# 05 / 2010
TI Working Paper # 04/2010
Table of Contents
1. Understanding corruption in
2. The cost of corruption for
3. Corruption risks and
4. Effective and transparent
Corruption and Public
Public procurement affects all aspects of people’s lives and assumes a large share of government budgets. The acquisition of buildings and land by municipal and national governments, the construction of roads, the provision of health and education services, and the construction and operation of drinking water and sanitation systems are just a few examples of public
investments that involve procurement. The Organisation for
Economic Co-operation and Development (OECD) has estimated
the value of government procurement markets worldwide to be
US$ 2 trillion annually.1 Wherever such large quantities of money change hands, the risk of corruption is high.
People often refer to public procurement as being very complex and a technical subject. But this assumption should be
challenged. Anyone can understand why it is important to
introduce safeguards against corruption in public procurement. Everyone — from individual citizens to high level government officials — can play a role in ensuring tax payers’ money spent on procurement delivers good quality services at a fair economic cost for all. The purpose of this paper is to raise awareness and guide interested individuals towards promoting greater
transparency and integrity in public procurement.
Corruption and public procurement
TI Working Paper # 05/2010 2 www. t ransparency.org
1. Understanding corruption in public procurement
In global policy circles, the importance of corruption-free procurement is uncontested. Numerous bilateral donors and all international organisations — including the OECD, multilateral development banks, the World Trade Organisation and the European Union — have emphasised the need to increase transparency and control corruption in procurement. The ultimate objective is to ensure the best impacts from the use of tax payers’ money and the increased effectiveness of aid.
In the last few years, the Paris Declaration on Aid Effectiveness and the Accra Agenda for Action4 have provided renewed focus on strengthening procurement systems at the country level in order to better deliver on development money being spent. The international community and developing countries have undertaken reforms that incorporate integrity as one of the main pillars for an effective country procurement system.
When low levels of integrity in public procurement lead to corruption, it can be characterised by a number of actions — from bribery, facilitation payments and collusion; to the violation of conflict of interest rules, bid-rigging, and trading of influence. In the case of bribery, public contracting is perceived to be more susceptible to corruption when compared to other areas of government, such as tax collection, the judiciary or public utilities.5
As in any other corrupt transaction, corruption in public procurement involves a series of actors who take decisions based on their own interests rather than the public good. Some of the most important actors involved include public officials who are responsible for procurement and the management of contracts; politicians who influence decisions at the planning and contracting stages; and bidders, suppliers, contractors and sub-contractors who are involved in competing for and delivering on contracts. Also, intermediaries who represent bidders, joint venture partners and private companies’ subsidiaries can play a role in corruption. Not to be forgotten are the banks, financial centres and other financial intermediaries that facilitate corruption by processing the illicitly acquired funds.6
2. The cost of corruption in public procurement
The cost of corruption in procurement is difficult to measure quantitatively, if at all, due to...
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