Does Corruption in Procurement have a Cure?

Procurement
University of Sharjah
1 February, 2018

Lisa Campbell, FCIPS - Chartered Procurement and Supply Professional

Presentation Content
Slide 3: Definition of Corruption
Slide 4: One View of Corruption
Slide 5: Forms of Corruption in Procurement
Slide 6: Effects of Corruption in Procurement
Slide 7: Cost of Corruption in Procurement
Slide 8: Proven Corruption
Slide 9: The United Nations Convention against Corruption
Slide 10: Possible Indicators of Corruption – Specification and Bid Related
Slide 11: Possible Indicators of Corruption – Collusion
Slide 12: Possible Indicators of Corruption – Conflict of Interest
Slide 13: Mechanisms to Prevent Corruption in Procurement
Slide 14: Fighting Corruption
Slide 15: Acknowledgements, References and Further Reading
Definition of Corruption

“Corruption is the abuse of

entrusted power for private gain.

It can be classified as grand, petty and

political, depending on the amounts of money
lost and the sector where it occurs.”

Transparency International
One View of Corruption

AfricLaw
Forms of Corruption in Procurement

Bribes and Kick-backs

Bid Rigging

Conflict of Interest

Deliberate Ignorance / Front Companies / Brokers / Fraud

Effects of Corruption in Procurement

Depletes national
Public Procurement wealth

as a % of GDP: Undermines trust

in political Perpetuates
systems, their inequality and
GCC: 15-20% institutions and
leadership
poverty

(World Bank)
What does
corruption do?
A hurdle to
OECD: 12% challenging
Lack of
enforcement of
Interferes with corruption can
the development
EU: 20%
regulations can
affect precious
of fair market be the very
structures
natural resources
populations
Distorts
competition and that become
deters
investment distrusting
and apathetic
Cost of Corruption in Procurement

€1,141 M

€2,248 M €228 M

€38 M

€86 M

€755 M
Proven Corruption
May 2013
Between 1995 and 2004, Total SA
US Department of paid $60 Million in bribes to an
Iranian official with oil sector
Justice Investigation influence to win contracts
into Total
Between 2006 and 2014, tens of
May 2017 millions of dollars in bribes included
luxury travel, hotel stays, elaborate
US Navy Investigation dinners, cash and parties
Submitted low ball bids to win
into Glenn Defense Created false invoices for services
not provided
Marine Asia Overcharged invoices
Total SA agreed to pay US
government $398.2 Million
Criminal case to be dropped if
comply with independent monitor
Case settled in US but faced
additional charges in France
13 pleaded guilty, 14 cases pending
Admiral Robert Gilbeau 18 months in
prison, 3 years of probation, 300 hours
of community service and $150,00
restitution
Alex Wisidagama, GDMA exe, 5 years in
prison and $34.8 M in restitution
Captain Daniel Dusek, 46 months in
prison
The United Nations Convention against Corruption

Preventative
measures

Technical
Criminalization
assistance and
and law
information
exchange The only legally enforcement

binding universal
anti-corruption
instrument

International
Asset Recovery
co-operation
Possible Indicators of Corruption
Use of brand names over generics Unjustifiably
unusual or Significant changes to specification
and the winning bidder’s goods are unreasonable from previous market approaches
uniquely similar to specification specifications

Low number of Bid manipulation – changes after submission, voided Bidders

bidders or interested
parties for errors, unreasonable disqualification complaining

Specification & Bid Related

Possible Indicators of Corruption
Prices All bidders
drop with consistently
Abnormal bids – just under budget, at budget, etc.
new submit high
entrants prices

Losing bidders
Winning bid too high compared to cost
subsequently hired
estimates/published pricing
as sub-contractors

Collusion
Possible Indicators of Corruption
Employee
Employee not completing company turns
Employee’s unexplained wealth
Conflict of Interest documentation down
promotion

Unexplained
Acceptance of
Increasing value of Contract through favoritism for a
high prices and
undocumented or frequent changes specific
low quality
contractor

Conflict of Interest
Mechanisms to Prevent Corruption in Procurement
Directors of Procurement
• Whistleblower protections
• Transparent Procurement
processes
• Adequate systems
• Adequate and independent audit
• Vetting of Contractors and Sub-
contractors
• Anti-corrupt organizational culture
• Specific training to tackle
corruption
Procurement Staff
• Follow Procurement processes
• Procurement qualifications
• Remain up to date with ethics
certification
• Anti-corrupt personal behavior
• Guard and protect your integrity
• Speak up
Fighting Corruption
Build Partnerships

Step by Step

Remain Non-
confrontational
Acknowledgements, References and Further Reading

https://www.transparency.org/
http://www.oecd.org/
http://ec.europa.eu/anti-fraud/home_en
http://www.worldbank.org/?cid=ECR_GA_HPlaunch_searchad_EN_EXTP&gclid=COfy8YbyhtQCFQgW0wodSokKcg
https://africlaw.com/2015/04/13/call-for-a-corruption-free-africa-a-rights-based-approach/
Burguet, R. and Che, Y-K. “Competitive procurement with corruption” RAND Journal of Economics, Vol. 35 (2004),
pp.50-68
Burguet, R. and Che, Y-K. “Corruption and competition in procurement auctions” RAND Journal of Economics, Vol.
36 (2005), pp.1-15
Laffont, J-J. and Tirole, J. “A Theory of Incentives in Procurement and Regulation” Massachusetts Institute of
Technology, Cambridge, London, 1993, Lecture Notes Text 14
Celentani, M. “Corruption and competition in procurement” European Economic Review, Vol. 46, n. 7, (2002)
pp.1273-1303