Excerpt
Table of Contents
Table of Contents
List of Figures
1. Introduction
1.1 Problem and Research Objective
1.2 Structure of Paper
1.3 Limitations of the Research
2. The Invisible Nature of Corruption
2.1 Overview
2.2 Causes of Corruption
2.3 Forms of Corruption
2.4 Corruption in the Public Sector
2.5 Corruption in the Private Sector
3. Public Procurement
3.1 Overview
3.2 Regulations and Agreements on Public Procurement
3.3 Principles and Goals of Public Procurement
3.4 The Procurement Procedures
3.5 The Procurement Process
4. Corruption in Public Procurement
4.1 Overview
4.2 Main Actors in Corrupt Deals
4.3 Risk Factors
4.4 Mechanism of Corruption in Public Procurement
4.4.1 Forms of Corruption in Public Procurement
4.4.2 Corruption in the Procurement Process
4.5 The Cost of Corruption
5. Mitigating Corruption in Public Procurement
Appendix
List of References
List of Figures
Figure 1: Conceptual framework of efficiency and effectiveness of public performance
Figure 2: Steps of the public procurement process
Figure 3: Purpose of paying bribes
Figure 4: Conflict of interest in the public sector
Figure 5: How conflict of interest becomes corruption in the public sector
Figure 6: Foreign bribery cases by sector.
Figure 7: Underlying motivation behind bribery in public procurement
Figure 8: Purposes of bribes in public procurement
Figure 9: Common kickback scheme
Figure 10: Misrepresentation of facts facilitated by bid-rigging and discretion
Figure 11: Manipulation of bid prices at public bid openings.
List of Abbreviations
Abbildung in dieser Leseprobe nicht enthalten
1. Introduction
“The social pandemic has been pervasive in public procurement. It distorts public finance, impairing the delivery of public services, such as the building of schools and the provision and quality of medical care; ultimately, it retards efforts to reduce poverty.” - Ware, G. et al.[1]
1.1 Problem and Research Objective
Corruption erodes the functioning of a state’s essential organs, meaning its political, economic and social structures, and causes its norms and values to deteriorate, but more severely, it ultimately weakens the heart of good governance - the most feared enemy of corruption.[2] Weakened by this disease, the state, however powerful its systems, becomes more vulnerable and exposed to a great variety of risk factors while the malicious disease increasingly thrives, spreading through the organism and capturing the state, trapping it in a vicious circle. There is no country that is immune to this disease. Whether on the local, national or international stage, corruption wreaks its destructive work at all political, economic and social levels.[3]
Public procurement embodies a large, if not the largest part of national economies.[4] Every year, trillions of dollars are deployed for the acquisition of goods, services and works, ranging from those intended to serve basic needs such as education or public health services to those destined for giant infrastructure projects; the latters’, large budgets make them tempting targets for corruption, which is often shielded behind the complicated and opaque procurement process. This results in wasteful spending, transforming public procurement, a powerful instrument for the promotion of prosperous economic development, into a harmful growth inhibitor.[5] Public procurement belongs to the group of government activities that are worst affected by corruption.[6] Corruption, seen as a key governance challenge, puts a detrimental strain on the functioning of a sound public procurement system. A public procurement system affected by corruption suffers from a wide range of symptoms; for instance, the quality of public projects may be reduced and public funds may be diverted from projects that are essential for the achievement of social and economic goals,[7] resulting in rising poverty and inequality.[8] Even worse, corruption undermines the rule of law, and erodes public trust and confidence in public bodies and in the market, ultimately impeding economic growth and development.[9]
Why and how does corruption enter the sphere of public procurement? Why is it essential to combat corruption and how can this phenomenon be mitigated in the context of public procurement? The research objective of this thesis is to give answers to these questions.
1.2 Structure of Paper
The second chapter provides a definition and brief overview of corruption, followed by an explanation of some of its most frequently discussed causes. Afterwards, some of the most common forms it may take will be demonstrated before the nature of the spread of corruption in both the public and private sector will be observed.
The third chapter comprises an overview of public procurement, including a definition of the term and a brief explanation of its main purpose. Furthermore, the importance of public procurement will be underlined by illustrating the size of the public procurement market, before presenting the most common regulations and agreements on public procurement. A more detailed insight into public procurement will be given by clarifying and presenting the goals and principles of public procurement, before the chapter delivers a brief insight into procurement procedures and into the procurement process.
The fourth chapter, the main part of this thesis, provides answers to the research questions of why and how corruption enters the sphere of public procurement, and why the prevention of corruption is so critical in public procurement. First, the chapter gives an overview of corruption in public procurement. After that, it will briefly demonstrate the distinction between the briber and the bribee in the context of public procurement, before exploring the main risk factors of and vulnerabilities to corruption in that field. The sub-chapters 4.4.1 and 4.4.2 examine the mechanisms of corruption in public procurement by illustrating its most common forms in public procurement and its manifestations in the procurement process. Finally, the costs of corruption will be presented, broken down into its economic, political, social and environmental consequences in the context of public procurement.
The fifth chapter addresses the question of what can be done to mitigate the risk of corruption in public procurement. The chapter focuses in particular on an explanation of the OECD Principles for Enhancing Integrity in Public Procurement (2008). It presents these principles and examines their immediate effect in the fight against corruption in public procurement.
Last but not least, the conclusion briefly summarises the main findings of this thesis.
1.3 Limitations of the Research
As the title of this thesis suggests, the focus of this paper lies in the area of research on corruption, in particular in the context of public procurement. In the second chapter, forms and causes of corruption that are relevant in the context of public procurement and to examining the research questions in the main part of this thesis are taken into account and further elaborated upon. Sub-chapter 4.5 examines the cost of corruption by discussing its consequences in the context of public procurement. In the fifth chapter, which deals with the mitigation of corruption in public procurement, the focus lies on the explanation of the OECD Principles for Enhancing Integrity in Public Procurement (2008) and recommendations for mitigation.
2. The Invisible Nature of Corruption
2.1 Overview
The invisible nature of corruption encompasses multiple diverse forms that are disguised in public, which makes it challenging to define corruption in a precise and comprehensive way. However, the most widely recognised definition, utilised by various public institutions and civil society organisations such as Transparency International and the World Bank,[10] is “the abuse of entrusted power for private gain” . [11] Corruption is seen as an invisible phenomenon since the corrupter and the corrupted do everything to disguise their corrupt acts.[12] When the complexity and intensity of the corrupt networks increase, it becomes more difficult to unveil corrupt activities. Corruption takes place when collusion exists between two parties, with one party involving persons from the private sector and the other at least one from the public sector.[13] Collusion may also occur in cases where both parties are from the private sector.[14] The question always arises of how to measure corruption, something which is predominantly hidden due to its nature. It is difficult to quantify and measure the extent of corruption but there are indices which try to estimate the scale of corruption based on subjective assessments. The best-known tool is the Corruption Perception Index (CPI) by Transparency International which measures corruption based on the perception levels of corruption in 183 countries around the globe.[15] It is evident that developing countries are more severely affected by corruption, but this does not mean that developed countries not suffer from this disease.[16] Corruption can have serious consequences not only on economic, but also on political and social levels. Not only does it devour public funds which could be used to promote sustainable development; it also makes political institutions more vulnerable, and therefore less efficient and less development-oriented, thereby impeding the achievement of a nation’s critical reform and development goals.[17] It is estimated that approximately US$1.5 trillion in bribes are paid every year, which is around 2 per cent of the world’s GDP and 10 times of the total sum of overseas development assistance.[18] Developing countries lose US$1.26 trillion to corruption annually which is half of the annual sum of US$2.5 trillion necessary to achieve the UN’s SDGs by 2030.[19] Furthermore, the European Commission has projected that the EU loses around €120 billion due to corruption annually,[20] which is almost as much as the EU’s budget, which stood at €157.9 billion in 2017.[21] Corruption impedes economic growth, increases income inequality, distorts competition and decreases governance capacity.[22] It unfolds its destructive effect on public revenues by attracting tax evasion, which results in less public investment in essential areas such as infrastructure, health care and education. Corruption undermines trust in government and thus erodes a nation’s political, social and economic foundations.[23]
2.2 Causes of Corruption
It is not only a complicated task to explain the nature of corruption in a comprehensive way, but also to figure out which kind of conditions really create a fertile breeding ground for corrupt acts. Causes of corruption vary across countries due to the differences between nations’ policies, history, bureaucratic practices and political development.[24] In general, it is challenging to assess the causes of corruption since these apparent causes might also be its consequences.[25] This sub-chapter will present some of the most discussed causes of corruption.
Lack of Transparency, Integrity and Accountability
Corruption is seen as a governance issue and may arise due to the presence of weak institutions involving ineffective political, judicial and economic checks and balances.[26] Poor legal and regulatory frameworks and insufficient enforcement mechanisms also contribute to this problem.[27] These conditions make the implementation and enforcement of laws, regulations and policies more difficult and weaken transparency, integrity and accountability in the public sector.[28] The absence of transparency, integrity and accountability promotes corruption and is primarily a consequence of weak governance.[29] Transparency enhances the disclosure of information, rules, processes and actions.[30] Furthermore, it promotes openness of decision-making processes to the public,[31] whilst the absence of transparency supports discretion, hence creating incentives for corruption.[32] Accountability refers to the idea that those parties, whether from the public or private sector who administer rules and regulations, are held responsible for the execution of their authority and power and are accountable for their actions.[33] However, in the absence of transparency and accountability, violators enjoy impunity and hence getaway without being held accountable.[34] Finally, lack of integrity principally leads to illicit actions, and the breaching of moral or ethical principles and standards.[35] Armstrong considers the existence of transparency, accountability and integrity as an essential prerequisite to curbing corruption,[36] while the UNDP recognise them as crucial “ingredients”, needed in order to balance monopoly and discretion:[37]
In this context, corruption occurs if rents are available, for instance due to government interventions (monopoly); public servants or politicians have discretionary power to allocate these rents (discretion);[38] taking place in an environment where transparency, accountability and integrity are lacking.[39] The UNDP has modified the “corruption formula” of Klitgaard[40], a leading expert in the field of corruption studies, who only takes the necessity of accountability for the balancing of monopoly and discretion into account. However, according to the UNDP, in addition to that of accountability, the principles of integrity and transparency are also seen as indispensable in order to curb corruption.[41]
Rent-Seeking and Lack of Competition
Restricted competition and the availability of rents are highly correlated, and are the main drivers of rent-seeking behaviour. In general, a high level of competition is desirable as it commonly leads to lower prices in a market and thus shrinks resulting economic rents. As a result, the attractiveness of corrupt activities taking place between private actors and public officials reduces since the latter have less to offer in return for bribes.[42] Enste and Heldmann emphasise that the lower the degree of competition, the easier it is to conceal corrupt payments as there are fewer competitors who may reveal corrupt activities. Furthermore, less competition often goes along with less participation in international trade which in turn exerts less pressure on a nation to promote a favourable environment for foreign firms by, among other means, combating corruption.[43] If economic freedom and therefore competition is restrained, for example due to the presence of a monopolistic or cartel-dominated market,[44] of government interventions or of any other restrictions such as trade restrictions or price controls based on discretionary power,[45] prices and, thereby, excessive profits may rise in line with artificially created rents, leading to increased motivation of and opportunity for politicians to enter in corrupt deals. Lambsdorff concludes that corruption may encourage politicians to support monopolies,[46] whereas Goel and Nelson observe that corruption may trigger rent-seeking behaviour.[47] The term rent-seeking refers to behaviour that maximises the existing wealth without producing any new wealth.[48] It is triggered by influencing or manipulating public decision-makers in order to receive preferential treatment by means of either lobbying or corruption.[49] Fischer underlines that rent-seeking may not reciprocate any productive contribution and output to society.[50] Furthermore, rent-seeking may lead to a possible reduction in economic efficiency and wealth creation, loss of government revenues and rising income inequality according to Reinert et al.[51] It is often quite difficult to draw a clear line between corruption and lobbying. However, lobbying may be accepted within a nation’s laws whereas corruption is considered illegal. It involves a series of events through which decision-makers are influenced without the provision of direct gains, whereas corruption involves acts which grant direct gains to the corrupted.[52]
Asymmetric Information and Conflict of Interest
The previously explained causes of corruption illustrate the broad circumstances under which corruption may arise; however, they do not demonstrate exactly why these lead to the corrupt interactions between the involved parties. Asymmetric information and divergent interests amongst the involved parties are seen as one of the main causes of corruption and might increase the probability of opportunistic behaviour.[53] Asymmetric information exists when one party is in possession of superior information when concluding and/or fulfilling a contract.[54] It is one of the main reasons for the occurrence of the so-called principal-agent problem, referring to cases in which interests between the principal and agent are divergent; asymmetric information is present, to the benefit of the agent;[55] and the principal, who demands a specific service of the agent, has insufficient information to monitor the performance of the agent effectively. This divergence leads to a power imbalance between these two parties, which hinders the principal from securing the compliance of the agent.[56] The opportunity for corruption lies in the authority and power of the agent to misallocate the principal’s resources.[57] It is especially precarious when the agent takes full advantage of this opportunity and acts in his or her own self-interest and betrays the interest of the principal,[58] and/or performs the delegated task contrary to the expectation of the principal.[59] This may result in moral hazard .[60]
Low Wages in the Public Sector
If low wages are paid to public officials from the public sector, this might also lead to corruption as it may trigger the need and incentive on the part of officials to earn extra money and to supplement their incomes by collecting bribes. They may be indirectly forced to do so due to their precarious situation, which is mostly found in developing countries.[61] Rose-Ackermann reveals that increasing wages may be seen as an instrument to curb corruption, arguing that high wages can be seen as a premium which may be lost if the public official is caught engaging in corruption and thus the official would not take this risk to lose his or her job.[62] However, this conclusion reflects the assumption that every public servant is risk-averse, which might not be the case in general, and does not consider the possibility that officials may be greedy. On the contrary, Mauro has observed that high wages are accompanied by high opportunity costs associated with being detected, which may increase the amount of bribes demanded by greedy and risk-taking officials to compensate them for the risk of participating in corrupt deals. As a result, high wages might reduce the number of corrupt acts but not the amount of money involved, which overall may not increase the advantage of increasing wages.[63]
2.3 Forms of Corruption
Corruption has multiple faces behind which it unfolds its destructive effects. In order to understand the phenomenon in more detail, some of the most common forms it may take will be demonstrated in this sub-chapter.
Bribery
Bribery involves the act of offering money or other favours as an inducement to illicitly persuade the other party to take a desired action.[64] The scale of bribery varies among sectors and countries and local conditions.[65] Bribes are used to “purchase” something which is provided by the central or local government involving public officials who abuse their power to look for bribes. Bribes might manipulate the allocation of government benefits including monetary benefits like subsidies or benefits in-kind. In a lot of cases, bribes are used to speed up bureaucratic processes.[66] Political favours, protected markets and monopolies can be bought and bribers may be able to skirt around the full burden of taxation and regulations.[67] They are often treated equally to kickbacks but there is a small important difference as kickbacks are negotiated bribes which evolve from a negotiated commission to compensate the person being bribed for the promised action taken. They occur mostly in public procurement when a company, having won a contract, pays a previous negotiated amount or percentage of the contract’s value to the public official(s) who influenced the procurement process and awarded that contract.[68]
Favouritism
Favouritism refers to the act of giving preferential treatment to one’s circle of acquaintances, family members or friends. This form of corruption predominantly occurs in the public sector where public officials and politicians abuse their power in terms of having access to state resources and to provide preferential treatment to certain people or firms when it comes to the distribution of these resources.[69] The unfair distribution of positions and resources may give rise to two special forms of favouritism which depend on the relationship between the “giver” and “receiver”, namely cronyism and nepotism.[70] Cronyism is a specific form that involves the preferential treatment of friends or associates.[71] Nepotism is a narrower form which includes the preferential treatment of family members. All levels of the state and the private sector are affected by this unfair behaviour.[72]
Embezzlement
Embezzlement refers to the illegal act of misappropriating funds, properties or other goods by an individual to whom they are legally entrusted, who has access to these resources,[73] and is holding office either in a firm, organisation or public institution, for personal gain. The trusted person may embezzle public or private resources.[74] Embezzlement is seen as a significant form of fraud and corruption since it is committed by an entrusted person abusing his or her office for personal enrichment, and may remain hidden and undetected for a long period of time, even for years. Embezzlement is closely interlinked with fraud.[75]
Fraud
Fraud involves deceiving and tricking thus breaching the trust of another party intentionally by employing fraudulent and corrupt practices in order to receive illicit gains and advantages which can be either of a financial or political nature.[76] It is often interlinked with corrupt acts especially with the embezzlement of resources involving schemes of falsifying and manipulating records in order to veil stolen funds.[77] Corruption is a subgroup of fraud which can be categorised in three types: (i) “Intentional manipulation of financial statements”; (ii) “misappropriation of tangible or intangible assets;” and (iii) “corruption”. In most countries, fraud is regarded as a criminal offence and will be prosecuted.[78]
Collusion
Collusion involves the conclusion of a secret agreement between two or more parties from the public and/or private sector to establish a collusive conspiracy with the goal of making illicit financial gains or of influencing another party’s actions.[79] Collusion involves either a horizontal corrupt relationship between parties solely from the private sector or a vertical corrupt relationship between a private party and public official.[80] The parties from the supply-side involved in such a collusive conspiracy are mostly cartels.[81] A cartel is established when companies operating in the same market conspire with the objective of manipulating the market using anti-competitive measures such as price-fixing in order to gain control over the market and seize funds. In general, cartels are illegal and forbidden under EU competition law.[82] The activities of cartels involve so called bid-rigging schemes, [83] which will be further elaborated upon in sub-chapter 4.4 by illustrating the mechanism of corruption in public procurement.
2.4 Corruption in the Public Sector
Corruption in the public sector is a state-society relation which involves the state, meaning any person who has the authority and power of allocating rights over public resources on one site and non-state actors so called “none-state society”, on the other site.[84] The public sector is vulnerable and exposed to political corruption, also called grand corruption, and administrative corruption, also known as petty corruption, which both will be demonstrated in this sub-chapter.
Political Corruption – “Grand Corruption”
Political corruption is a severe form of corruption since it occurs at the highest level of the state which involves the political elite,[85] and political decision-makers who have the power and authority to shape, formulate, implement and enforce laws.[86] It is also called “grand corruption” because transactions involved in corrupt activities are grand in scale.[87] This form of corruption is particularly severe since the political elite or other top-level public officials and politicians may design, abuse, ignore or even tailor laws and regulations systematically to fit their own interests for private gain,[88] or to fit the interests of the briber from the private sector. This is the most widespread form of political corruption and is called state capture.[89] State capture involves a situation in which the nation’s policy, laws, regulations or economy are influenced and shaped by corrupt activities and agreements between powerful companies, institutions or individuals and top-level public officials. The legislature, executive and judiciary are especially vulnerable to being captured.[90] One main problem of political corruption is that it can manipulate the decision-making involved in the procurement process resulting in dispensable procurement and thus misallocating and wasting (scarce) public resources to the detriment of the general public.[91]
Administrative Corruption – “Petty Corruption”
The counterpart of political corruption is administrative corruption, which in contrast is known as “everyday corruption” and occurs at the lower level of the state where low-level public officials and the general public encounter each other daily. Administrative corruption is also described as “petty corruption” since the amounts involved are petty in scale.[92] Administrative corruption affects the implementation of laws, regulations and rules which are mainly influenced by bribes paid to low-level public officials with the goal of influencing or speeding up bureaucratic processes,[93] including custom clearance, application for government benefits or issuance of licenses procedures.[94] Therefore, these facilitation payments are also called “speed money”.[95] Administrative corruption is seen as problematic since it may restrict the access to basic goods and services such as health care or education when expected bribes to public officials are not paid which mostly hurts the poor especially in developing countries.[96] Petty corruption is also called “corruption of need” as many civil servants are underpaid; this makes them highly reliant on small illicit payments as an extra income source in order to financially support their families and provide them with housing and education.[97]
2.5 Corruption in the Private Sector
Corruption in the private sector or “private-to-private corruption” [98] takes place within or between legal entities with the exclusion of the public sector.[99] Legal entities may be private businesses, mostly multinational corporations.[100] In the private sector, the most common forms of corruption are bribery, collusion, fraud and money laundering. Private-to-private corruption can have a detrimental effect on the investment climate. It distorts markets and curbs fair competition which might lead to increasing costs and a reduction in quality of goods and services at the expense of the general public.[101] It is not unusual for public servants to become silent partners in businesses and be engaged in business affairs.[102] Beyond that, companies often try to influence the public procurement process by paying bribes or by colluding with other firms resulting in the establishment of cartels in order to be awarded a contract. Furthermore, they often evade paying taxes and abuse legal loopholes. A serious problem is that a lot of corrupt activities are disguised and take place in the context of secret subsidiaries or partnerships.[103]
3. Public Procurement
3.1 Overview
After giving an overview of the nature of corruption, this chapter will provide a broad understanding of public procurement by outlining the most common regulations and agreements on public procurement before clarifying and illustrating the goals and principles of a sound public procurement system. Afterwards, this chapter will give a brief insight into procurement procedures and into the procurement process. This chapter, together with the general information on corruption presented in the previous chapter, shall serve as a basis for the analysis of corruption in public procurement in the fourth chapter.
Governments, whether at central or sub-central level,[104] are committed to carry out the functions of providing proper public services to their citizens,[105] and of supporting government services in order to accomplish horizontal policy objectives.[106] An indispensable instrument for this is that of public procurement, which involves the process of purchasing goods, services and works from the private sector on behalf of contracting authorities,[107] in conformity with public procurement rules, regulations and principles.[108] Contracting authorities may be either the state, or regional or local authority bodies that are governed by public law.[109] Goods refers to supplies or products, from simple goods such as office supplies up to highly complex and costly articles like defence missiles. Services involve manual services or legal and consultancy services and works relates to any activity related to construction.[110] Public procurement is a broad term and can be distinguished into two different types of procurement tools. One is e-procurement, involving the application of electronic communications by public sector institutions for the purchase of goods, services and works,[111] whereas green public procurement (GPP) focuses on the procurement of goods, services and works that will have a minimised environmental impact throughout their life cycle.[112] Since public procurement involves a significant portion of taxpayers’ money, the government has the responsibility to conduct the procurement in the most efficient and effective way possible and has to ensure that the delivered procurement reflects the public interests;[113] in other words: it has to ensure value for money (VFM).[114] The government may conclude many different forms of contracts with private firms to deliver goods, services and works for areas such as health-care services, energy, education, the military and construction.[115] These may take the form of short- or long-term contracts delivering a one-time service or a single supply, or governments might approve exploitation rights.[116] Public procurement is an essential instrument for driving development. Beyond the mere acquisition of goods, services and works, it may bolster local economies, enhance local capacity development,[117] improve the performance of the public sector and boost domestic economic growth. Therefore, economies are highly reliant on public procurement.[118]
Size of the Public Procurement Market
The economic importance and the size of the public procurement market is substantial. The public procurement market is characterised by huge volumes and massive quantities of money circulating within it. During the past decade, the public procurement market has grown tenfold and it is expected that this significant growth will continue.[119] Public procurement accounts for around 15 to 20 per cent of the global GDP. In the majority of high-income nations, it amounts one-third of the total government spending and in developing countries, even half of the total public spending.[120] In 2015, general government procurement spending accounted for 11.9 per cent of OECD nations’ GDP and 29.1 per cent of total general government expenditures.[121] [122] Taking the EU into consideration, approximately 14 per cent of the EU’s GDP, which is roughly €1.8 trillion annually, is used for the acquisition of goods, services and works.[123] In 2015, tenders worth €450.21 billion have been published in TED;[124] this is 11.9 per cent more than in 2012.[125] [126] It is evident that public procurement plays a key role not only for the domestic economy but also for the total global economy.[127] This raises the question of how such a broad and significant phenomenon can be governed and regulated.
3.2 Regulations and Agreements on Public Procurement
Public procurement is generally subject to and governed by national legislation and policies.[128] However, national legislation and the drafting of procurement legislation is mainly influenced by treaties, agreements or directives which can be legally binding or be just a proposal for establishing a regulatory framework for public procurement.[129] The most common legally binding agreements used for drafting procurement legislation are the United Nations Convention Against Corruption (UNCAC),[130] the Agreement on Government Procurement (GPA)[131] of the WTO and the EU Directives on Public Procurement. The UNCITRAL Model Law on Public Procurement[132] is another important model; however, it is not legally binding and prescriptive.[133] The rules of these models for designing an efficient procurement system might be different, but they underline nearly the same principles which build the foundation of a sound procurement system.[134] In this sub-chapter, these models will be briefly introduced.
United Nations Convention Against Corruption (UNCAC)
The UNCAC is the first and only legally binding international anti-corruption treaty to combat corruption globally and was adopted in 2003.[135] The convention entered into force after the 30th ratification on 14 December 2005 and has been ratified by 183 parties to date.[136] The main purposes of the UNCAC are:
i. to prevent and fight corruption more effectively and efficiently by promoting and strengthening the relevant and necessary measures to do so;
ii. to bolster and assist the progress of international cooperation and technical assistance for the recovery of assets;
iii. to encourage the integrity and accountability of public servants and to support managing public affairs and public property.[137]
The UNCAC is a vital element which aims to shape and design the legislation of a nation’s public procurement system by delivering an appropriate regulatory framework integrated into a comprehensive anti-corruption initiative.[138] Article 9 of the UNCAC specifically addresses public procurement and the management of public finances.[139] It states that in order to guarantee legitimate procurement procedures and proper public records,[140] (i) each party shall establish sound procurement systems in accordance with the principles of transparency, competition and objective criteria in decision making which are indispensable in curbing corruption and (ii) each party must guarantee transparency and accountability in managing public finances,[141] and promote the integrity of public servants.[142] Objective criteria in decision-making attempts to reduce or eliminate biases and subjective evaluations in decision-making as much as possible. This principle facilitates suppliers in following the principles of non-discrimination and equal treatment, ensuring fair competition.[143]
Agreement on Government Procurement (GPA)
International public procurement is mainly addressed by the WTO’s GPA, which is a plurilateral agreement and binding only to WTO members who have signed it. It was signed on 15 April 1994 and to date, 19 parties[144] involving 47 WTO members have ratified this agreement.[145] In 2014, the revised GPA entered into force; this involves several improvements to the provisions of the original GPA,[146] such as more transparent rules and new market opportunities.[147] Public procurement has never been specifically addressed by the WTO’s multilateral rules as the GATT (Article III: 8a) and GATS (Article XIII:1) strictly exempt public procurement from the primary disciplines thereby the GPA is a special agreement and a milestone, attained after several rounds of negotiations.[148] The GPA allows that procurement tenders worth around US$1.7 trillion are published in the international procurement market annually.[149] It is applicable to contracts which exceed defined threshold values expressed in special drawing rights (SDR’s).[150] The framework includes rules to ensure a fair and non-discriminatory environment for international competitive bidding among the parties. The GPA places particular importance on the provision of transparent laws and regulations concerning public procurement.[151] These shall ensure that the parties follow and respect the underpinning fundamental principles of procedural fairness, national treatment and non-discrimination.[152] The principles of non-discrimination and national treatment expect from the parties that they give treatment no less favourable than to domestic products, services and suppliers (Article III:1(a)) and to those of another GPA party (Article III:1(b)),[153] so that access to procurement is granted to all GPA parties equally.[154]
EU Directives on Public Procurement
The fundamental EU legal rules concerning public procurement have evolved from the Treaty on the Functioning of the European Union (TFEU),[155] which shapes the procurement framework of the EU based on articles 26, 34, 53(1), 56, 57, 62, 114,[156] 49 and 18 of the TFEU and from a number of directives which regulate the procedures for awarding procurement contracts. EU public procurement involves acquis communautaire which means that each EU member state is committed to transposing the directives into national legislation.[157] In 2014, the EU has adopted a new public procurement package involving the adoption of three new directives,[158] which had to be transposed into national legislation by each EU member state by 18 April 2016,[159] namely:
- Directive 2014/23/EU [160] – “Concessions Directive” - on the award of concession contracts;
- Directive 2014/24/EU [161] – “Classical Directive” - on public procurement (repealing Directive 2004/18/EC);
- Directive 2014/25/EU [162] – “Utilities (Sectors) Directive” - on procurement by entities operating in the water, energy, transport and postal services sectors (repealing Directive 2004/17/EC).
Another important directive is Directive 2009/81/EC [163] (“Defence & Security Directive”) which has not been affected by the reform. It applies to firms operating in the defence and security sector.[164] These directives define specific thresholds;[165] if the monetary value of tenders exceeds a given threshold, EU law on procurement will apply and tenders must be published EU-wide. However, if a tender’s value is lower than the defined threshold, national rules will apply with respect to the general principles of EU law.[166] (18)Directive 2014/24/EU stipulates that the EU thresholds shall be based on the thresholds set out in the GPA thus the European Commission redefines the EU thresholds with respect to those of the GPA every two years by compensating the exchange rate fluctuations between the euro and SDR’s defined in the GPA.[167] The “Classical Directive” lays out a number of different public procurement procedures, namely:
- Open procedure (Article 27 of Directive 2014/24/EU);
- Restricted procedure (Article 28 of Directive 2014/24/EU);
- Competitive procedure with negotiation (Article 29 of Directive 2014/24/EU);
- Competitive dialogue (Article 30 of Directive 2014/24/EU);
- Innovation partnership (Article 31 of Directive 2014/24/EU).[168]
The directives underline the core principles of procurement, namely transparency, equal treatment, non-discrimination, open competition and sound procedural management, which are necessary to establish a competitive, open and well-regulated procurement market across the EU.[169] Overall, the new public procurement rules promote higher efficiency, a more efficient e-procurement system thus transparency and increased competition resulting from the facilitative participation of SMEs in public tenders.[170] Furthermore, new rules encourage the division of large contracts into lots,[171] enabling SMEs with limited financial capacity to participate in the bidding. The participation of SMEs plays a vital role for the economy as they promote the creation of jobs to a significant extent, and drive innovation.[172] Furthermore, Article 67 of Directive 2014/24/EU stipulates using the “MEAT” criterion for awarding contracts, which involves three different approaches to awarding the contract, based on price only; cost only (utilising a cost-effectiveness approach) or on the best price/quality ratio, an option which additionally takes qualitative, environmental and/or social aspects into account, ensuring better VFM overall.[173] The member states may still use the “lowest price only” as a sole award criteria; however, the new directive gives EU member states the possibility of eliminating “the lowest price only” criterion, or restricting it to certain types of contracts.[174] Beyond that, the new directives help to create a “culture of integrity and fair play” which curbs corruption and encourages the development of innovation by introducing “innovation partnerships” as a new procurement procedure. All in all, the reform of the EU directives on procurement will promote cross-border procurement and free movement of goods and services, and lay the foundation for a deeper and fairer single market. This will make public procurement across the EU more efficient and will create billions in public savings beside boosting growth, investment and the creation of jobs.[175]
The UNCITRAL Model Law on Public Procurement
The UNCITRAL Model Law was first adopted in 1994, as the UNCITRAL Model Law on Procurement of Goods, Construction and Services, which was replaced by the UNCITRAL Model Law on Public Procurement in 2011.[176] The Model Law is not legally binding unlike treaties or conventions.[177] It serves as a “template” which can be utilised by governments to introduce, reform or shape their national public procurement legislation. This model delivers a set of procedures and principles to implement procurement efficiently, and more importantly, accomplish VFM and prevent any abuse or corruption in the procurement process.[178] The model can easily and flexibly be adjusted to local circumstances, in contrast to treaties or conventions which commonly limit opportunities for derogations.[179] It helps governments to fulfil their domestic policy goals.[180] The Model Law sets the following minimum requirements:[181]
i. to accomplish economy and efficiency in procurement;
ii. to promote the participation of providers and contractors in procurement procedures thus bolstering international trade;
iii. to increase competition among suppliers and contractors;
iv. to guarantee fair, equal and equitable treatment among all providers and contractors;
v. to guarantee integrity, fairness and public confidence throughout the whole procurement process;
vi. to promote transparency in the procurement process and procedures.
The revision and development of the UNCITRAL Model Law on Public Procurement (2011) was significantly influenced by the provisions of Article 9 of the UNCAC.[182] The Model Law has been designed in such a way as to enhance the harmonisation of and compliance with international standards concerning public procurement and considers the provisions laid down in the GPA, EU directives on public procurement and UNCAC which enhances its compatibility. The majority of the nations that have used the Model Law since 1994 have been the developing and transitional nations; however, the revised model proves international best practice and is applicable to all nations.[183]
3.3 Principles and Goals of Public Procurement
In the previous sub-chapter, it could be examined that there are a number of agreements and directives that address public procurement and emphasise several principles and goals. In general, a sound public procurement system must fulfil its functions properly and to achieve this, it must pursue certain goals and be constructed on certain essential principles.[184] There are some goals that are shared by most public procurement systems and which are implemented through legal and regulatory rules. Some differences within the public procurement systems are attributable to the fact that procurement systems may place a different level of emphasis on particular objectives and principles, for example a government could place a higher importance on fair treatment of providers, on integrity or on accountability than others. According to Arrowsmith et al., the key goals can be summarised as follows:
- Value for money;
- Integrity (in terms of avoiding corruption and conflicts of interest);
- Accountability;
- Equal opportunities and equal treatment for providers;
- Fair treatment of providers;
- Efficient implementation of industrial, social and environmental objectives in procurement;
- Efficiency in the procurement process;
- Opening up public markets to international trade.[185]
It becomes clear that some of these goals have also been emphasised as principles in the previous sub-chapter, for instance equal treatment and integrity. Concerning the key principles, Arrowsmith et al. categorise them as follows:
- Transparency;
- Competition;
- Equal treatment,[186]
all of which are closely in line with the principles of the EU directives on public procurement. In addition to these principles, integrity[187] and accountability[188] are also seen as crucial principles for a sound procurement system that is free from corruption. The focus of this sub-chapter lies on the brief explanation of the key goals categorised by Arrowsmith et al. For the explanation of the principles, the principles of transparency, competition, equal treatment, integrity and accountability will be considered.
Principles vs. Goals
There is a consensus that the main difference between procurement principles and goals is the condition that principles lay the foundation of a sound procurement system and should be prevalent throughout the whole procurement process and in all procedures, whilst the outcome and result of the process should meet the determined procurement goals.[189] Principles form a code of conduct for all officials involved in the procurement process and are essential to the achievement of the procurement goals.[190]
Explanation of ‘Procurement Goals’
The primary goal of most procurement regimes is the achievement of VFM . [191] This term has been mentioned in the previous sub-chapters several times, but what does it really mean in the context of public procurement? In the following, VFM will be elaborated in more detail than the other procurement goals since it is given a high importance in public procurement. Value for money is not just about selecting the lowest price possible;[192] rather, it refers to finding the right balance between economy, efficiency and effectiveness. All three dimensions must be considered in order to evaluate whether an activity does or does not, in the end, produce value.[193] In this context, these terms can be understood as follows:
- Economy - Resources utilised should be accessible at the right time, in the most suitable quantities and quality and at the best prices for exercising an organisation’s activities.[194] More commonly, it refers to minimising costs for the employed inputs while maintaining quality.[195]
- Efficiency - A measure describing the relationship between resources utilised and realised results.[196] In a more detailed sense, the aim is to minimise the input for a given output or to maximise the output for a given input while keeping the same quality as far as possible.[197]
- Effectiveness – This concerns to what extent the determined goals have been attained and the planned results achieved.[198]
Since efficiency and effectiveness play a significant role in the context of public procurement, their relationship will be briefly explained in the following.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1 : Conceptual framework of efficiency and effectiveness of public performance. Adopted from: Mandl, U. et al. (2008).
Figure 1 demonstrates the conceptual framework of efficiency and effectiveness in the context of public performance according to Mandl et al., which explains the relationship between input, output and outcome. It shows that the employed monetary and non-monetary resources (input) create a specific output, for instance, the input might be spending for education which affects educational enrolment rates (output). Using input-output ratios is a widely recognised instrument with which to measure efficiency. Instead, effectiveness places input or output in relation to the intended outcome (i.e. the desired goals to be achieved) and demonstrates the results and success of the resources deployed for attaining the set goals. The outcome mainly manifests objectives relating to growth and welfare and may be affected by numerous factors, known as “environmental factors”, including institutional and structural factors. The concepts of output and outcome are often used interchangeably; however, the distinction between them is quite important. For instance, the attainment rates of pupils are frequently used to represent outputs in education but the ultimate outcome might be the quality of education.[199] So, what really characterises VFM in public procurement? VFM refers to the acquisition of goods, services and works under the best possible terms and conditions.[200] Put simply, VFM in public procurement reflects the optimal combination of life-cycle costs and quality and can be evaluated based on the measures of economy, efficiency and effectiveness.[201] Another key procurement goal is integrity, which refers to the avoidance of corruption and conflict of interest throughout the whole procurement system. According to Arrowsmith et al., ensuring integrity can be seen as a separate goal of public procurement when corruption is a serious and deep-rooted problem in a country, a situation which is often associated with developing nations.[202] Integrity comprises two elements, namely integrity of the procurement process and integrity of public procurement practitioners, which both refer to integrity as a principle.[203] As is the case with integrity, accountability can also be seen as a principle.[204] However, when accountability is set as a goal, it means that the effectiveness of accountability mechanisms has to be ensured in order to control and monitor the procurement process.[205] A lot of procurement systems follow the goal of ensuring equal opportunities and equal treatment for providers, which guarantees that all firms have equal opportunities to participate in the procurement process and are treated equally. Arrowsmith et al. argue that equal treatment can be an objective but also a principle. Maintaining equal treatment throughout the whole procurement process may be an ultimate procurement objective but it is seen more as a key procurement principle. Equal treatment also involves fair treatment of providers, which principally comprises procedural fairness. In some cases, it may happen that some suppliers are debarred from public contracts due to doubts concerning their integrity which might affect them detrimentally. In such cases, fair treatment of providers makes it possible for their cases to be heard before a final decision concerning the contract award is made.[206] The goal of the efficient implementation of industrial, social and environmental policies in procurement refers to the argument that public procurement is not just about the mere purchase of goods, services and works but also has the responsibility to follow horizontal policies by promoting societal, environmental or other societal objectives; these might involve industrial, social or environmental policies such as minimising carbon emissions or strengthening local economies.[207] Opening up public markets to international trade comprises any means of enabling domestic firms to have access to other nations’ public procurement market and vice versa. In this case, agreements and treaties play a crucial role in order to establish the appropriate regulatory framework for such an environment. As illustrated before, the GPA and the EU directives (with respect to the EU public procurement market) are some of those means. Finally, efficiency in the procurement process, as the term already expresses, refers to ensuring that the whole procurement process is conducted in an efficient manner, meaning without redundant delays, irrational costs and waste of resources.[208]
Explanation of “Procurement Principles”
After giving a broad overview of the key procurement goals, the following discussion will present the key procurement principles in a deeper sense. The discussion begins with the explanation of the principle of transparency. Transparency is given a high value in a sound public procurement system.[209] It must be deep-seated throughout the whole procurement process.[210] Transparency ensures that information concerning rules, regulations, procedures or decisions is made publicly available, so that these can be reviewed and monitored. Transparency involves a variety of practices, such as the publication of contract awards or supplier sanction lists, advertising tender notices openly,[211] or conducting the procurement processes openly with regard to respective rules and procedures. It enables the monitoring of the procurement process in the sense that public officials act in the government’s and public’s interests and not in their own by making sure that procurement rules are obeyed.[212] Transparency is a powerful instrument with which to curb corruption, strengthen the integrity and effectiveness of public services, reduce discrimination, increase competition, and ultimately, to promote VFM.[213] A robust transparent procurement system additionally helps to hold public bodies accountable, which infuses trust in public institutions; thus, transparency is also closely linked to the principle of accountability.[214] Beyond that, an increase in transparency can minimise the risk of unfairness and corruption by reducing discretion.[215] It promotes competition by creating confidence among potential suppliers that their offers will be evaluated in an objective manner, triggering their incentive to bid and by promoting a fair an non-discriminatory competitive environment.[216] With regard to public procurement, competition exists in an environment where potential suppliers compete directly under the same terms and conditions to win a contract.[217] Increased competition is a key accelerator of better market efficiency, reduced prices, higher quality, innovations and fair market conditions. It is further underpinned by transparency which promotes the absence of collusive tendering and thereby ensures fair competition.[218] Competition leads to efficient and economic procurement outcomes, therefore distortions or any other restrictions of it must be prevented. This is promoted by equal treatment.[219] Equal treatment guarantees that all participants are given the identical conditions for the bid submission and evaluation process and are treated in exactly the same manner.[220] Discriminatory decisions can also be prevented, if discrimination based on nationality is prohibited, as it is in the EU context. Equal treatment is a key contributor to VFM in the acquisition of goods, services and works since it protects and increases fair competition and curbs collusive behaviour. This helps to further open public markets to international trade for competition.[221] Integrity is another crucial principle, which ensures that the whole procurement process is conducted in compliance with respective regulations and laws.[222] The OECD defines integrity as “the use of funds, resources, assets, and authority, according to the intended official purposes, to be used in line with public interest”.[223] Integrity ensures transparency of the procurement process and the fair and equal treatment of participants; ensures that procurement officials act in the public interest and administer public resources accordingly; guarantees accountability; and encourages public scrutiny. If integrity is violated, this might result in illicit behaviour such as waste or exploitation of resources; manipulating or abusing information; or corrupt activities such as collusive tendering or fraud.[224] Last but not least, accountability implies that all participants involved in the whole procurement process (such as public authorities and their public servants, private company executives and agents, financial institutions, etc.) must be held accountable for their decisions, the execution of their duties and the actions for which they are responsible towards the general public.[225] Accountability with regard solely to the public sector can also be defined as the “responsibility of government and its agents towards the public to achieve previously set objectives and to account for them in public”.[226] If any legal or contractual obligations, or any respective laws and regulations concerning the procurement process are violated, the violator must be held to account by means of the appropriate disciplinary, contractual or criminal sanctions since any negligence of accountability will erode the integrity of a sound procurement system.[227]
Shaping and designing a sound procurement system and thus upholding political legitimacy is not just about the mere integration of all these principles and goals in a procurement system but rather about balancing them to achieve the desired goals and outcomes of public procurement.[228] It is common that a conflict between maintaining these principles and the achievement of some procurement goals may arise. An example might be a conflict between VFM, together with efficiency of the procurement process and the principle of equal treatment in the sense that, for example, an offer is submitted but does not meet some of the requirements for participation in the tendering process. In this context, the bid would be rejected to maintain equal treatment of all participants but this offer could in fact be the most favourable one in terms of VFM and therefore should be normally accepted.[229] Similarly, equal treatment generally favours open tendering so that every qualified candidate can be given the chance to participate. However, awarding contracts by open tendering is more costly and time-consuming than a restricted procedure. This would adversely affect the efficiency of the procurement process thus, again, VFM. Nevertheless, protecting and complying with the above principles will promote VFM in the longer term and to do so makes the whole sound procurement system more sustainable.[230]
3.4 The Procurement Procedures
Public procurement involves different types of tendering procedures for the award of a procurement contract. The choice of the specific procedure mainly relies on the value of the contract, number of bidders and predicted degree of complexity of the related good, service or works.[231] Procurement procedures can be categorised in competitive procurement procedures and non-competitive procurement procedures,[232] which will be further elaborated upon in this sub-chapter. For the explanation of competitive procedures, the procedures from the EU Directive 2014/24/EU will be considered. This directive covers the open procedure, restricted procedure, competitive dialogue procedure and additionally takes into account the competitive procedure with negotiation and innovation partnership.[233] Concerning non-competitive procedures, single-source procurement will be briefly explained. These procedures vary in regard to their degree of flexibility, discretion and manageability.[234]
Open procedure
Open tendering represents a single-stage process, meaning that any interested firm can bid for a tender without a pre-selection of bidders.[235] The contracting authority issues a public notice in which it advertises the contract opportunity, providing detailed contract specifications and requirements, and it issues the required tender documents on the publication date of the contract notice to all economic operators who are willing to participate in the tendering process. Before a defined deadline, the bidders simultaneously submit their selection (qualification) information and tenders in response to the detailed advertised parameters defined by the public authority. All tenders which have been submitted before the deadline and fulfil the selection criteria are taken into account and are evaluated based on the MEAT criterion.[236] Open tendering is seen as the most favourable procedure since it gives an unlimited number of interested firms the chance to participate in the tendering process without any restrictions; thereby it enables maximum competition.[237] This results in greater favourable results such as lower prices and better quality, outcomes that are desired by the contracting authority and that, of course, are in the public interest.[238] Furthermore, open tendering guarantees the accountability of public funds, ensures transparency, reduces discretion and prevents favouritism. However, processing the high amounts of tenders is very costly and time-consuming.[239] Moreover, open tendering is best used for lower-value contracts or “commodity procurement”, meaning the acquisition of simple and straightforward goods such as stationery or furniture supplies and not for large and complex procurement projects, which are characterised by complex technical and legal specifications.[240]
Restricted procedure
In contrast to the open procedure, the restricted procedure is a two-stage process. The main difference between this and open tendering is that only pre-selected economic operators are invited to submit a bid.[241] In the first step, economic operators respond to the advertised contract opportunity by submitting a request for participation. This includes a filled-out selection questionnaire, which is used by the contracting authority to assess the firm’s capabilities, experiences, suitability etc., and to compile a shortlist of at least five economic operators who meet the contract’s requirements and fulfil the selection criteria. In the second step, suppliers who have been shortlisted, and who fulfil the selection criteria are then invited to submit their tenders.[242] These tenders are also evaluated based on the MEAT criterion.[243] This procedure is best employed if a high number of economic operators responding to the advertised public notice is expected or the specified requirements of the contract opportunity are complex. Moreover, the number of participants who are invited to bid can be restricted and reduced, making the bid evaluation more feasible. However, this procedure is more exposed to corruption and collusion than an open procedure, as it involves more discretion.[244]
Competitive dialogue procedure
The competitive dialogue procedure is also a two-step process and starts with the same step as in the restricted procedure. This is followed by the pre-selection of the qualified suppliers; however, the selected suppliers are then invited to a competitive dialogue instead of submitting their bids directly.[245] The dialogue is executed in successive phases with the bidders.[246] In contrast to the open and restricted procedure, in the case of competitive dialogue the contract’s technical specifications have not been pre-defined and determined to satisfy the needs of the contracting authority, which is often the case for complex contracts like large infrastructure construction projects. At least three pre-selected economic operators must be invited by the contracting authority to the dialogue,[247] where all aspects concerning the project are further discussed; for example, the final technical or legal details are identified and defined. As soon as the proposals received from the participants satisfy the requirements of the contracting authority, the competitive dialogue is completed and closed and the economic operators are invited to submit their bids, which must be evaluated based on the best price/quality ratio.[248] This procedure enhances additional market innovations and helps to develop the most appropriate solution for the contracting authority’s needs through detailed dialogue.[249]
Competitive procedure with negotiation
A competitive procedure with negotiation is similar to a competitive dialogue, except for the difference that the contracting authority invites the shortlisted economic operators (of which there are at least three)[250] not to a competitive dialogue but rather to a negotiation of the terms of the contract. Another difference is that tenders will be evaluated based on the MEAT criterion and not solely based on the best price/quality ratio.[251] This procedure has been largely replaced by the competitive dialogue procedure but it is still common for tendering concerning the electricity, water, and postal-services and the transportation sector.[252]
Innovation partnership
The innovation partnership is a new procedure under the new EU Directive 2014/24/EU. It can only be used if an innovative solution is required and the latter must be specifically developed, to satisfy specific needs on the part of the contracting authority which the already existing goods, services or works on the market cannot meet.[253] The advertised contract opportunity describes the scope of the project which tends to consist of the minimum requirements instead of definite technical specifications or a specific solution for the contract opportunity. The interested economic operators will be pre-selected from a qualitative perspective which involves the evaluation of their expertise, experiences, costs and research capacity in order to assess their capability to participate in the innovation partnership.[254] Throughout the innovation partnership, the contracting authority can discuss all relevant content relating to the project with the candidates. This procedure awards the contract solely on the basis of the best price/quality ratio.[255] The particularity of this procedure is that the developed innovative solution can be immediately bought without issuing a separate tender to do so.[256] However, the contracting authority is not obliged to acquire the developed good, service or works.[257]
Single-source procurement
Single-source procurement or “direct contracting”[258] is a non-competitive procedure which involves the acquisition of goods, service and works only from one source and the awarding of the contract without a prior public notice to tender. In the case of the EU, single-source procurement is conducted under the negotiated procedure without prior publication (Article 32 EU Directive 2014/24/EU) but its use is very limited and can only be exercised if justified reasons are given, for example:
- if any unsuitable, unacceptable or irregular bid or no applications have been collected in response to an invitation for competition,[259] under the open or restricted procedure,[260] competitive dialogue or competitive procedure with negotiation;[261]
- if the needed goods, services or/and works can be sourced only from one particular economic operator for technical reasons or due to the protection of exclusive rights such as intellectual property rights;[262]
- in a case of extreme urgency caused by unforeseeable events, for which an open or restricted procedure or competitive dialogue procedure and competitive procedure with negotiation could not meet the time frame.[263]
Single-source procurement allows the contracting authority to select the contracting partner in the absence of transparency and competition,[264] which makes this procedure highly vulnerable to abuse and corruption. Therefore, governments are eager to keep this kind of procedure to the absolute minimum and set strict requirements for its implementation.[265]
Exclusion grounds
The contracting authority does not only decide to whom the contract will be awarded but is also obligated to exclude economic operators from tendering if there is enough evidence that they have been finally convicted of one of the following offences according to Article 57 EU Directive 2014/24/EU:
- being a member of a criminal organisation;
- corruption;
- fraud with regards to Article 1 of the convention on the protection of the European communities’ financial interests;
- terrorist offences, other crimes related to terrorist activities or inciting, aiding or abetting others to commit a crime;
- money laundering or financially supporting terrorists;
- child labour and other crimes relating to human trafficking.[266]
3.5 The Procurement Process
The procurement process, often called the “procurement cycle”, consists of different phases which must be successively completed in order to acquire the desired goods, services or works.[267] In general, the procurement process involves a high degree of complexity and can be conducted in different ways depending on the choice of procedure,[268] as these are associated with different procurement rules and steps.[269] The procurement process must be implemented on the basis of the procurement principles as these are essential to the avoidance of corruption and to ensuring the desired outcomes during and after the whole process.[270] The procurement process relating to competitive procedures consists of three phases, which can be categorised as follows:
Abbildung in dieser Leseprobe nicht enthalten
Figure 2 : Steps of the public procurement process. Illustration based on Kühn, S. / Sherman, L. (2014), United Nations Office on Drugs and Crime (2013) and OECD (2009a).
Pre-tender phase
In the pre-tender phase, the contracting authority first assesses its needs for goods, services and/or works and then decides which goods, services or works must be acquired and when. It is also responsible for preparing a budget for the planned acquisition,[271] and for identifying and determining the technical requirements and specifications of the contract. Furthermore, the contracting authority also plans and prepares the procurement process by, for instance, designing and preparing the bidding documents and contract notice,[272] and defining the evaluation criteria. Moreover, it determines the number of stages in the process, the time frames for tendering, the award criteria for the tender, the expected number of bidders and any possible relevant restrictions or exceptions, all of which primarily depend on the chosen procurement procedure.[273]
[...]
[1] Cf. Ware, G. et al. (2007), p. 295.
[2] Cf. Shabbir, G. / Anwar, M. (2007), p. 1.
[3] Cf. Support for Improvement in Governance and Management (2016), p. 11.
[4] Cf. Transparency International (2006), p. 7.
[5] Cf. Transparency International (2018i).
[6] Cf. OECD (2007a), p. 9.
[7] Cf. OECD (2005), p. 9.
[8] Cf. Transparency International (2006), p. 28.
[9] Cf. OECD (2011), p. 9f.
[10] Cf. International Monetary Fund (2016), p. 3.
[11] Cf. Transparency International (2018e).
[12] Cf. Transparency International (2018j).
[13] Cf. Redwitz, C. (2014), p. 13.
[14] Cf. Amundsen, I. (1997), p. 3f.
[15] Cf. Transparency International (2018f).
[16] Cf. The World Bank (1997), p. 1.
[17] Cf. Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung (2018).
[18] Cf. The World Bank (2017).
[19] Cf. United Nations Development Programme (2017), p. 1.
[20] Cf. OECD (2013), p. 21.
[21] Cf. European Union (2018b).
[22] Cf. Grossi, G. / Pianezzi, D. (2016), p. 1.
[23] Cf. International Monetary Fund (2016a).
[24] Cf. Martini, M. (2012), p. 3.
[25] Cf. Lambsdorff, J. (2005), p. 28.
[26] Cf. United Nations Development Programme (2003), p. 2.
[27] Cf. United Nations Economic Commission for Africa (2016), p. 16.
[28] Cf. Armstrong, E. (2005), p. 2f.
[29] Cf. United Nations Development Programme (2003), p. 2.
[30] Cf. Kuyumdzhieva, A. et al. (2015), p. 8.
[31] Cf. United Nations Economic Commission for Africa (2016), p. 8.
[32] Cf. Tanzi V. (1998), p. 575.
[33] Cf. Myint, U. (2000), p. 38.
[34] Cf. Center for International Private Enterprise (2011), p. 3.
[35] Cf. Kuyumdzhieva, A. et al. (2015), p. 8.
[36] Cf. Armstrong, E. (2005), p. 2f.
[37] Cf. United Nations Development Programme (2003), p. 2.
[38] Cf. Mills, A. (2012), p. 8.
[39] Cf. United Nations Development Programme (2003), p. 2.
[40] Cf. Klitgaard, R. (1988).
[41] Cf. United Nations Development Programme (2003), p. 2.
[42] Cf. Lambsdorff, J. (2005), p. 18ff.
[43] Cf. Enste, D. / Heldman, C. (2017), p. 15.
[44] Cf. Center for International Private Enterprise (2011), p. 3.
[45] Cf. Mauro, P. (1998a), p. 11.
[46] Cf. Lambsdorff, J. (2005), p. 18ff.
[47] Cf. Goel, R. / Nelson, M. (1998), p. 117.
[48] Cf. Reinert, E. et al. (2016), p. xix.
[49] Cf. Lambsdorff, J. (2002), p. 98.
[50] Cf. Fischer, P. (2004), p. 2.
[51] Cf. Reinert, E. et al. (2016), p. xix.
[52] Cf. Giovannoni, F. (2011), p. 12.
[53] Cf. Singh, J. / Sirdeshmukh, D. (2000), p. 152.
[54] Cf. Do, Q-T. (2003), p. 1.
[55] Cf. Groenendijk, N. (1997), p. 208.
[56] Cf. UK Department for International Development (2015), p. 15.
[57] Cf. Kajsiu, B. (2015), p. 20.
[58] Cf. Persson, A. et al. (2013), p. 452.
[59] Cf. Shah, S. (2014), p. 1.
[60] Cf. Marquette, H. / Pfeiffer, C. (2015), p. 4.
[61] Cf. Lambsdorff, J. (2005), p. 20.
[62] Cf. Rose-Ackermann, S. (2006), p. 39.
[63] Cf. Mauro, P. (1998a), p. 11.
[64] Cf. Transparency International (2018).
[65] Cf. U4 Anti-Corruption Resource Centre (2015), p. 2.
[66] Cf. The World Bank (1997), p. 9ff.
[67] Cf. Amundsen, I. (1997), p. 11.
[68] Cf. Ware, G. et al. (2007), p. 299.
[69] Cf. Amundsen, I. (1997), p. 14.
[70] Cf. U4 Anti-Corruption Research Centre (2018).
[71] Cf. Shabbir, B. / Siddique, H., p. 300f.
[72] Cf. U4 Anti-Corruption Research Centre (2018).
[73] Cf. U4 Anti-Corruption Research Centre (2018).
[74] Cf. Transparency International (2018b).
[75] Cf. Dugan, M. / Lopatka, J. (2014).
[76] Cf. Transparency International (2018d).
[77] Cf. U4 Anti-Corruption Resource Centre (2018).
[78] Cf. PwC / Ecorys (2013), p. 58.
[79] Cf. Transparency International (2018a).
[80] Cf. Transparency International (2016), p. 1.
[81] Cf. Transparency International (2018a).
[82] Cf. European Commission (2017).
[83] Cf. Transparency International (2016), p. 2.
[84] Cf. Amundsen, I. (1999), p. 2.
[85] Cf. Jain, A. (2001), p. 4.
[86] Cf. Amundsen, I. (1999), p. 3.
[87] Cf. U4 Anti-Corruption Research Centre (2018).
[88] Cf. Amundsen, I. (1999), p. 3
[89] Cf. Matei, A. / Popa, F. (2009), p. 1.
[90] Cf. Transparency International (2014b), p. 1f.
[91] Cf. European Parliament (2013), p. 27.
[92] Cf. U4 Anti-Corruption Research Centre (2018).
[93] Cf. European Parliament (2013), p. 27.
[94] Cf. Lambert-Mogiliansky, A. et al. (2005), p. 2f.
[95] Cf. Shepherd, B. (2009), p. 3.
[96] Cf. Transparency International (2018g).
[97] Cf. U4 Anti-Corruption Research Centre (2018).
[98] Cf. Argandoña, A. (2003), p. 1.
[99] Cf. Transparency International (2014a), p. 2.
[100] Cf. Amundsen, I. (1999), p. 3.
[101] Cf. Transparency International (2018c).
[102] Cf. Johnston, M. (2007), p. 1.
[103] Cf. Transparency International (2018h).
[104] Cf. OECD (2011b), p. 11.
[105] Cf. European Commission (2018).
[106] Cf. OECD (2018).
[107] Cf. OECD (2009a), p. 9.
[108] Cf. Lynch, J. (2013), p. 1f.
[109] Cf. European Union (2014a) / Article 2(1) EU Directive 2014/24/EU.
[110] Cf. Arrowsmith, S. et al. (2010), p. 2.
[111] Cf. European Commission (2018c).
[112] Cf. European Commission (2018b).
[113] Cf. OECD (2018).
[114] Cf. Arrowsmith, S. et al. (2010), p. 5.
[115] Cf. Heggstad, K. et al. (2010), p. 3.
[116] Cf. The World Bank (2018).
[117] Cf. Ballard, T. (2011), p. 2.
[118] Cf. The World Bank (2016), p. 1.
[119] Cf. The World Bank (2016), p. iv.
[120] Cf. The World Bank (2016), p. 1.
[121] Cf. OECD (2017), p. 173.
[122] See Appendices 1-4 for more information concerning general government procurement spending as share of GDP and of total general government expenditures of OECD nations.
[123] Cf. European Commission (2018b).
[124] Electronic database which publicises all public tenders exceeding the EU thresholds (European Union, 2018).
[125] Cf. European Commission (2016a).
[126] See Appendices 5-6 for illustrations of total general government expenditures on goods, services and works (excluding utilities) as a share of GDP of EU-nations and values of tenders published in TED from 2012-2015.
[127] Cf. Ballard, T. (2011), p. 2.
[128] Cf. Collins, J. et al. (2008), p. 4.
[129] Cf. Nicholas, C. (2014), p. 7.
[130] Cf. United Nations Convention Against Corruption (2004).
[131] Cf. World Trade Organization (2018).
[132] Cf. United Nations Commission on International Trade Law (2011).
[133] Cf. Arrowsmith, S. et al. (2010), p. 27.
[134] Cf. United Nations Office on Drugs and Crime (2013), p. 3.
[135] Cf. U4 Anti-Corruption Resource Centre (2017), p. 1.
[136] Cf. United Nations Office on Drugs and Crime (2017).
[137] Cf. United Nations Office on Drugs and Crime (2004), p. 7.
[138] Cf. United Nations Office on Drugs and Crime (2013), p. 2.
[139] Cf. United Nations Office on Drugs and Crime (2004), p. 12.
[140] Cf. United Nations Office on Drugs and Crime (2013), p. 8.
[141] Cf. United Nations Office on Drugs and Crime (2004), p. 12.
[142] Cf. United Nations Office on Drugs and Crime (2004), p. 7.
[143] Cf. Vlassis, D. (2016), p. 180.
[144] See Appendix 7 for a complete list of the parties.
[145] Cf. World Trade Organization (2018).
[146] Cf. World Trade Organization (2018d).
[147] Cf. European Commission (2012), p. 2f.
[148] Cf. World Trade Organization (2018f).
[149] Cf. World Trade Organization (2018).
[150] Cf. World Trade Organization (2018d).
[151] Cf. World Trade Organization (2018b).
[152] Cf. World Trade Organization (2018e).
[153] Cf. World Trade Organization (2018a).
[154] Cf. European Commission (2012), p. 2.
[155] Cf. European Union (2012).
[156] Cf. European Parliament (2018a).
[157] Cf. European Parliament (2013), p. 31f.
[158] Cf. European Parliament (2017).
[159] Except for e-submission as part of the roll-out of e-procurement which will be mandatory for all contracting authorities and procurement procedures from 18th October 2018 (European Commission, 2018) / See Appendix 8 for the full timetable for the rollout of e-procurement in the EU.
[160] Cf. European Union (2014).
[161] Cf. European Union (2014a).
[162] Cf. European Union (2014b).
[163] Cf. European Union (2009).
[164] Cf. European Commission (2018d).
[165] See Appendix 9 for a complete list of the thresholds triggering EU-wide rules (effective from 1st January 2018).
[166] Cf. European Commission (2018c).
[167] Cf. Ferber, T (2016), p. 14.
[168] Cf. European Union (2014a), p. 109ff.
[169] Cf. European Commission (2018c).
[170] Cf. European Commission (2018b).
[171] Cf. European Union (2014a), p. 123 / Article 46 of Directive 2014/24/EU.
[172] Cf. European Commission (2016).
[173] Cf. Support for Improvement in Governance and Management (2016b), p. 2.
[174] Cf. European Union (2014a), p. 134 / Article 67 of EU Directive 2014/24/EU.
[175] Cf. European Commission (2018b).
[176] Cf. United Nations Commission on International Trade Law (2018).
[177] Cf. Nicholas, C. (w/o Y), p. 2.
[178] Cf. Dua, N. (2008), p. 6.
[179] Cf. Nicholas, C. (w/o Y.), p. 2.
[180] Cf. United Nations Commission on International Trade Law (2018).
[181] Cf. United Nations Commission on International Trade Law (2011), p. 3.
[182] Cf. United Nations Office on Drugs and Crime (2013), p. 3.
[183] Cf. United Nations Commission on International Trade Law (2018).
[184] Cf. United Nations Office on Drugs and Crime (2013), p. 8.
[185] Cf. Arrowsmith, S. et al. (2010), p. 4f.
[186] Cf. Arrowsmith, S. et al. (2010), p. 20.
[187] Cf. OECD (2009a), p. 9f. / Kühn, S. / Sherman, L. (2014), p. 12f. / Cf. European Parliament (2013), p. 30f. / Ferguson, G. (2017), p. 11-23. / United Nations Office on Drugs and Crime (2013), p. v.
[188] Cf. Kühn, S. / Sherman, L. (2014), p. 12f. / Cf. European Parliament (2013), p. 30f. / Komakech, R. (2016), p. 22f.
[189] Cf. Arrowsmith, S. et al. (2010), p. 20.
[190] Cf. Lynch, J. (2013), p. 8.
[191] Cf. World Trade Organization (2018f).
[192] Cf. Ministry of Foreign Affairs and Trade (New Zealand), p. 1.
[193] Cf. Jackson, P. (2012), p. 1f.
[194] Cf. European Court of Auditors (2017), p. 7
[195] Cf. Jackson, P. (2012), p. 1f.
[196] Cf. European Court of Auditors (2017), p. 7
[197] Cf. Jackson, P. (2012), p. 1f.
[198] Cf. European Court of Auditors (2017), p. 7
[199] Cf. Mandl, U. et al. (2008), p. 2f.
[200] Cf. Arrowsmith, S. et al. (2010), p. 5.
[201] Cf. Jackson, P. (2012), p. 1f.
[202] Cf. Arrowsmith, S. et al. (2010), p. 8f.
[203] Cf. Lynch, J. (2013), p. 10f.
[204] Cf. Kühn, S. / Sherman, L. (2014), p. 12f. / Cf. European Parliament (2013), p. 30f. / Komakech, R. (2016), p. 22f.
[205] Cf. European Parliament (2013), p. 25.
[206] Cf. Arrowsmith, S. et al (2010), p. 11ff.
[207] Cf. Arrowsmith, S. / Kunzlik, P. (2009), p. 12f.
[208] Cf. Arrowsmith, S. et al. (2010), p. 18ff.
[209] Cf. European Parliament (2012), p. 30.
[210] Cf. Kühn, S. / Sherman, L. (2014), p. 12.
[211] Cf. Transparency International (2006), p. 49f.
[212] Cf. United Nations Office on Drugs and Crime (2013), p. 8f.
[213] Cf. Fenster, G. (2003), p. 12.
[214] Cf. Anderson, R. et al. (2011), p. 9.
[215] Cf. The United Nations Office for Project Services (2011), p. 1.
[216] Cf. Anderson, R. et al. (2011), p. 9.
[217] Cf. Komakech, R. (2016), p. 23.
[218] Cf. Georgieva, I. (2017), p. 15.
[219] Cf. Support for Improvement in Governance and Management (2011), p. 4f.
[220] Cf. Georgieva, I. (2017), p. 6.
[221] Cf. Arrowsmith, S. et al. (2010), p. 11ff.
[222] Cf. Transparency International (2006), p. 48.
[223] OECD (2009a), p. 19.
[224] Cf. European Parliament (2012), p. 30.
[225] Cf. Transparency International (2006), p. 51.
[226] Cheminais, J. et al. (1998), p. 54.
[227] Cf. Transparency International (2006), p. 51.
[228] Cf. United Nations Office on Drugs and Crime (2013), p. 2.
[229] Cf. Arrowsmith, S. et al. (2010), p. 7.
[230] Cf. Arrowsmith, S. et al. (2010), p. 20.
[231] Cf. United Nations Office on Drugs and Crime (2013), p. 5.
[232] Cf. Lynch, J. (2013), p. 19.
[233] See Appendix 11 for an illustration of the single steps of the open and restricted procedure, competitive dialogue and competitive procedure with negotiation.
[234] Cf. Baldi, S. et al. (2016), p. 2.
[235] Cf. United Nations Office on Drugs and Crime (2013), p. 5.
[236] Cf. Support for Improvement in Governance and Management (2016a), p. 2f.
[237] Cf. United Nations Office on Drugs and Crime (2013), p. 5.
[238] Cf. Asquer, A. et al. (2017), p. 102.
[239] Cf. Uher, T. / Loosemore, M. (2003), p. 164.
[240] Cf. Sweett Group (2012), p. 6.
[241] Cf. European Union (2018a).
[242] Cf. Hertfordshire County Council (2017), p. 76.
[243] Cf. Support for Improvement in Governance and Management (2016a), p. 3.
[244] Cf. Support for Improvement in Governance and Management (2016a), p. 6f.
[245] Cf. Support for Improvement in Governance and Management (2016a), p. 3ff.
[246] Cf. Sweett Group (2012), p. 7f.
[247] Cf. European Union (2018a).
[248] Cf. Support for Improvement in Governance and Management (2016a), p. 3 / Article 30 in accordance with Article 67(2) of EU Directive 2014/24/EU.
[249] Cf. Hertfordshire County Council (2017), p. 77.
[250] Cf. European Union (2018a).
[251] Cf. Support for Improvement in Governance and Management (2016a), p. 3.
[252] Cf. Global Affairs Canada (2017), p. 31.
[253] Cf. Support for Improvement in Governance and Management (2016a), p. 4.
[254] Cf. Global Affairs Canada (2017), p. 31f.
[255] Cf. Support for Improvement in Governance and Management (2016a), p. 4.
[256] Cf. Global Affairs Canada (2017), p. 31f.
[257] Cf. Support for Improvement in Governance and Management (2016a), p. 4.
[258] Cf. Arrowsmith, S. et al. (2000), p. 537.
[259] Cf. Transparency International (2016a), p. 5.
[260] Cf. European Union (2014a), p. 113. / Article 32(2a) EU Directive 2014/24/EU.
[261] Cf. Transparency International (2016a), p. 47.
[262] Cf. European Union (2014a), p. 113. / Article 32(2b) EU Directive 2014/24/EU.
[263] Cf. European Union (2014a), p. 113. / Article 32(2c) EU Directive 2014/24/EU.
[264] Cf. United Nations Office on Drugs and Crime (2013), p. 4.
[265] Cf. Arrowsmith, S. et al. (2000), p. 537.
[266] Cf. European Union (2014a), p. 127. / Article 57 EU Directive 2014/24/EU.
[267] Cf. Heggstad, K. et al. (2010), p. 4.
[268] Cf. Kühn, S. / Sherman, L. (2014), p. 7.
[269] Cf. Søreide, T. / Schultz, J. (2006), p. 9.
[270] Cf. Arrowsmith, S. et al. (2010), p. 20.
[271] Cf. Heggstad, K. et al. (2010), p. 5.
[272] Cf. United Nations Development Programme (2017), p. 49.
[273] Cf. United Nations Office on Drugs and Crime (2013), p. 4.