-responsive bids must be rejected. The procurement

officer did not have any discretion in this regard, since the submission of an incomplete

price offer was expressly defined as being a ground for rejection of a bid. In addition, an

incomplete price offer should be considered non-reparable regardless of any provision in

the tender documents. A bidder who is granted the opportunity to submit parts of the bid

after the respective deadline has an illegitimate advantage over the other bidders and is

treated more favourably, as this bidder has more time to prepare the bid. Furthermore, good

practice suggests that award decisions should be made by more than one person or at least

be reviewed and approved by a superior.

(e) Publication of intended contract award and awarded contract

Aer bid evaluation and ranking of bids, bidders should be promptly notied about the procuring

entity’s intention to award the contract to the successful bidder. is award decision should, for

reasons of transparency, contain sucient information, besides the name of the successful tenderer,

the contract price and a summary of other characteristics and relative advantages of the successful

tenderer, to allow all bidders and stakeholders to assess whether the procuring entity’s decision is

reasonably based. e award notice should include the standstill period (i.e., the period during

which the procuring entity is not allowed to conclude the contract), if such a period is specied

in the relevant procurement legislation. Good practice suggests that the opportunity of a debrieng,

either in writing or orally, should be oered to suppliers on request. Aer contract award, the

procuring entity should publish an award information notice.

Example: A procuring entity tenders waste disposal services for toxic waste based on the

most economically and technically advantageous offer. The two award criteria are the

(a)

price

and

(b)

technical and safety features of the waste collection vehicles. Both factors are weighted

as 50 points and the second criterion is further subdivided into five different subcriteria

weighted as 10 points each. The award notice announced bidder C to be the successful bidder

and justified this on the basis that he offered the lowest price. In fact, bidder C ought to

have been ranked second because he scored only 10 points in connection with the waste

collection vehicles offered. Even upon request, the remaining bidders were not provided with

any information beyond the name of the winning tenderer and the price offered by this

company.

Solution: Good practice requires that an award notice, when awarding a contract on the basis

of the most economically and technically advantageous offer, include not only the price but

also the relative advantages and the characteristics of the successful bid. Only the disclosure

of the relevant characteristics of the waste collection vehicles offered would have allowed

others to assess whether the procuring entity’s award decision was justified. Good practice

requires the procuring entity to re-issue an appropriate award notice.

Post-tender stage

e post-tender stage commences once a contract is awarded. It refers to the implementation and

administration of the contract and has the objective of ensuring eective performance according

to the agreed contractual obligations. is stage is oen also referred to as contract administration.

Important international texts on procurement, especially the UNCITRAL Model Law, the WTO

GPA and the EU Directives, as well as many national domestic public procurement regimes, oer

Chapter II. High-risk areas and key elements of successfulpublicprocurement

little guidance in relation to this stage of the contract since these legal texts are concerned with

the prior phase, of contract formation. Similarly, article 9 (1) of UNCAC does not specically

focus on the post-tender stage. Due to its focus on preventing corruption in the area of public

procurement, UNCAC seeks to ensure that public contracts are awarded in a transparent and

competitive manner by using objective criteria in decision-making and that an eective system of

domestic review will guarantee that breaches of these principles can be challenged.

In practice, however, corruption risks in the procurement cycle are particularly high once the

contract has been awarded. Contract specications or the scope of work are oen altered aer

contract conclusion, and contractors all too oen do not perform according to their contractual

obligations. Due to an understanding between the contractor and a corrupt public ocial, devi-

ations from what has been agreed to between the parties, such as poor quality or defective per-

formance, may not result in any negative consequences. e same is true for unjustied change

orders, that is, orders which increase the scope of goods or services and, at the same time, the

costs of the contract, oen through highly uncompetitive prices.

Good practice includes the setting-up of an eective monitoring system regarding the verication

of compliant contract performance, for both contract terms and specications. Contract changes

should be allowed only if this possibility is provided for in the contract or the law (e.g., by a clear

and pre-established monetary cap on the contract’s value), or if those changes will not substantially

change the essence of the contract.

Example: A procuring entity awards the delivery of ten diesel locomotives in an open tender

procedure. After the contract is signed, the contractor and the procuring entity come to the

understanding that, five electrical locomotives are also to be paid for and delivered under

the contract. The contractor is one of the few companies that can deliver both

technologies.

Solution: The additional order for five electrical locomotives under the awarded contract is

problematic in various respects. It alters the quantity of goods as well as the contract’s

value substantially. Because the order comes after the award, and the order is made in the

relatively non-transparent context of administration of an existing contract, the order raises

concerns about corruption. Also, the order changes the subject matter of the awarded con-

tract partially from diesel locomotives to diesel and electrical locomotives. The supply of

electrical locomotives was at no time subject to a competitive tender procedure. According

to good practice, the correct course of action would have been to include the delivery of the

five electrical locomotives in the original tender or to initiate a separate competitive pro-

curement procedure for the delivery of the five electrical locomotives.

C. Effective remedy systems

An eective remedy system, which is also known as a challenge or bid protest system, in public

procurement is a key element of a robust procurement framework. For this reason, article 9 (1)

of UNCAC explicitly calls for an eective system of domestic review in public procurement.

An eective review mechanism has several purposes. Most importantly, it is an incentive to respect

an established procurement system because non-compliance will be enforced. Bidders have the

right to turn to a review body, which will then verify whether a decision by the procuring entity

was made in conformity with applicable rules.

An eective remedy system requires that an application for review be heard by an independent

body. e notion of independence with respect to the review body usually means independence

from the procuring entity rather than independence from the government. For instance, a body

that merely has the competence to approve or disapprove of certain actions of the procuring entity

probably will not qualify as truly independent. e same will be true if this body advises a pro-

curing entity on public procurement procedures.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

It is good practice for a reviewing body to include, or be composed of, outside experts independent

from the government, such as experts from statutory professional representations such as a chamber

of commerce or a non-governmental organization. It is also good practice to have the manner of

the appointment of members of a review body and the duration of their term specied in the law

or in other regulations. For instance, personal independence should be guaranteed by the fact that

any arbiter is appointed for life, is not subject to transfer, and cannot be relocated involuntarily.

Whether the review body is an impartial administrative authority or a judicial authority, and

whether it specializes in public procurement law cases, will depend in part on the legal system in

the country concerned. e decisive factor is that the independent body be aorded the highest

possible degree of autonomy and independence of action from the executive and legislative

branches.

Eectiveness in the area of remedies will also require that any supplier which has, or has had, an

interest in a particular procurement will be granted sucient time to prepare and submit a chal-

lenge. Procurement legislation usually sets out a minimum period of time to le a complaint,

starting from the time when the basis for the challenge becomes known or reasonably should have

become known to the supplier. It is good practice to ensure that an aggrieved bidder is able to

appeal any important decision or action taken by a procuring entity.

Remedies in an eective enforcement system usually include interim measures and corrective

measures, as well as damages. e possibility of suspension of a procurement procedure as an

interim measure while the challenge is pending is essential, because this prohibits the procuring

entity from entering into the contract before the review body has decided on an application for

review. A suspension will allow the reviewing body to verify whether the challenged decision was

made in accordance with the rules and the solicitation materials. If it is found that a decision was

issued in breach of the applicable rules, the review body may make use of a corrective measure,

such as prohibiting the procuring entity from taking a decision, or overturning or revising a

decision of the procuring entity. Procurement systems also oen provide for the payment of

damages for breaches of procurement law by the procuring entity. Damages may comprise com-

pensation for the loss or damage suered such as the costs of participation in the tender procedure

and/or the loss of expected prots.

A weakness in many procurement systems is the lack of eective remedies in situations where the

contract has already been concluded. National procurement legislation may, therefore, provide for

the possibility of setting aside contracts that have already been concluded, if they were the product

of a awed formation process. If this is not feasible, procuring entities could be obliged to pay

penalty payments for having entering into public contracts in breach of public procurement law.

UNCAC sets out various consequences for corruption, which are also relevant in the area of public

procurement. ese include the annulment of a contract which was entered into as a result of

corrupt behaviour, such as a bribe, and compensation for damages.

D. Further corruption prevention strategies in public

procurement

Sound legal frameworks for public procurement and anti-corruption are important pillars in the

ght to reduce corruption. Both are prerequisites for a transparent, competitive and objective

procurement system. Respect for the rule of law is essential. Experience has shown, however, that

legislation alone is not sucient to prevent corruption in public procurement. If that were the

case, corruption in public procurement would barely exist in countries with advanced legal regimes

based, for example, on the UNCITRAL Model Law or the EU Directives.

It is essential that legal frameworks be supported by other eorts to ensure qualities such as

accountability and integrity. Various additional strategies have proven to be particularly useful in

ghting corruption in public procurement.

Chapter II. High-risk areas and key elements of successfulpublicprocurement

Integrity of public officials and bidder employees

Both the public sector and the private sector must ensure that only professional, honest, reliable

and skilled sta who demonstrate integrity are involved in public procurement activities. Sta

must be appropriately informed and trained on how to navigate through complex legal frameworks,

such as public procurement and anti-corruption laws. A robust compliance programme that

includes a code of conduct is considered important, to provide contractors and potentially public

agencies a framework for following the law (see annex II below on how to implement robust

compliance programmes in the area of public procurement law). Article 8 of UNCAC also calls for

the implementation of codes of conduct for public ocials.

Procurement personnel, in particular, exercise discretion throughout the entire procurement cycle.

Eorts to limit the discretion of procurement ocials with specic rules of operation have proven

eective in curbing corruption. To this end, important decisions such as the approval of tender

documents, the decision to reject a bid or the decision to award a contract to a particular bidder

should be made by more than one person, or through a process that includes several informed

stakeholders. e same is true for bidders. e decision, for instance, to partner with other com-

panies when participating in a tender procedure or to set a nal bid price, should be undertaken,

or at least reviewed, by a group of people.

Exclusion, suspension and debarment

As anti-corruption initiatives around the world gain momentum, one device for ghting corrup-

tion—debarment, or blacklisting, of corrupt or unqualied contractors and individuals—has

emerged as an especially noteworthy tool. Governments and international institutions have devel-

oped their own debarment systems, to exclude contractors that have committed certain types of

wrongs such as bribery or fraud or, more broadly, to exclude contractors that pose unacceptable

performance or reputational risks because of bad acts or broken internal controls. Although

UNCAC does not specically cite debarment as an anti-corruption tool, the Legislative Guide for

the Implementation of the United Nations Convention,

notes that States parties should implement

appropriate measures, such as debarment, to encourage compliance with UNCAC’s anti-corruption

requirements.

As debarment systems have matured in dierent countries, two broad models for debarment have

emerged. e rst is a highly discretionary approach, such as that used by the United States federal

procurement system, under which a senior contracting ocial, acting on behalf of one or more

government agencies, may exclude contractors because of almost any serious issue regarding con-

tractor qualication. e alternative model, used by the World Bank (WB) in its sanctions system,

is much more focused: under this approach, the reviewing ocials act in an adjudicative manner,

and a formal determination must be made as to whether the contractor in question has committed

acts that qualify as grounds for debarment, under a specic list of prohibited acts. e EU

Directives, for example, do not provide for a debarment regime, but for an ad-hoc approach of

exclusion in which each procuring entity has to determine, on a case-by-case basis, whether or

not a particular company is suitable and reliable or should be excluded from a public tender

procedure.

Suspension or debarment from public contracts has proven to be an eective tool in the ght

against corruption. Depriving private companies of the opportunity to do business with the

government is likely to be one of the strongest deterrents for future wrongdoers, and it ensures

that the government does not contract with those contractors that lack eective internal

controls.

Collective action

Collective action, which is a collaborative and sustained process of cooperation of like-minded

stakeholders, has become a concrete policy issue in the ght against corruption. is is particularly

is discussion is adopted from Cross-Debarment: A Stakeholder Analysis, Christopher R. Yukins, to be published in

the Geo. Wash. U. Int’l L. Rev., 2013 (forthcoming).

Legislative Guide for the Implementation of the United Nations Convention against Corruption, UNODC, 2006: 338.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

true in the area of public procurement, where private companies, governments, international

organizations, civil society, academia, etc. join forces to limit the opportunity for corruption in

the business environment. e goal of this collective action is to create a level playing eld for

companies competing for government contracts. Public procurement processes should be trans-

parent and exclusively based on market economic criteria, such as price, quality and innovation,

so that the best bidder is awarded the contract and not the bidder who, for instance, paid the

highest bribe. Collective action seeks to put this principle into action and to ensure that bidders

competing for public contracts are not disadvantaged for acting honestly and ethically.

Despite the protective legal frameworks already in place, corruption in public procurement remains

a challenge for governments and companies around the world. It is vital that all actors in society

cooperate to counter corruption when taxpayers’ money is spent awarding public contracts. All

actors involved are required to build an alliance and to act collectively in the ght against

corruption.

Governments should, therefore, implement UNCAC so that public procurement processes are

conducted in a transparent and competitive manner, based on objective criteria. Companies com-

peting for public contracts should implement eective compliance programmes in order to prevent

corruption. Civil society should monitor the eorts governments and companies are making in

order to ght corruption in a watchdog role.

ere are various methods of collective action, the most important of which are integrity pacts,

including anti-corruption declarations, principle-based initiatives and codes of conduct:

•

Integrity pacts: Integrity pacts usually refer to a particular tender and include a written

agreement between the procuring entity and all bidders agreeing to refrain from corrupt

practices. A violation of the agreement is sanctioned (for instance, by penalty payments,

right of exclusion for future tenders, damages, etc.). Frequently, an independent monitor is

appointed to oversee compliance with the integrity pact.

•

Principle-based initiatives: Public procurement processes are oen very complex and this

complexity plays an important role when it comes to corruption in the area of public

procurement. Principle-based initiatives include the promotion of collective action methods,

training and capacity-building programmes, information campaigns and best practice

sharing. In particular, training programmes with the contributions of the public sector, the

private sector and civil society explaining corruption risks in the procurement cycle and

how to tackle these risks are vital so that anti-corruption eorts in public procurement

are eective.

•

Compliance systems: Compliance systems include business principles that reject corruption

and put standards and procedures in place to ensure that the entity acts according to the

legal requirements. A compliance system in the area of public procurement should not only

focus on anti-corruption law but also on public procurement law. e content of the

compliance system will be dierent if it is for the government or a private bidder, depending

whether it relates to an entity which may pay a bribe or an entity receiving a bribe.

Civil society procurement monitoring

Civil society plays an essential role in monitoring procurement processes to ensure that public

procurement is conducted in a transparent, competitive and objective manner. Civil society—be

it a single citizen, media, a company, an NGO, academia, etc.—may identify possible improper

public ocial action which may be the result of collusion between a public ocial and a bidder.

For instance, a journalist may discover that the number of computers contracted and purchased

for a public school was not delivered or that a procurement ocial is providing incomplete infor-

mation to selected bidders in order to favour a certain company, which repeatedly wins contracts

from the same procuring entity.

Civil society, therefore, frequently generates pressure against corruption in public procurement,

leading to the penalization of corrupt actors.

Chapter II. High-risk areas and key elements of successfulpublicprocurement

In order to allow eective monitoring by civil society, access to government information is needed.

Good practice in the area of public procurement suggests that information regarding awarded

contracts, including the name of the contractor and the contract price, should be publically avail-

able, either through transparency measures or through access to information regimes.

Whistle-blowing

Whistle-blowing, the reporting of information about perceived corruption, has proven to be an

important tool in the ght against corruption. In the area of public procurement, whistle-blowing

by individuals directly involved in the procurement process is particularly important. ose per-

sons involved in the process may be the only ones who have access to procurement documents,

such as the evaluation report on the submitted bids, and therefore the highest potential knowledge

of corrupt behaviour. In addition, these individuals usually possess the necessary technical and/

or legal knowledge to notice corruption.

Whistle-blowing allows insiders to provide information to other individuals or organizations, such

as the compliance ocer within the corporate structure of a private company participating in a

public tender or a public anti-corruption authority, so they can take the necessary steps.

In order to encourage reporting of corruption, it is absolutely essential to have eective

whistle-blower protection systems in place.

E-procurement

E-procurement became a key component in the reform and modernization of public procurement

frameworks in many countries worldwide. e use of electronic procurement can be very ecient

in increasing competition and transparency, and can therefore greatly help in reducing corruption

in public procurement.

E-procurement tools include the electronic publication of contract opportunities, the electronic

distribution of tender documents and the electronic submission of bids. Importantly, all the tools

of e-procurement (e.g. e-communication, e-submission, e-tendering, etc.) have one essential eect:

they eliminate or minimize the direct human interactions between bidders and the procurement

personnel, interactions which are one of the main sources of corrupt behaviour in public

procurement.

E-procurement in the area of anti-corruption is also important for other reasons. In particular,

e-procurement has the advantage of allowing for easy data generation and data management.

is could in particular be helpful in the assessment of oered prices, to assess whether bid prices

are reasonable and in line with market rates, such as by benchmarking collected data such as

prices/price items in an electronic database with oered prices in a particular tender procedure

in order to detect overpricing or bid rigging.

Electronic data collection and data management in the area of public procurement could also

constitute an important tool in helping to comply with article 9 (3) of UNCAC, which requires

its parties to preserve the integrity of its records, including accounting books or other documents

related to public expenditure.

For all the reasons mentioned above, States parties to UNCAC adopted resolution 3/2 on preven-

tive measures which invites States parties “to consider the use of computerized systems to govern

public procurement”.

e use of e-procurement is well suited to assisting countries to establish

systems of public procurement based on the fundamental principles of transparency, competition

and objective decision-making as required by article 9 of UNCAC.

Conference of the States Parties to the United Nations Convention against Corruption, Resolution 3/2, para. 13,

UNODC, 2009. http://www.unodc.org/documents/treaties/UNCAC/COSP/session3/V0988538e.pdf

CHAPTER III.

Public finance and public records:

requirements of articles 9 (2) and (3)

UNCAC

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

A. Introduction

A weak public nance management system leaves the door open for corruption. Corruption, in

turn, can damage public nances, public condence in the government and delivery of services

to the citizens. To address this challenge, article 9 (2) of UNCAC requires each State party to take

“appropriate measures to promote transparency and accountability in the management of public

nances,” such as: (a) procedures for the adoption of the national budget; (b) timely reporting of

expenditures and revenues; (c) a system of accounting and auditing standards and related oversight;

(d) eective and ecient systems of risk management and internal control; and, (e) corrective

actions to remedy non-compliance of UNCAC requirements where appropriate.

ese provisions mark out the general means of preventing, monitoring and remedying corruption.

While implementation requires technical measures in diverse subject matters, all of the measures

are rooted in the principle of public money for public good.

B. Public finance management

Budget formulation and adoption

Article 9 (2) (a) of UNCAC calls for procedures for the adoption of the national budget. Since

corruption diverts public funds to unlawful ends, a healthy public nance management system

must begin with identifying the public scal’s legitimate aims. is process draws on how the laws

and politics allocate scal powers and responsibilities among the executive, the legislature, other

State entities, subnational governments and central banks. Indeed, with increased transparency in

government, even non-governmental stakeholders, such as civil society, the private sector and

international organizations, can play a part.

e division of scal powers begins with a basic legal framework comprising the constitutional

provisions, statutes on public nance management, nancial regulations and other frames of ref-

erence like accounting standards. Ideally, the country should have a budget law that addresses

public nance management from the beginning to the end, including: powers and responsibilities

for budget preparation, formulation, adoption, execution, accounting and auditing; key procedures

such as budget timetables, reporting deadlines, the format of budget documents; and substantive

requirements such as expenditure ceilings, treasury functions and public debt.

e main driver of budget adoption is the executive-legislature relationship. e executive is usu-

ally responsible for preparing the initial budget before presenting it to the legislature for adoption.

During this process, ocials and legislators can be swayed by corruption to earmark projects for

their constituencies or to pad scal assumptions with room for future corruption. e legislature’s

ability to examine, debate and amend the budget can check abuses by the executive agencies;

however, there must also be constitutional and legal measures (e.g., balanced budget requirements)

that check the legislature’s power against abuse.

Within the public nance management system itself, the budget can deliver at least a reality check:

policy actions have a cost; the government has a limited bank account; and even honest spending

choices may entail controversial trade-os. To serve policy, the budget needs to be comprehensive.

is requires the inclusion of a national chart of accounts, a budget classication system, macro-

economic outlooks, all spending authorizations, extra-budgetary funds and activities, contingencies,

and quasi-scal operations, just to name a few. Performance-based budgeting and a medium-term

budget framework can help to account for long-term consequences. A comprehensive budget

planning process helps to draw the line against the illegitimate shadow budgets that understate

the government’s liabilities or conceal corrupt operations.

Timely reporting of revenues and expenditure

Article 9 (2) (b) calls for “timely reporting on revenues and expenditures.” Although the UNCAC

text is silent on the subject, timely reporting is only meaningful if there is an eective budget and

nance process that supplies the necessary information. Revenue administration and budget

Chapter III. Public finance and public records: requirements of articles 9 (2) and (3) UNCAC

execution are high-risk areas for corruption because cash changes hands in these stages. Corruption

can erode budget expectations, through the evasion of taxes or taris, or because of diversion of

funds from their intended expenditures.

In revenue administration, corruption brings in lower revenues. Red ags include high tax burdens,

opaque laws and procedures, arbitrary exemptions, and a lack of monitoring and enforcement

sanctions in collections and assessments. ese suggest a potential for collusion between ocials

and tax evaders. To enact reform, a State should begin with an ecient and transparent tax system

that minimizes intervention by ocials. e linchpin of such a system is the self-assessment of

liabilities by the taxpayer coupled with targeted and appealable reviews by the government. To

that end, governments should ensure transparent tax obligations and liabilities, eective taxpayer

registration and tax assessment, and eective collection procedures. Within the tax agencies, cor-

ruption needs to be controlled by a network of checks and balances which separate certain key

functions (e.g., policy and enforcement), and which make ocials monitor one another along the

process.

In expenditure management, eective execution requires a series of controls to enforce the adopted

budget. As with revenue administration, activities (contracts, debts and asset management) involv-

ing frequent transfers of money between the public and private sectors deserve scrutiny. Execution

must follow the money along the expenditure cycle: allocation of appropriations, commitment,

acquisition/verication for accepted services and goods, and payment. is multi-step system helps

to deter corruption by dividing powers of payment among multiple ocials. For each stage,

depending on the transaction, the government also needs to limit ocials’ discretion with specic

rules of operation and clear standards of review.

Timely reporting of revenues and expenditures tells oversight authorities whether the ministries

are carrying out the budget as authorized. Whether ministries can deliver timely, complete, rele-

vant, reliable and compliant nancial reports, reects on the health of the scal operations. To

overcome the incentive of insiders to withhold information, the best practice is to mandate a

schedule of release for scal documents, such as annual budget documentation and nancial

reports, mid-year reports, periodic budget execution reports, external audit reports and special

reports such as pre-election reports.

Accounting and auditing

Accounting

Article 9 (2) (c) of UNCAC calls for a “system of accounting and auditing standards and related

oversight.” While accounting and auditing oers no prot for corruption per se, poor or collusive

accounting and auditing compound the harms of corruption by making it hard to detect. us,

accurate accounting and independent auditing are essential backstops against corruption.

Timely reporting of revenues and expenditures requires the government to have a system to record

and organize its nancial information in the regular course of business. As with any other large

private entity, a proper government accounting system needs:

•

A double-entry ledger; adequate, clear and well-documented procedures for accounting and

bookkeeping; a common expenditure classication system

•

Consistent recording, reporting and reconciliation of accounts and transactions

•

Adequate security and controls

•

Disclosure of transactions under suspense accounts and accounting policies.

Unlike the private sector, the government also needs to track the lifecycle of appropriations through

budgetary accounting. is diers from commercial accounting in its focus on compliance with

the budgetary authorizations and on the underlying budget laws or appropriation acts.

e two current challenges to transparency are cash-based accounting and disparate national

standards. A cash-based accounting system recognizes transactions only when the government

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

pays or receives money associated with the transaction. Cash accounting provides limited and

oen untimely information about the government’s transactions, assets and liabilities. Yet, many

countries still follow cash accounting and/or budgeting. As a result of cash accounting and diver-

gent accounting standards, the international community oen lacks a comparable basis to evaluate

any given country’s eectiveness and transparency in public nance management.

Auditing

A rigorous audit system includes a hierarchy of internal audits, external audits and legislative

oversight. As a practical matter, it is the independence of the auditors, a mechanism for corrective

action, and recourse to political oversight that ensure an eective auditing system.

As the rst line of defence, the internal audit evaluates whether the organization is complying

with internal standards, so as to assure managers that their objectives are being achieved and the

organization’s internal control environment is adequate. While the nancial management unit for

each government agency is typically responsible for the agency’s internal audit, as well as the

standards of its own agency, the internal auditor should also look to national and international

standards. To encourage corrective action, the auditing group should build trust with management

through clear and credible ndings and cost eective recommendations before undertaking any

recourse to external oversight.

Nonetheless, the internal audit is oen constrained by its management environment, the evaluation

of which is best le to the agency’s external auditors, e.g., the supreme audit institution. e supreme

audit institution generally centres its work on the regularity audit of the nancial accountability of

individual agencies and of the government as a whole, systemic public nance management issues,

nancial systems and transactions, internal controls and audit functions. e institution may also

conduct performance audits, compliance audits on the legality of specic transactions, and attestation

audits on the integrity of the administration and accuracy of the nancial report data. Ultimately,

the legislature can exercise oversight during the course of a scal year through a general oversight

committee, such as a public accounts committee, or even through regular legislature committees

that have programmatic or budgetary oversight over specic agencies.

In the end, an audit is meant for assurance, not insurance. Auditors only check the standards, and

do not design or implement them. Given the human, nancial and political resource constraints

on auditors, a government may need to design a system of controls and strategize risk management

to set the proper foundation for the auditors’ work.

Internal controls and risk management

Article 9 (2) (b) of UNCAC calls for an “eective system of risk management and control,” which

is essential to detecting and controlling scal irregularities. Internal controls can be preventive

measures to enforce budget authorizations, policy priorities and other laws and regulations gov-

erning public nance management. ese include the separation of duties, hierarchies of approvals

and reviews, cross-monitoring among independent actors, accounting controls, documentation

requirements and personal certication. Controls can also be remedial measures to catch and x

problems during execution, such as nancial reporting, performance monitoring, protection of

whistle-blowers and internal audits.

Controls of revenue administration should help to prevent the diversion of anticipated revenues

caused by collusion between the taxpayer and the tax ocial. An eective system of taxpayer

self-assessment requires not only cross monitoring within the tax agency from assessment to

collection, but also empowering the taxpayer through education, transparency of liabilities, limi-

tations on ocial discretion and appeal rights. In particular, governments may also need to target

specic sectors susceptible to collusion, such as customs, defence or natural resources. For example,

in cases of a resources curse, where countries suer poverty despite a wealth of natural resources,

revenue accountability requires a targeted scal regime that sets out national ownership of the

resources, with clear procedures for developing rights, transparency of the payment streams and

limits on ocial discretion and negotiation.

Chapter III. Public finance and public records: requirements of articles 9 (2) and (3) UNCAC

Expenditure management harbours risks such as unauthorized commitments, irregular payments

and sham transactions that deviate from the budget’s policy objectives. Typical controls that are

employed to address this are: budgetary accounting; alignment of commitments with funds avail-

ability; controls on the use of appropriations before committing funds (e.g., the amount, the time

period of availability, and the purpose of funds); requirements for periodic reconciliation of

accounts; and tripwires for fraud and abuse. Additional deterrents are criminal penalties against

ocials who incur unauthorized commitments and the provision of protection and incentives for

whistle-blowing. is kind of regime of scal protections slows corruption and eases accountability,

but makes it more dicult to use other scal strategies, such as extra-budgetary funding, tax

expenditures, quasi-scal activities and contingent liabilities, even when they may have justiable

bases.

Predictably, though, these protective measures can become merely perfunctory unless govern-

ments: (a) pinpoint activities prone to corruption in the country; (b) decode incentives (poor pay,

peer pressure, easy access to funds, etc.) for corruption; and (c) based on this information, apply

controls to defuse opportunities for collusion. Given the size of most governmental organizations,

the central authority cannot watch everyone. For the sake of eciency, governments must empower

line ocials to watch one another, and provide incentives for them to report problems rather than

collude.

Still, even the most prudent controls do not eliminate risks such as shis in commodity prices

and exchange rates, natural disasters and market failures. In more extreme cases, crisis manage-

ment will entail overrides of the budget process by emergency solutions, reshuing of political

powers and systemic changes to the public finance management. While these measures do

not necessarily lead to corruption, emergency powers, to the extent they dispense with regular

discipline, can be abused.

To prevent such abuse requires limiting the recourse to emergency powers and contingency budgets,

i.e., by distinguishing true crises from more predictable calamities. For the more foreseeable uncer-

tainties, governments can manage with concrete measures such as standardized disclosures of con-

tingent liabilities, risk sharing with counterparties, nancial hedging and the institution of scal

rules. Even in the case of true crises, the government can still set a basic order of business to absorb

the impact on scal discipline by: (a) assigning roles and responsibilities within government to

manage contingencies; (b) incorporating scal risks into budgetary forecasts and internalize the

costs of contingent liabilities; and (c) adopting procedures and prescribing conditions for contin-

gency appropriations. is kind of response is not a one-time eort, but part of a proactive

adaptation to the economic cycle and a commitment to scal sustainability over the long term.

Corrective actions

e nal provision on public nance, article 9 (2) (e), mandates corrective action in the case of

“failure to comply with the requirements established” in article 9 (2) (a)-(d). As the requirements

in these paragraphs concern dierent stages of public nance management, proper corrective actions

require pinpointing the responsible ocials and the applicable level of government. Generally, eec-

tive corrective action requires both sound recommendations and their enforcement. Most oen,

literature in this eld discusses corrective action as a response to audits where sound recommen-

dations depend on the audit and the auditors; however, without enforcement, the recommendations

only make for good advice. Enforcement requires personal deterrence, such as sanctions against

the wrongdoers and other responsible ocials who fail to take corrective actions and oversight

from the legislature, the media and the public. By its power in controlling the spending of govern-

ment resources, the legislature can hold agencies accountable through investigations, hearings and

threats of budget reduction based on audit reports and other outside information.

C. Integrity of records

Article 9 (3) of UNCAC requires each State party to “take such civil and administrative measures

as may be necessary […] to preserve the integrity of accounting books, records, nancial state-

ments or other documents related to public expenditure and revenue and to prevent the

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

falsication of such documents.” e integrity of records helps to provide accurate information

for scal forecasting and establishes an audit trail to deter corruption. e International Standard

on records management, ISO 15489-1,

as established by the International Organization for

Standardization, prescribes authenticity, reliability, integrity and usability as the essential charac-

teristics of a record. With regard to integrity, ISO 15489-1 describes the necessary controls over

“access monitoring, user verication, authorized destruction and security” to prevent tampering.

For nancial records in particular, the International Records Management Trust (IRMT) has devel-

oped a reference model and assessment tools based on ISO 15489-1 and other standards for the

public sector. ey expand the bare requirements of records retention into a system of personnel,

controls, contingencies and facilities, and even model legislation.

More recently, electronic technologies have changed the basic model and security requirements

of record keeping. Governments may have to choose whether to start afresh with electronic systems

now, or to phase in electronic records technology later while keeping the old manual system.

To ensure that any entity spending public funds complies with the same requirements, in the very

least governments need to incorporate record-keeping requirements in various agency agreements

with such an entity. Ensuring the integrity of records also requires external safeguards. ere should

be, as many countries have established, specic criminal and civil statutes governing unauthorized

destruction or tampering with public records. Litigation procedures can also impose sanctions for

destroying, whether inadvertently or intentionally, evidentiary documents required by the court,

fact-nders or litigants. e Convention on the Protection of the European Communities’ Financial

Interests requires member states to adopt laws criminalizing fraud involving false statements and

documents that lead to misappropriation and diminution of budgets and resources of the EU

Communities. Finally, some countries have enacted Freedom of Information Acts which allow

members of the public to request the disclosure of government information. e best way, and in

some cases the cheapest way, to preserve the integrity of records may be to publish them.

D. Compliance and assessments

e requirements under UNCAC are quite general and leave a great deal of exibility to the State

party. A number of other international organizations have developed several comprehensive frame-

works to assess national public nance systems over the past two decades based on the same

principles of internal discipline and external oversight. For example, the International Monetary

Fund (IMF)’s Code of Good Practices on Fiscal Transparency

rests upon four core principles: clarity

of roles and responsibilities, open budget processes, assurances of integrity and public availability

of information. e IMF assesses countries on observance of its Code of Good Practices on Fiscal

Transparency through Reports on Observance Standards and Codes (ROSC) based on the four

main principles mentioned above. e ROSC also looks at non-budgetary indicators such as cur-

rent reforms, the legal framework, conduct of ocials and scal sustainability. In partnership with

the IMF, the World Bank has also conducted ROSCs on a country’s general accounting and audit-

ing standards and practices, measured against International Financial Reporting Standards (IFRS)

and International Auditing Standards (IAS).

Another set of international standards is the Performance Measurement Framework under the

Public Expenditure and Accountability (PEFA) Program (PEFA Framework),

developed by

OECD, the World Bank and aid organizations from donor countries to evaluate eective budgetary

performance. e PEFA Framework aims to provide a baseline for identifying reforms. e

Program has six key indicators: credibility of the budget-based actual expenditures and original

budget; comprehensiveness and transparency; policy-based budgeting; predictability and control

ISO 15489-1: 2001, Information and Documentation – Records Management, International Organization for

Standardization, 2001. www.iso.org

IMF’s Code of Good Practices on Fiscal Transparency, International Monetary Fund, 2007. http://www.imf.org/external/

np/pp/2007/eng/051507c.pdf

Performance Measurement Framework, Public Expenditure and Accountability Program, 2011. http://www.pefa.org/

en/content/pefa-framework

Chapter III. Public finance and public records: requirements of articles 9 (2) and (3) UNCAC

in budget execution; accounting, recording and reporting; and external scrutiny and audit. ey

help to measure the public nance management’s ability to “deliver ecient and eective outcomes”

in the six key indicators and addresses scal transparency in relation to the overall ecacy of public

nance management.

Both of these frameworks provide starting points for implementing the provisions of UNCAC

because they give actionable guidance for national governments and have country data on com-

pliance with these frameworks. However, complying with multiple standards can be costly and

even complicated for a government. Implementing the Convention may be another opportunity

to build on existing initiatives and integrate dierent best practices.

Checklist for meeting minimum requirements set out by article 9 (2)-(3) of UNCAC

Article 9 (2)-(3) of UNCAC set out the general parameters for shaping national legislation to

reect transparency and accountability in the management of public nances. ese provisions of

UNCAC focus primarily on identifying a number of measures which can be used to comply with

this requirement.

In order to assess the eectiveness of national measures taken to promote transparency and

accountability in the management of public nances, annex II provides a set of questions that will

assist States parties in determining whether the public nance management system of a party to

UNCAC is in compliance with article 9 (2)-(3) of the Convention.

CHAPTER IV.

Case examples

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

is chapter contains selected case examples, including good practices and lessons learned.

ese case examples were discussed during the second expert group meeting on transparency,

competition and objectivity in public procurement, sponsored by UNODC and held at the

International Anti-Corruption Academy from 21 to 22 May 2013 in Laxenburg, Austria.

A. The use of electronic government procurement to fight

corruption—a case example from Georgia

e country Georgia is one of the rst countries in the world in which paper-based tender pro-

cedures in the area of public procurement have been eliminated. Since this reform, all tender

procedures have been carried out electronically through the Georgian Electronic Government

Procurement system (Ge-GP). e reform making electronic tender procedures the exclusive

means aimed to promote:

•

Transparency: ensure transparency for citizens regarding the expenditure of state resources

and make documents relating to tender procedures and contracts awarded easily available

to the public.

•

Non-discrimination: introduce tender procedures in which all interested bidders, including

foreign bidders, have equal opportunities.

•

Fair selection: guarantee fair qualication/disqualication of bidders based on objective

criteria according to a transparent evaluation system.

•

Simplied procedures: simplify tender procedures and remove administrative barriers, as

paper-based tenders involved complicated procedures and were deemed to be a waste of

both time and material resources, making many companies reluctant to participate in public

tenders.

•

Getting rid of paper: ensure that documents submitted to the procuring entity are a reliable

source of information, to be handled eciently by the procuring entity. It was important

to make documents relating to tender procedures easily available to the public.

e main benets of the Ge-GP are its simplicity and transparency. Registration to participate in the

system is very straightforward. Any information related to State procurement is accessible in the

Ge-GP system for any interested person. is information includes: annual procurement plans; tender

notices; estimated procurement values; tender documentation including amendments and corrections;

bids of suppliers, bidding documents and bid prices; minutes of tender commission meetings and

correspondence exchanged with the suppliers; contracts awarded; decisions of the tender evaluation

commission; information about payments made; and all other relevant correspondence.

According to data provided by the government of Georgia, the number of public tenders in Georgia

rose remarkably due to the introduction of the Ge-GP. In addition, overall in 2011, with the

introduction of the Ge-GP system, it was possible to save GEL 191,487,127 in the budget. In 2012,

GEL 155,610,107 was saved, which amounted to approximately 10 per cent of the estimated net

value of public contracts.

Procurement procedures became more transparent due to the Ge-GP, providing equal opportuni-

ties for bidders across the country/region. Approximately 200 foreign bidders have been awarded

more than 50 contracts.

Any person may le electronic complaints, which are reviewed by the Dispute Resolution Board,

which includes members of the Competition and State Procurement Agency and NGO represent-

atives. is procedure greatly simplies the appeal process, makes dispute resolution more trans-

parent, and increases public engagement in the state procurement processes.

e Ge-GP has resulted in a tremendous increase of transparency of all information to all stake-

holders and of competition in public tenders. Although the Ge-GP was introduced only recently,

Georgia reports that the level of corruption has already been reduced. In 2012, the United Nations

recognized the Ge-GP as one of the best tools in “Preventing and Combating Corruption in Public

Service” worldwide.

Chapter IV. Case examples

B. The transparent town of Martin—a case example from

Slovakia

Martin, a district town located in northern Slovakia chose to carry out a pioneer anti-corruption

project in 2008. e project, called the “transparent town”, maximizes the level of transparency in

municipal administration and minimizes the room for corrupt behaviour at the same time.

Before implementing the project, the town Martin, according to an audit carried out by TI Slovakia,

showed unsatisfactory levels of transparency in almost all of its policy areas, including public

procurement. e public had had only very limited options to control its elected representatives

or town hall employees, particularly in the area of awarding public contracts. Contracts had pre-

viously only been awarded to a small group of contractors and were heavily overpriced.

Furthermore, the mayor himself had been approached by a number of bidders who tried to

pressure and corrupt him in order to win public tenders.

Under the project, the town of Martin voluntarily initiated standards in the area of public pro-

curement, which go far beyond the mandatory legislative framework. One of the key measures

was the implementation of an e-procurement platform which provides for the possibility of elec-

tronic auctions into the process of procurement. To make procurement fully transparent, all infor-

mation regarding public tenders is available on the Internet.

Aer the launch of electronic

auctions to award public contracts, the prices of the winning bidders have gone down rapidly;

with the cost savings amounting to approximately 25 per cent in the rst year of operation.

e electronic platform lists public tenders, and also all concluded contracts, including the name

of the winning company and the oered price, as well as invoices and amounts paid by the town

of Martin.

e electronic platform can be openly accessed and, therefore, provides an ecient tool for the

public to monitor the activities of the town of Martin when awarding public contracts.

In 2011, the United Nations recognized the project the “transparent town” as one of the best tools

in “preventing and combating corruption in public service” worldwide.

C. An independent monitor as a tool to fight corruption

—acase example from Austria

Austria is about to renovate the Austrian Parliament building, a landmark building in Vienna

from the 19th century. e estimated costs for this project are EUR 500 million. e project

environment is considered to be technically and logistically highly complex. Furthermore, it comes

on the heels of very negative experiences due to signicant delays and cost-over-runs in connection

with recent large-scale building projects in Austria. Over the last couple of years, Austria has also

been facing a variety of corruption scandals in the area of public procurement and there are

negative perceptions among the public with regard to corruption in Austria.

For all these reasons, the Austrian Parliament decided to conduct this renovation project with the

highest degree of transparency possible. To this end, it was decided to make communication and

information open during the entire project, including through press releases, information on a

website, conferences and one-to-one communication with interested parties.

Of signicance, the Austrian Parliament decided to cooperate with the Austrian Chapter of TI to

prevent any corruption in the project. It was agreed that an instrument similar to the TI Integrity

Pact be adopted and applied. e Integrity Pact is a formal agreement between a government

entity and those companies submitting a tender for a specic project who agree to conduct a

public tender in accordance with the highest ethical standards possible.

e below text is adapted from e United Nations Public Service Award, United Nations Public Service Programme,

http://unpan3.un.org/unpsa/Public_NominationProle.aspx?id=1030

Further information on public tenders in Martin available at www.transparentnemesto.sk

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

To ensure accountability, TI Austria nominated an external, independent lawyer who is spe-

cialized in compliance and anti-corruption and appointed by the Austrian Parliament as an

independent monitor to oversee selected tender procedures relating to the renovation project.

e independent monitor has extensive powers, including the following:

•

Right to review all published and non-published documents in connection with the public

tenders;

•

Right to participate in all meetings of the various committees in the tender process (e.g.,

evaluation meetings);

•

Right of access to all documentation and electronic data.

e independent monitor reports to the project management and, directly to the President of the

Austrian Parliament, if necessary. In case of the breach of a law such as the anti-corruption law,

the independent monitor has not only the right, but the obligation to inform the respective

Austrian judicial authorities.

While the project is not yet completed, as an intermediate conclusion, the Austrian Parliament

considers that the cooperation with the independent monitor has been positive. One of the main

benets has been an institutionalized safeguard against corruption, including an eective means

of counteraction in case of any allegations. In this way, the independent monitor also provides

safety and security for the project management. While cooperation with the independent monitor

naturally involves costs (the direct costs of paying the independent monitor’s fees as well as the

indirect costs of involving him in the tender process), it is felt that these costs are outweighed by

the benets of having the independent monitor, given the high-prole nature of this project and

the potential actual and reputational costs of corruption.

D. Social witnesses in the area of public procurement

—a case example from Mexico

Mexico has introduced a social witness programme in the area of public procurement. is pro-

gramme is a central pillar of the Mexican federal public procurement system and has made a

considerable contribution towards transparency and integrity in public procurement processes in

Mexico. It was initially a voluntary programme that became legally binding in 2009 under certain

conditions (e.g., for public procurements exceeding a certain threshold level or when the impact

of a project is stated to be signicant).

A social witness is a representative of civil society, such as a trusted individual, organization or

company with appropriate experience, knowledge and recognized moral qualities, that participates

in selected public procurement processes as an external observer. e criteria for becoming a

registered social witness are rigorous and, besides experience and knowledge, potential conicts

of interests and criminal convictions are considered.

e responsibilities of social witnesses can be far-reaching, from review of dra tender documents,

to participation in the opening of the bids and evaluation meetings, to on-site visits at the place

of performance.

A social witness is allowed to propose any improvements regarding the tender procedure that

might foster eciency, transparency, impartiality and the ght against corruption, such as those

concerning minimum selection or award criteria. Social witnesses must issue a publicly available

report on the procurement procedure, which contains their assessment as well as recommenda-

tions. Social witnesses are required to alert authorities if they detect any irregularities in the

procurement process.

e social witness programme is publicly funded; a social witness is paid an hourly fee plus

expenses.

Chapter IV. Case examples

Various individuals and organizations have participated in hundreds of public procurements valued

at many US$ billon so far. Experience and research have shown that the social witness programme

has a positive impact on transparency, competition and objectivity in public procurement, and is

therefore a valuable tool in the ght against corruption.

Annex I.

Other standards and policies available

fromotherinternationalorganizations

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

A. Introduction

An appropriate system of public procurement, as required under article 9 (1) of UNCAC, is

considered to be a core part of any government programme. Due to the volume of public funds

spent on public procurement and the multiple negative eects of corruption in public procurement,

several international organizations, in addition to UNODC, promote the implementation of

appropriate systems of public procurement.

In this regard, the UNCITRAL Model Law, the WTO GPA and the EU Directives play the most

important role from a legislative perspective. While the comprehensiveness of the rules framing

an ecient procurement system varies signicantly in these instruments, the same principles

underpin all of the rules set out. All the texts are designed to promote procurement systems based

on the cornerstone principles of transparency, competition and objectivity in decision-making, as

required under article 9 (1) of UNCAC.

Besides these international texts on public procurement, the World Bank and other international

nancial institutions have developed guidelines on public procurement. Other organizations, such

as the Organisation for Economic Co-operation and Development (OECD) and Transparency

International (TI), have developed important tools for ghting corruption in public procurement.

is chapter will briey discuss these international texts and publications.

B. UNCITRAL Model Law on Public Procurement

e UNCITRAL Model Law is, internationally speaking, one of the most commonly recognized

public procurement codes. 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.

e UNCITRAL Model Law is available online.

It reects 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.

e UNCITRAL Model Law is supplemented by a comprehensive tool—the Guide to Enactment.

e 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. e Model Law, and its accompanying Guide to Enactment, have been used extensively

as a benchmark for assessing procurement laws around the world. e Model Law was revised in

2011 and is intended to conform to the requirements of UNCAC.

e UNCITRAL Model Law is predicated on the familiar principles of: (a) achieving economy

and eciency; (b) widespread participation by suppliers and contractors, with procurement open

to international participation as a general rule; (c) maximizing competition; (d) ensuring fair, equal

and equitable treatment; (e) assuring integrity, fairness and public condence in the procurement

process; and (f) promoting transparency. It regulates, in detail, the elements provided for in article

9 (1) (a)-(d) of UNCAC to establish the required appropriate systems of procurement.

ese basic principles in the UNCITRAL Model Law are also reected in article 9 (1) of UNCAC.

Given that the UNCITRAL Model Law thus implements the requirements set forth in article 9(1)

of UNCAC, it can be considered that, in principle, a country basing its national public procure-

ment legislation on the UNCITRAL Model Law will, at the same time, comply with the requirement

that it establish the legislative framework for an appropriate system of procurement as set forth

in article 9 (1) of UNCAC.

UNCITRAL Model Law on Public Procurement, UNCITRAL, 2011. http://www.uncitral.org/uncitral/uncitral_texts/

procurement_infrastructure/2011Model.html

Guide to Enactment of the Model Law on Public Procurement, UNCITRAL, 2012. http://www.uncitral.org/uncitral/

uncitral_texts/procurement_infrastructure/2011Model.html

Annex I. Other standards and policies available fromotherinternationalorganizations

C. WTO Government Procurement Agreement

e WTO GPA is a multilateral agreement within the WTO system which provides a framework

for the conduct of international trade with governments. Current WTO GPA parties are: Armenia,

Canada, the European Union (including its 28 Member States), Hong Kong SAR of China, Iceland,

Israel, Japan, Liechtenstein, the Netherlands with respect to Aruba, Norway, Republic of Korea,

Singapore, Switzerland, Chinese Taipei and the United States.

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. e WTO GPA regulates,

in detail, the measures set out in article 9 (1) (a)-(d) to establish the required appropriate systems

of procurement.

e WTO GPA, based on its principal purpose of opening-up national public procurement mar-

kets, 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.

D. EU Public Procurement Directives

e EU Directives are intended to be implemented by the 28 EU Member States (Austria, Belgium,

Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,

Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal,

Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom) as part of progressive EU

legal harmonization. e Directives cover the fundamental principles of procurement processes

and transparency and countries are required to apply these fundamental principles when awarding

public contracts, particularly concerning non-discrimination, equal treatment, competition and

transparency.

It may be argued that the EU Directives establish the most developed public procurement system

encompassing dierent countries worldwide. eir 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.

e legal regime, as established by the EU Directives, is built upon various fundamental principles,

which have been developed by the Court of Justice of the European Union (EJC) over the years.

e principles of transparency and fair competition, as well as non-discrimination and equal

treatment are among the most important principles. e EU Directives regulate, in detail, the

measures contemplated by article 9 (1) (a)-(d) of UNCAC to establish the required appropriate

systems of procurement.

E. World Bank/International Financial Institution Guidelines

Another source of guidance for anti-corruption eorts in public procurement is provided by the

guidelines from the World Bank and other international nancial institutions. Borrower nations

must generally conform with these guidelines in order to qualify for nancing. ese institutions

routinely impose minimum procurement rules to ensure transparency, competition and integrity

in the projects they fund, in order to ensure that the Banks’ money is well 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 UNCAC.

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

F. OECD Procurement Assessment Tools and Principles for

Enhancing Integrity in Public Procurement

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

which map corruption risks throughout the entire procurement cycle. ese documents serve as

an important tool to foster better practice in public procurement. e most important OECD

publications in this regard are: OECD Principles for Integrity in Public Procurement, Policy

Brief – Keeping Government Contracts Clean, 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.

In cooperation with the European Union, the OECD sponsors the work of Support for Improvement

in Governance and Management (SIGMA), which is a research organization that has developed

a number of briefs and guidelines on the interpretation of the complex EU public procurement

regime.

G. Transparency International

TI, a leading non-governmental organization in battling corruption, is also very active in the eld

of public procurement. It has developed a number of important tools to assist in reducing

corruption in government contracts.

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. ese 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 eld of public

procurement. e most comprehensive in this regard is the Handbook for Curbing Corruption in

Public Procurement.

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

SIGMA research reports are available at http://www.oecd.org/site/sigma/publicationsdocuments/publicprocurement

publications.htm

Handbook for Curbing Corruption in Public Procurement, Transparency International, 2006. http://www.transparency.

org/whatwedo/pub/handbook_for_curbing_corruption_in_public_procurement

Annex II.

Checklist for meeting minimum

requirements set out by article 9

of UNCAC

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

A. Introduction

Article 9 (1) of UNCAC sets the general parameters for shaping national legislation on procure-

ment. It outlines selected measures which can be used to comply with the Convention’s call for

appropriate systems of procurement “based on transparency, competition and objective criteria in

decision-making that are eective, inter alia, in preventing corruption”.

Article 9 (2)-(3) of UNCAC set out the general parameters for shaping national legislation to

reect transparency and accountability in the management of public nances. ese provisions of

UNCAC focus primarily on identifying a number of measures which can be used to comply with

this requirement.

In order to assess the eectiveness of national public procurement legislation in curbing corrup-

tion, this appendix provides a set of questions that will assist States parties in determining whether

their procurement system is in compliance with article 9 (1) of UNCAC.

In order to assess the eectiveness of national measures taken to promote transparency and

accountability in the management of public nances, this annex also provides a set of questions

that will assist States parties in determining whether the public nance management system of a

party to UNCAC is in compliance with article 9 (2)-(3) of the Convention.

B. Checklist for meeting minimum requirements set out by

article 9(1) of UNCAC

General

(1) Is the State’s national public procurement legislation based on other international texts in

the area of public procurement (e.g., the UNCITRAL Model Law)?

(2) Is the State a party to an international text on public procurement (in particular the WTO

GPA or the EU Directives)? Is it in conformance?

(3) Is the State’s procurement system in conformance with procurement guidelines draed to

combat corruption, such as those published by the Organisation for Economic Co-operation

and Development (OECD)?

Public distribution of information and publication of conditions for participation

(article 9 (1) (a)-(b))

(4) Are the existing laws, regulations and policy guidelines on public procurement publicly

available?

(5) Do contract opportunities have to be publicly published? If so, are there any restrictions for

low-value procurement?

(6) What is the minimum content of an invitation to tender?

(7) What is the minimum content of tender documents?

(8) Is a procuring entity only allowed to enter into a contract on the basis of predisclosed

criteria?

(9) Is there any obligation to set out the manner of application for the selection and award

criteria in the invitation to tender or the tender documents?

(10) Is there any obligation that minimum, selection and award criteria must be relevant and

appropriate in the light of the subject matter of the procurement?

Annex II. Checklist for meeting minimum requirements set out by article 9 of UNCAC

(11) Does your country’s procurement law address the consequences for when a bidder is

insolvent, bankrupt or in the process of being wound up or has not fullled its obligation

to pay taxes or social security contributions?

(12) Does your country’s procurement law address the consequences for when a bidder submits

information that is false, inaccurate or incomplete?

(13) Are the minimum requirements and the terms and conditions of the procurement required

to be disclosed in advance?

(14) Is it permissible to use for the description of a particular procurement a trademark or trade

name, patent, design or type?

(15) How is the involvement of a bidder in the preparatory stage of a public contract dealt with?

(16) What is the minimum deadline for the submission of requests for proposals (in a two-stage

tender procedure) and submission of bids?

(17) Are there reasons specied as to why (minimum) timelines may be shortened?

(18) Do bidders have the right to request clarication of tender documents?

(19) Do bidders have the right to attend bid opening sessions?

(20) Are procuring entities permitted to make use of electronic communications?

(21) Do bidders have the right to correct an error regarding a submitted bid?

(22) Are there any rules on non-responsive tenders?

(23) Does your country’s procurement legislation list grounds for the rejection of tenders (e.g.

the bidder is not qualied)?

(24) Is the procuring entity allowed to cancel a procurement procedure? If so, does the procurement

legislation list possible grounds for such a cancellation?

Use of objective and predetermined criteria for decision-making (article 9 (1) (c))

(25) Is there a default method of procurement?

(26) Is there any obligation to justify reasons for using procurement methods other than open

tender procedures?

(27) Is it permissible to enter into a contract without any prior call for competition? If so, under

what circumstances?

(28) What is the procedure in the event that no responsive bids were submitted?

(29) Is it permissible to negotiate the contract in the course of the tender procedure? What are

the prerequisites for such negotiations?

(30) Does your public procurement legislation set out selection criteria and award criteria or

any weighting a particular criterion must have (for instance, the price)?

(31) Are there any rules regarding technical specications?

(32) Does your country’s public procurement regime allow for price preferences and

domestic-only procurement?

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

(33) Is it permissible to change the tendering rules or the selection/award criteria during the

procuring procedure? If so, are there any limits to such changes?

(34) Is it possible to reject abnormally low tenders due to the risk of non- or substandard

performance?

(35) Is a procuring entity required to disqualify a tender if the bidder oers to bribe or bribes

any public ocial of the procuring entity?

(36) Is the procuring entity required to disqualify a tender if the bidder is convicted by nal

judgment of corruption or fraud?

(37) Can a contract be renegotiated aer the contract award? If so, are there any limits as to

what extent a contract may be subsequently changed?

(38) Are procuring entities required to keep a record of each procurement? If so, what is the

minimum content of such procurement record? How long must procurement records be

preserved and who has the right of access to these records?

(39) Is there any obligation to provide reasons for the rejection of a tender?

(40) To whom are the decisions of a procuring entity to be disclosed (for instance, a decision

to reject a bidder or the award decision)? Is there any minimum content of such decisions

(for instance, the price or the relative advantages of the bid of the winning bidder)?

Effective systems of domestic review (article 9 (1) (d))

(41) Does your country’s procurement system establish or designate at least one administrative

or judicial authority responsible for review in public procurement?

(42) Does your country’s system of review in public procurement include a system of appeal of

the ocial decisions of the review body of rst instance?

(43) Is an application for review of a public procurement decision heard by a body which is

independent of the procuring entity?

(44) Which decisions of a procuring entity are subject to review?

(45) Who has the power to le an application for review? Does it include any supplier who has,

or has had, an interest in a particular contract?

(46) Does your country’s system of review in public procurement set out any deadlines within

which a supplier must prepare and submit a challenge?

(47) Does your country’s system of review in public procurement require a supplier to pay any

fees to le a complaint and to have a review body decide? If so, what is the amount of such

fee?

(48) Which remedies are provided for in your country’s system of review in public procurement

(interim measures, corrective measures, damages)?

a. If both corrective measures (e.g., setting aside or annulling a procurement decision)

and damages are provided for, is it possible for both types of remedies to be awarded?

b. May compensation be limited (e.g., either to the cost of the preparation of the tender

or the cost relating to the challenge or both)?

Annex II. Checklist for meeting minimum requirements set out by article 9 of UNCAC

The responsibilities of procurement personnel (article 9 (1) (e))

(49) Does your country’s system of public procurement lay down any measures regulating

matters regarding procurement personnel?

a. Are there any screening procedures regarding procurement personnel? If so, do such

screening procedures apply during the selection of the personnel and/or throughout their

employment?

b. Are there any requirements as to the training of procurement personnel? Does this

training cover how to award contracts in line with the relevant public procurement legisla-

tion or how to award a contract in line with the relevant anti-corruption laws?

c. Are procurement personnel required to declare any interests in a particular public

procurement (e.g., due to a possible conict of interest)?

(50) Are codes or standards of conduct for correct, honourable and proper performance by

procurement personnel required by law?

C. Checklist for meeting minimum requirements set out by

article 9 (2)-(3) of UNCAC

Adoption of the budget (article 9 (2) (a))

(1) What is the timetable for preparing and presenting the budget to the legislature? Does the

legislature have a legal deadline in which to pass the budget?

(2) What are the voting procedures (e.g., aggregate ceilings voted on before individual appro-

priations)? To what extent, if at all, and when can the legislature amend the budget?

(3) What laws and procedures specify the format of the budget or the type of information

required as part of the submission to the legislature? Does the legislature have budget anal-

ysis sta?

(4) Which government operations are not funded through appropriations?

(5) What is the accounting treatment of quasi-activities such as government participation in

private enterprises, guarantees of third-party obligations and securities holdings?

(6) Is there a requirement for the disclosure of personal nancial interests, recusal from

budgetary proceedings, and divestiture of conicted interests of ocials?

Timely reporting of revenues and expenditures (article 9 (2) (c))

(7) Which budgetary and nancial documents must the executive release to the legislature

and/or the public? Is there a mandatory schedule for publication and sanctions for failing

to meet the deadlines?

(8) What are the sources of revenues for the government? How are they assessed and

collected?

(9) Are the laws and regulations on taxation, custom duties and other assessments available to

the public? How do the laws dene tax evasion? What are the penalties for committing or

aiding and abetting tax evasion?

(10) How are tax agents and collectors paid, evaluated and trained?

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

(11) What are the requirements for committing and releasing funds? Are payments made out of

central treasury account(s) or directly through individual agency accounts? Which

institution serves as the central government’s scal agent?

(12) What are the limits on transfers across appropriations, allotments or other expenditure

accounts?

(13) Do top and mid-level ocials have special borrowing or contracting powers apart from

appropriations and procurement regulations? What are the limits on spending and time

limits on the agency’s emergency expenditures and credit cards?

Accounting and auditing (article 9 (2) (c))

(14) Does your country have proprietary and budgetary accounting systems? Are these systems

cash or accrual based?

(15) How are accountants and auditors accredited and trained?

(16) How are compensation, training and operations of internal and external auditors funded?

Who supervises and evaluates the performance of the auditors? What are the hiring and

ring procedures for auditors?

(17) What procedures and laws govern communications between: (a) the internal auditors and

the external auditors; (b) the auditors (internal or external) and the legislature?

(18) What are the security protocols for accessing nancial information systems? What are means

of certications (stamps, signatures, etc.) and who maintains them? How are documents

authenticated?

(19) Is there civil and/or criminal liability for false statements to the auditors and/or legislature

during audits, investigations and hearings?

Internal controls and risk management (article 9 (2) (d))

(20) Who designs, implements and reviews the agency’s internal controls? How oen and by

what means do agencies update the controls and provide trainings?

(21) Do managers have to personally certify payment orders, nancial reports, etc.? What is the

extent of their liability for nancial wrongdoing by subordinates, and vice versa?

(22) Are the internal auditor’s oce, systems and les segregated from the rest of the agency?

Do they share common services?

(23) Are there anonymous channels, whether inside or outside the agency, to report suspected

wrongdoing? Who processes the reports that are received? How is it decided which reports

will trigger internal investigations? What are the protections, incentives and immunities for

whistle-blowers or cooperating witnesses?

(24) What are the legal bases and procedures for enacting supplemental budgets and other emer-

gency appropriations? How are responsibilities and powers allocated between the executive

and the legislature in this regard?

(25) How does the government classify risks? Which contingent liabilities, if any, does the gov-

ernment’s nancial report disclose? How much of the annual budget does the government

set aside for contingencies?

(26) Does the budget have any built-in scal rules (e.g., balanced budget) mandated by law?

Annex II. Checklist for meeting minimum requirements set out by article 9 of UNCAC

Corrective action (article 9 (2) (e))

(27) Are there legal deadlines for corrective action? What is the actual time lag between the

issuance of auditors’ reports and the initiation of corrective action by the agencies?

(28) Does the central government keep track of the number of instances in which the particular

agency follows or does not follow the auditors’ recommendations?

(29) Do laws or regulations provide for sanctions against individuals and agencies that refuse to

adopt corrective action?

(30) Which laws, if any, provide for investigation of executive agencies by the legislature and its

committees? What powers (subpoena, hearing, production of documents, etc.) are available

to the legislature in these investigations?

Integrity of public records (article 9 (3))

(31) Is there a national archiving institution that oversees record keeping?

(32) Does the government have a general schedule of records retention and disposition? What

are the controls and security standards for government records?

(33) What are the government’s policies on electronic records, cyber-security and new

technologies?

(34) What are the rights and remedies available to the public to access information from the

government? Is there a dedicated sta and budget for processing public requests for

information?

(35) Is there civil and/or criminal liability for tampering with documents, falsifying documents

or intentionally destroying bookkeeping documents? What are the penalties for the violation

of any of the related criminal oences?

Guidebook on anti-corruption in public procurement and the management of public finances. Good practices in ensuring compliance with article 9 of the United Nations Convention against Corruption

International codes/references

A. Important international codes on public procurement

•

EU Public Procurement Directives, European Union. http://ec.europa.eu/internal_market/

publicprocurement/rules/current/index_en.htm

•

Guide to Enactment of the Model Law on Public Procurement, UNCITRAL, 2012.

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

•

UNCITRAL Model Law on Public Procurement, UNCITRAL, 2011. http://www.uncitral.org/

uncitral/ uncitral_texts/procurement_infrastructure/2011Model.html

•

United Nations Convention against Corruption, UNODC, 2004. http://www.unodc.org/

unodc/en/treaties/CAC/index.html

•

WTO Agreement on Government Procurement, World Trade Organization, 2012.

http://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm

B. References

•

Bribery in Public Procurement: Methods, Actors and Counter-Measures, OECD, 2007.

http://www.oecd.org/investment/anti-bribery/anti-briberyconvention

•

Conference of the States Parties to the United Nations Convention against Corruption,

Resolution 3/2, para. 13, UNODC, 2009. http://www.unodc.org/documents/treaties/UNCAC/

COSP/session3/V0988538e.pdf

•

Convention on the Protection of the European Communities’ Financial Interests, European

Union, 1995. http://europa.eu/legislation_summaries/ght_against_fraud/protecting_euro

pean_communitys_nancial_interests/l33019_en.htm

•

Cross-Debarment: A Stakeholder Analysis, Christopher R. Yukins, to be published in the

George Washington University International Review, 2013 (forthcoming).

•

Curbing Corruption in Public Procurement in Asia and the Pacic: Progress and Challenges

in 25 Countries, ADB/OECD, 2006. http://www.oecd.org/site/adboecdanti-corruptioninitia

tive/37575976.pdf

•

Enhancing Integrity in Public Procurement: A Checklist, OECD, 2008. http://www.oecd.org/

gov/ethics/enhancingintegrityinpublicprocurementachecklist.htm

•

Handbook for Curbing Corruption in Public Procurement, Transparency International, 2006.

http://www.transparency.org/whatwedo/pub/handbook_for_curbing_corruption_

in_public_procurement

•

Code of Good Practices on Fiscal Transparency, International Monetary Fund, 2007.

http://www.imf.org/external/np/pp/2007/eng/051507c.pdf

•

ISO 15489-1: 2001, Information and Documentation – Records Management, International

Organization for Standardization, 2001. www.iso.org

•

Legislative Guide for the Implementation of the United Nations Convention against Corruption,

UNODC, 2006. http://www.unodc.org/pdf/corruption/CoC_LegislativeGuide.pdf

•

Performance Measurement Framework, Public Expenditure and Accountability Program,

2011. http://www.pefa.org/en/content/pefa-framework

•

Principles for Integrity in Public Procurement, OECD, 2009. http://www.oecd.org/gov/ethics/

oecdprinciplesforintegrityinpublicprocurement.htm

•

Technical Guide to the United Nations Convention Against Corruption, UNODC, 2009.

http://www.unodc.org/unodc/en/treaties/CAC/technical-guide.html

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