(1) What is client and public official travel?

Client or public official travel is where the organisation pays the travel and related expenses of a client employee or of a public official.  In this case, there is a risk that the payment by the organisation of these expenses may be an attempt to influence improperly, or could be perceived as an attempt to influence improperly, the client employee or public official to make a decision in favour of the organisation.

An example of this situation is where the organisation has submitted a tender to the client in another country for the manufacture, supply and installation by the organisation of equipment for the client.  As part of its tender evaluation procedure, the client may wish to send some managers to visit the factory of the organisation so as to ensure that the quality control procedures are adequate.  The client requests that the organisation pays the travel costs of these managers.  This can cause difficulties, as it may be difficult to ascertain the intent of the client’s managers:

• They may genuinely be seeking to verify the organisation’s quality, and will not be improperly influenced by the organisation paying for their flight and related costs.
• They may genuinely be seeking to verify the organisation’s quality, but may be improperly influenced if one competing tenderer pays for business class travel, 5-star hotels and extravagant hospitality, and another competing tender flies them economy class, and puts them up in lower quality accommodation with limited hospitality.
• They may have no real intention to ascertain quality, and are just imposing this condition on tenderers so as to obtain overseas travel opportunities.
• Demands may be made on the organisation over and above those necessary for the inspection.  For example:
  • to pay for the flights and hotel of family members
  • to pay for hotels and meals for a length of time in excess of that necessary for the visit.
  • to pay for hotels and meals in a location different from the one where the factory is located.

In the above example, the organisation is probably bearing the costs of the client’s managers (as it may not win the contract, and may not have included these travel costs in the contract price).  The situation is different if, as part of the contract scope of work, the organisation is obliged to pay the costs of client manager travel to inspect the manufacture of the actual equipment in the factory.  In this case, the organisation will normally have included the cost of the travel in the contract price, as it is part of the scope of work, so the reality is that the client is paying for the cost of the travel (but through the contract mechanism).  However, even if the travel is included in the price, there is a risk if the organisation offers a higher quality of travel and accommodation than is provided for in the contract, and if the client manager is responsible for approving the organisation’s quality.

Due to the risk that the provision by the organisation of travel or related costs for client employees or public officials may be corrupt, or be perceived as corrupt, the organisation must implement adequate controls over client and public official travel.

The above circumstances should be distinguished from a case where the organisation appoints e.g. a consultant to undertake services for the organisation, and agrees in the appointment contract to pay the consultant’s reasonable travel, accommodation and meal expenses.  These consultant expenses are a contract commitment, and are likely to fall under the organisation’s commercial controls (including relevant anti-corruption controls on the appointment and management of the consultant), rather than under the organisation’s client and public official travel policy.

(2) What types of payment by the organisation of client and public official travel are not likely to be regarded as corrupt?

The following are examples of where payment by the organisation of client and public official travel are more likely to be regarded as corrupt:

• An organisation wishes to be included on a client’s pre-qualification list as an approved supplier.  One of the formal pre-qualification requirements of the client is that one of their quality inspectors should inspect the organisation’s factory, and that the costs should be borne by the pre-qualifying organisation.  The organisation pays the economy class flight ticket for one inspector, a reasonable hotel for two nights (the night before the inspection and the night of the inspection), the airport taxi costs of the inspector, and takes the inspector out to a reasonable business dinner on both nights.  This itinerary and these expenses are approved in advance by a manager of the client who is senior to the inspector.
• An organisation wins a contract.  Part of the contract scope of work, for which the organisation has included a priced item in the contract, involves paying the reasonable travel expenses of a government official from the public works department to inspect the equipment at the organisation’s factory before shipment.  The travel costs and time specified in the contract are reasonable and proportionate to the inspection requirements.  The inspector is appropriately qualified for the role.  The organisation pays these costs as specified in the contract.  In addition, the organisation takes the inspector out to a reasonable business dinner.

(3) What types of payment by the organisation of client and public official travel are more likely to be regarded as corrupt?

The following are examples of where payment by the organisation of client and public official travel are more likely to be regarded as corrupt:

• The subsidiary of an organisation is based in country X, and is tendering to provide on-site services in country X.  Public officials from country X who are administering the tender ask to visit the subsidiary’s parent company which is based in country Y for one day, and request that their expenses for a five day visit to country Y are paid by the subsidiary or parent company.
  • Unless there is some real and necessary business issue which they need to discuss with the parent company which necessitates a visit, the whole visit could look like an attempt by the public officials to obtain an all-expenses paid overseas visit.  The payment for this visit by the subsidiary or parent may influence the public officials to act corruptly, or be seen to have such an influence.
  • In the event that the organisation can reasonably satisfy itself that the visit is necessary, and is unlikely to be perceived to be corrupt, then the payment of expenses should be limited to the time necessary for the visit (i.e. one to two days), and to the number of officials necessary.
• A government inspector needs to visit the organisation’s factory to approve quality procedures.  The inspector requests the organisation to pay the airfares and hotels for the inspector’s spouse and children.  While the payment by the organisation of the inspector’s reasonable expense may (depending on the above factors) be legitimate, the payment by the organisation of family expenses is likely to be corrupt, or to be perceived as corrupt.

(4) Controls and factors

The organisation should implement effective controls over the payment of client and public official travel, so as to minimise the risk that payment could be corruptly given, or be perceived to be corruptly given.

The following are recommended controls, and some factors to be taken into account in implementing these controls.

(1) State the restriction in the policy

If the payment by the organisation of client or public official travel is wholly or partially prohibited or restricted by the organisation, or by law, then state the prohibition in the organisation’s policy.

(2) Consider the intention behind the payment of the travel costs

The payment by the organisation of client or public official travel costs should not be offered if it could be intended to influence someone to act improperly.

(3) Consider the perception

Do not pay the travel costs if it could reasonably be perceived to be corrupt.  There are two common perception tests:

• “Newspaper test”.  Would a newspaper be likely to report the payment, and, if a newspaper did report, what would the public perception be?
• “Prosecutor test”.  If the payment did lead to a corrupt outcome, with the result that a prosecution takes place, how would you explain the payment in court to a prosecutor?  Would your explanation be plausible to the judge or jury?

(4) Ensure that the payment of these expenses is permitted

Ensure that the payment of these expenses is permitted by the procedures of the client or public body, and by local law and regulations.  Many public sector agencies and organisations purchasing goods or services do not permit the travel and related expenses of their personnel to be paid by a tendering organisation, as they wish to avoid any actual or perceived corruption.

(5) Ensure that the travel is necessary

Ensure that the travel is necessary for the proper undertaking of the duties of the client representative or public official (e.g. to inspect the organisation’s quality procedures at its factory).  This has three elements to it:  (i) that the visit is necessary; and (ii) that the person(s) visiting is the appropriate person to visit (i.e. someone whose role it is to inspect quality); and (iii) that the number of persons visiting is appropriate for the purpose of the visit.

(6) Ensure that the recipient’s employer is notified in advance

Ensure that the employer or supervisor of the client personnel or public official is notified in advance of the travel and hospitality to be provided.  This helps to ensure that the visit is an approved visit by the client or public sector agency, and is not an individual trying to arrange an unauthorised visit.

(7) Ensure that payments are reasonable

Restrict payments to the necessary travel, accommodation and meal expenses directly associated with a reasonable travel itinerary.  For example, if the public official visits the factory for one day, yet stays in the organisation’s home country for one week.  In this case, the organisation could pay for the flight, and the hotel and meal costs for the time directly necessary for the visit (including, if appropriate, the night before and night of the visit).  All other hotel and meal costs for the rest of the stay should not be borne by the organisation.

(8) Limit associated hospitality and entertainment to a reasonable level

Associated hospitality and entertainment should be limited to a reasonable level as per the organisation’s gifts, hospitality and entertainment policy.

(9) Prohibit paying the expenses of spouses, children or other family members

(10) Prohibit the paying of holiday or recreational expenses

(11) Require approval in advance of the payment from the compliance manager

Require approval in advance of the payment from the compliance manager, (and, if appropriate from an additional senior manager).   The reasons for the request and the approval should be documented, and the compliance manager must be satisfied that the payment is appropriate, and is not corrupt, and could not reasonably be perceived to be corrupt. 

(12) Require payments made to be appropriately recorded

Payments made in relation to client and public official travel should be recorded in a register or other appropriate record.

(13) Action if the organisation cannot be reasonably satisfied that the payment of these expenses is not corrupt

If the organisation cannot be reasonably satisfied that the payment of these expenses is not corrupt, or is unlikely to be perceived to be corrupt, then this does not mean that the visit by the client personnel or public official cannot take place.  It just means that the organisation cannot pay for the visit.  The organisation should then explain in a diplomatic way to the client personnel or public official that they are very welcome to visit, but because of the laws and policies applicable to the organisation, the organisation cannot pay these expenses, so they will need to be borne by the client or public sector agency.