Corruption and Procurement

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International Handbook on the Economics of Corruption, Volume Two

Edited by

Susan Rose-Ackerman
Yale University, USA

Tina Søreide
Chr. Michelsen Institute, Norway

Edward Elgar
Cheltenham, UK • Northampton, MA, USA

© Susan Rose-Ackerman and Tina Søreide 2011 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2011925769

ISBN 978 1 84980 251 2 (cased) Typeset by Servis Filmsetting Ltd, Stockport, Cheshire Printed and bound by MPG Books Group, UK

5

A fighting chance against corruption in public procurement?
Gustavo Piga1

‘When I use a word’, Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean – neither more nor less.’ ‘The question is’, said Alice, ‘whether you can make words mean so many different things.’ ‘The question is’, said Humpty Dumpty, ‘which is to be master – that’s all.’ (Through the Looking-Glass, and What Alice Found There, 1871, Lewis Carroll)

1. Introduction Public procurement is said to account for between 15 and 20 percent of the GDP of most countries.2 The allocation of these funds brings to the fore a vast array of interests, both over specific tenders and also over broad national and supra-national legislation regarding procurement.3 Those interests are often said to be non-benevolent, that is, prone to generate corruption, in both poor and rich countries. Economic and social development is not sufficient to eradicate corruption. Why is the battle against corruption in public tenders an ongoing problem that weakens the credibility of institutions and governments at all levels of development?4 One possible answer is to note that ‘transparency’, the instrument most widely used in the war against procurement corruption, does not generate the right incentives to avoid improper behavior. The Recommendation of the OECD Council on Enhancing Integrity in Public Procurement contains 10 principles to enhance integrity in public procurement. Principle number 2 sums up quite well the concept of transparency: ‘governments should provide clear rules, and possibly guidance, on the choice of the procurement method and on exceptions to competitive tendering. Although the procurement method could be adapted to the type of procurement concerned, governments should, in all cases, maximize transparency in competitive tendering’.5 Although no one can deny the usefulness of such a principle and the fact that it has been used by many governments, we argue here that transparency in procurement is almost worthless if governments do not also know: (a) how to evaluate procurement activity and reward it when positive performance ensues, and (b) how to open those evaluations to citizens at large. These two requirements are yet to be fully 141

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developed, let alone implemented, even in rich countries. We also argue that, if these two preconditions are met, a country has a fighting chance against corruption in procurement. The deficiencies in the standard approach against corruption in public procurement are vast and often related to the mixture of far- and shortsightedness in contemporary policies. On the one hand, as Section 2 argues, even benevolent policy makers take far too long a view and do not seem to appreciate the day-to-day dimensions of the phenomenon of corruption. They do not tackle fully or aptly the root of this public failure, which is often a systemic one. Since, as we...
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