PACS Standard 1 forms part of GIACC’s Project Anti-Corruption System (PACS), which comprises 15 PACS Standards (see links at foot of this webpage).
PACS Standard 1 establishes the overall general obligations in relation to implementing PACS on the relevant Project. In particular, it:
The Project Owner is the obvious organisation on which to impose the overall responsibility for implementing PACS on the Project as it owns the Project, can design the appropriate anti-corruption procedures, and can ensure that these procedures and the other anti-corruption obligations are implemented and enforced.
As the Project Owner is an organisation, it acts though its managers. PACS Standard 1 therefore allocates responsibility for carrying out the Project Owner’s obligations as follows:
The consequence of paragraphs 4 to 6 of PACS Standard 1 is that the Project Owner’s top management (supported by the compliance manager) retains ultimate responsibility for the effective design and implementation of the Project Procedures and compliance with the Anti-Corruption Obligations, but individual managers also have responsibility for ensuring compliance within their functions.
The PACS Standards impose obligations not only on the Project Owner, but also on Suppliers and Sub-suppliers and their personnel. Therefore, as part of the Project Procedures, the Project Owner should ensure that:
These obligations include that:
The Project Owner, and each Supplier and Sub-supplier should ensure that they comply with their relevant obligations, and that they require their relevant personnel to comply. Accordingly, the relevant requirements of the PACS Standards are mandated and enforced throughout the Project contractual structure.
Corruption can occur, or be perceived to occur, when a manager has a conflict of interest. For example:
It is therefore vital that managers do not participate in activities or decisions in which they have a conflict of interest. Any actual or potential conflict of interest should be declared by the manager in advance, and be recorded by the Project Owner in a register.
Paragraph 11 of PACS Standard 1 provides that, in relation to any Project Contract, the same Project Owner manager, or managers from the same department of the Project Owner, should not make more than one of the following decisions:
To allow one manager to take all three decisions would be an obvious corruption risk. For example, a manager could arrange for a Supplier in which s/he has an ownership interest to be awarded a contract, and could then approve the work done by that Supplier, and then approve payment to that Supplier. This would give the manager plenty of opportunity to corruptly influence all of these processes without being discovered. In such circumstances, the Supplier may not be capable of undertaking the work, and may not actually undertake the work, or may carry out the work defectively, but may still get paid. It would be considerably more difficult for a manager to arrange a corrupt benefit for the Supplier if different managers took decisions in relation to the above three processes.
There is also a risk if three different managers from the same department make all of the above three decisions (e.g. if three managers from the contract management department select the supplier, approve the suppliers work, and approve payment). This is because working in the same department increases the risk that the three managers may collude.
Therefore, the risk is materially reduced if each of the above three decisions is made by a different manager from a different department.
Even if the separation of decision-making referred to above is implemented, there is nevertheless still a corruption risk which may necessitate further separation. However, this corruption risk and the loss it may cause, should be balanced against the financial and efficiency costs in further separating functions. Consequently, paragraph 11 provides that in high value transactions where there is potential for significant loss caused by corruption, there should be further separation of decision-making, namely, that the same person should not make more than one of the following decisions, and these persons should come from at least three different departments:
The number of managers approving a decision, and the seniority of the managers, should increase according to the value of the transaction and the corruption risk. This should reduce corruption risk (albeit that it is of course possible for a large number of senior managers all to be involved in the corruption).
Paragraph 11 of PACS Standard 1 states that decisions relating to activities above a reasonable value threshold, or which carry more than a low corruption risk, should be made by more than one appropriate person.
There is no one correct answer as to what these value thresholds should be. They should be high enough so as not to result in disproportionate management time and cost being incurred, but should be sufficiently low so as to reasonably safeguard against any corruption which could have a material adverse impact.
As part of its risk assessment under paragraph 7 of PACS Standard 1, the Project Owner should ensure that the value thresholds are appropriate bearing in mind the likelihood of the corruption occurring, and the severity of impact if it does.
Yes, the provisions of paragraphs 4 to 13 of PACS Standard 1 apply to all of the PACS Standards. Therefore, the over-arching responsibility of top management under paragraph 4, the compliance manager’s and managers’ responsibilities under paragraphs 5 and 6, the risk assessment in paragraph 7, the provision of resources in paragraph 8, the employment controls in paragraph 9, the conflict of interest and decision making controls in paragraphs 10 and 11, and the requirements for communications and records in paragraphs 12 and 13 would also apply, as far as is relevant, to all of the PACS Standards. For example:
PS 1: Anti-corruption management of the project
PS 2: Project selection, design and land acquisition
PS 7: Controls for Major Suppliers and Sub-suppliers
PS 13: Reporting and investigation
Updated on 1st November 2021