GIACC.PACS 3.LOGO.2021


PACS STANDARD 3:

Procurement

PACS Standard 3 forms part of GIACC’s Project Anti-Corruption System (PACS), which comprises 15 PACS Standards (see links at foot of this webpage). 

[NOTE:  The webpages on PACS Standards 1 to 15 are being updated between 1st and 30th September 2021, during which time the page content may not be complete, and there may be inconsistencies on these pages.]

Requirements

(Note:  The term “Supplier” is used below to include a potential Supplier which is participating in or may participate in the procurement process, and which, if successful, will be awarded a Project Contract.)

  1. General management controls:  The anti-corruption measures in paragraphs 10 (conflict of interest), 11 (decisions), 12 (communication) and 13 (records) of PACS Standard 1 should apply to all Project Contract procurement processes.
  2. Appointment and employment of procurement managers:  An appropriate number of managers of the Project Owner who are of appropriate skill and seniority should be appointed to manage the procurement of each Project Contract.  These managers should be employed in accordance with paragraph 9 (employment procedures) of PACS Standard 1.
  3. Procurement responsibilities:  The Project Owner’s procurement managers should ensure that, in relation to each Project Contract procurement process which they manage:
    1. relevant Anti-corruption Obligations are complied with by the managers, the Project Owner, relevant Suppliers and Sub-suppliers, and the personnel of each of these bodies
    2. they are alert to any suspicions of corruption or breach of the Anti-corruption Obligations, and they report any such suspicions, as soon as possible:
      1. to the compliance manager (paragraph 5 of PACS Standard 1), and/or
      2. under the reporting system in PACS Standard 13
  4. General principles:  All procedures for the procurement of Project Contracts, and the criteria used in such procedures, should:
    1. be clear and detailed
    2. be pre-determined, pre-disclosed, objective, relevant and proportionate to the subject matter of the procurement
    3. be designed to maximise competition and value for money
    4. be designed to minimise the need for discretion by procurement personnel
    5. not be designed with the intention of favouring any particular Supplier
    6. not be changed in any negotiations or dialogue during a procurement process
    7. be applied by the Project Owner fairly and impartially.
  5. Economic offsets:  Economic offsets should not form part of the procurement arrangement. The subject matter of any proposed economic offset should be separately procured.
  6. Illicit participants:  No individual or organisation should be nominated or allowed by the Project Owner to participate in any capacity in relation to the Project or to receive any funds in relation to the Project unless that individual or organisation:
    1. has a genuine legitimate role in relation to the Project
    2. is appropriately qualified to undertake such role
    3. where appointed by the Project Owner, has been appointed in accordance with the Project Owner’s procurement procedures.
  7. Procurement method:
    1. All Project Contracts over an estimated contract value of the equivalent of US$ [*] should be procured by the Project Owner using an open competitive process, which is open to all appropriately qualified Suppliers, and which is designed to maximise competition.
    2. All Project Contracts under an estimated contract value of the equivalent of US$ [*] should be procured by the Project Owner either using an open competitive process, or a process under which at least three appropriately qualified Suppliers compete for the contract.
    3. (* See Guidance G6 below for comments on threshold values.)
  8. No negotiations or dialogue:  There should be no negotiations, dialogue or other communication between the Project Owner and Suppliers during the procurement process, save as permitted by the procurement procedures.
  9. Criteria for qualification:  In order to qualify to participate in a procurement process for a Project Contract, a Supplier should provide a declaration and reasonable supporting evidence to the Project Owner that:
    1. it has the necessary competence, resources, and financial and legal standing to perform the required works or services
    2. it has no connection with any person that could constitute a conflict of interest in relation to the procurement (in relation to which the Supplier should also provide details of its legal and beneficial ownership, and authorisations to enable the Project Owner to verify such ownership with relevant company registries or agents)
    3. it has not been debarred from participating in public sector procurement
    4. neither it nor any of its senior managers have unspent convictions for corruption offences
    5. (where the contract being procured is a Major Project Contract) it has implemented an anti-corruption management system which includes the Project within its scope, has obtained certification of such implementation, and has provided evidence of such certification, and has appointed a compliance manager in accordance with PACS Standard 7.
  10. Criteria for mandatory exclusion:  At any point in the procurement process for a Project Contract, a Supplier should be excluded from the process if the Project Owner has sufficient plausible evidence to conclude that the Supplier has, in relation to the procurement:
    1. committed a corruption offence
    2. obtained an improper competitive advantage
    3. a connection with a person which constitutes a material conflict of interest
    4. provided information that is materially false or incomplete.
  11. Criteria for evaluating offers:  All submissions should be evaluated in accordance with evaluation criteria which are based on the most economically advantageous offer, taking into account all relevant factors.
  12. Notices of intended procurement:  At the outset of the procurement, the Project Owner should make known its intentions of planned procurement by the publication of a procurement notice which describes the subject matter of the intended procurement, the procurement method, and how the procurement process shall proceed.  Such notice should be published at the same time to all potential Suppliers and to the public.
  13. Solicitation documents:
    1. The procurement should be conducted on the basis of solicitation documents issued by the Project Owner.  Such documents should:
      1. be expressed impartially and in understandable terms
      2. contain the complete relevant contract, specification and drawings, and all other information necessary to enable the potential Suppliers to provide a timely and responsive submission
      3. require a response by way of written submission by a specified deadline
      4. be made available at the same time to all potential Suppliers and to the public.
    2. Any clarification of solicitation documents should be made only prior to the deadline specified for making of submissions, and should be notified at the same time to all potential Suppliers and to the public, giving Suppliers reasonable time to take such clarifications into account in their submissions.
  14. Submissions:  All submissions by Suppliers should be made in writing by a secure method within the deadline specified by the solicitation documents.  No changes should be permitted to submissions after the deadline for submission.  Submissions should be kept secure to avoid any tampering with them prior to the opening time specified in the solicitation documents.
  15. Opening of submissions:  Submissions should be opened only after the deadline for submissions has expired and only at the time specified in the solicitation documents.  At the opening, the Project Owner should announce the names of all Suppliers who have made submissions and all other elements of the submissions which are necessary for applying the award criteria, and should then publish a written record of such information to all Suppliers and to the public.
  16. Rejection of submissions:  Submissions should be rejected prior to evaluation if:
    1. the Supplier does not meet the qualification requirements in paragraph 9 above
    2. there are grounds for mandatory exclusion of the Supplier under paragraph 10 above
    3. the submission is not compliant
    4. the submission is submitted late
    5. the submission price is abnormally low or high in comparison to the estimated contract value or according to other objective assessment.
  17. Evaluation of submissions:  Evaluation of submissions should be carried out honestly and impartially, in accordance with the evaluation criteria. The evaluators should be alert to any indication in the submissions of possible corruption in the procurement process. The evaluators should issue a written evaluation report, signed by them, and each evaluator should sign a declaration that they have made the evaluation honestly and in good faith and based on the evaluation criteria, and that they had no conflict of interest in respect of the evaluation.
  18. Notice of outcome of the evaluation:  Following the evaluation, a notice should be provided promptly in writing and at the same time to all Suppliers and to the public of the outcome of the evaluation.  Such notice should identify the successful Supplier, and provide sufficient information for Suppliers and the public to assess whether the Project Owner’s decision was reasonably based.
  19. Standstill period:  Following issue of the notice of outcome of the evaluation, there should be a reasonable prescribed standstill period during which time the Project Owner should not be permitted to enter into the procurement contract and unsuccessful Suppliers may challenge the outcome of the evaluation (see paragraph 21 below).
  20. Acceptance of the successful submission:  The successful submission should be accepted only after the standstill period has ended, and any challenge notified during the standstill period has been resolved.  Notice of the acceptance should be issued in writing to the successful Supplier, to unsuccessful Suppliers, and to the public.
  21. Challenge to the procurement process, contract award, or cancellation of procurement:  There should be an effective, fair, transparent, impartial and independent process by which the Project Owner or Suppliers can seek a review of the procurement process and/or contract award on grounds inter alia that the relevant procedures were not followed or that there is evidence of corruption.
  22. Making of the contract:  The Project Contract entered into between the Project Owner and successful Supplier upon completion of the procurement process should:
    1. be in writing
    2. be on arm’s length terms and conditions
    3. include the provisions set out in PACS Standard 4
    4. include all necessary contractual documents, such as contract terms and conditions, drawings, specifications and technical information.
  23. Termination and re-award of contract:
    1. Where it is found that a Project Contract has been awarded on the basis of corruption or a materially flawed procurement process, the contract should be terminated or declared void.
    2. Where a Project Contract is terminated or declared void, the outstanding work, products and services should be re-awarded to another Supplier only following a new procurement process in accordance with the above provisions.

Guidance

G1: What is the purpose of the requirements in PACS Standard 3?

PACS Standard 3 is not intended to supersede the Project Owner’s standard procurement procedures.  It is intended to recommend anti-corruption measures with which the Project Owner’s procurement procedures should comply in order to minimise the risk of corruption in the procurement process.

The procurement process is highly vulnerable to corruption.  For example, a Supplier may pay a bribe to the Project Owner’s procurement managers to induce them to:

  • specify procurement criteria that are not objective and wrongly favour the Supplier
  • leak information on the procurement process to the Supplier so as to give it an unfair advantage
  • disqualify competitors for false reasons, thereby ensuring that the Supplier is the winner
  • award the contract to the Supplier even though it is not the best evaluated bidder
  • award the contract to the Supplier without giving sufficient time for other Suppliers to challenge the award
  • include contract terms in the awarded contract that are unduly favourable to the Supplier.

Therefore, PACS Standard 3 contains a series of anti-corruption measures which are designed to ensure an open, objective and competitive procurement process, with equal treatment of all Suppliers, and the opportunity for an aggrieved Supplier to challenge the outcome.

G2:  General management controls (paragraph 1 of PACS Standard 3)

Paragraph 1 of this PACS Standard provides that the general anti-corruption measures in paragraphs 10 (conflict of interest), 11 (decisions), 12 (communication) and 13 (records) of PACS Standard 1 should apply to the procurement of all Project Contracts.   This means, for example, that:

  • no manager should act where s/he has a conflict of interest
  • there should be appropriate separation of functions
  • decisions should be made by an appropriate number of skilled, senior managers
  • all decisions, approvals, recommendations and outcomes should be properly communicated and recorded.

G3:  Appointment and employment of procurement managers (paragraph 2 of PACS Standard 3) 

Paragraph 2 of this PACS Standard provides that the Project Owner’s procurement managers should be employed in accordance with paragraph 9 (employment procedures) of PACS Standard 1.   This means, for example, that:

  • they should be obliged by their conditions of employment to comply with applicable anti-corruption laws and regulations, the Project Code of Conduct and relevant Project Procedures, and can be disciplined if they do not comply
  • if they are in a position which is exposed to more than a low corruption risk, then they should be vetted before they are employed, should be competent to undertake their role, and should declare any conflict of interest, and their performance bonuses and targets should be reviewed periodically to verify that there are reasonable safeguards to prevent these bonuses and targets from encouraging corruption.

G4: Why are economic offsets not permitted (paragraph 5 of PACS Standard 3)?

‘Economic offsets’ refer to additional works, products or services which a project owner may require a supplier to provide but which are not related to the main subject matter of the procurement.  For example, a contractor building a power station may also be required to provide unrelated products, such as fire engines for the fire department.  There may be little commercial sense to this arrangement, as the fire engines would more effectively be procured under a separate competitive tender from fire engine manufacturers.  Such offset arrangements are a high corruption risk, as the true value of the offset is obscured without a proper competitive tender for the offset from the best placed suppliers, and this can provide a corruption opportunity for corrupt public officials and suppliers.

G5: What is the purpose of the illicit participant exclusion (paragraph 6 of PACS Standard 3)?

This provision is to protect against attempts to insert an organisation into the Project contractual structure as a vehicle to extract funds corruptly from the Project.  This could be done, for example, by a corrupt public official requiring a Supplier which has been properly selected under a procurement process to take on an illicit organisation as a joint venture partner or Sub-supplier in relation to the Project. This joint venture partner may be inactive but may be entitled to receive a percentage of the contract payments.  The Sub-supplier may not undertake any work or services, but may be paid as if it had.  These illicit organisations may be owned covertly by public officials or Project Owner managers, who may then ensure that the contract works or payments are improperly inflated so as to maximise their corrupt share. 

Paragraph 6 therefore requires that no organisation or individual should participate in the Project or receive Project funds unless it has a genuine legitimate role in relation to the Project, and is appropriately qualified to undertake such role.

G6: Procurement method (paragraph 7 of PACS Standard 3):

Paragraph 7 of PACS Standard 3 requires all Project Contracts which are over an estimated contract value of the equivalent of US$ [*] to be procured using an open competitive process.  Recognising that an open competitive process can be costly and time consuming, paragraph 7 permits all Project Contracts under an estimated contract value of the equivalent of US$ [*] to be procured either using an open competitive process, or a process under which at least three appropriately qualified competitors compete for the contract.

The threshold for the value over which all procurement must be under an open competitive process should be set by regulations or by the Project Owner, and should be set at a sufficiently low level so as to maximise the use of open competitive tendering, but so as to allow a simpler competitive process (with at least three competitors) where the cost and time of an open competitive process is not justified. 

PACS is designed to address corruption on infrastructure projects.  Consequently, it does not permit single source procurement (i.e. where a Supplier is awarded a Project Contract without competition).  Nor does it permit any bypassing of the procedures on grounds of an alleged emergency.  Both single source procurement and alleged emergency exceptions can be abused for corrupt purposes, and a properly planned infrastructure Project should require neither single source nor emergency procurement.

G7:  Can procurement procedures which comply with PACS Standard 3 be abused

There is a risk that, even though there are procedures in place effectively designed to comply with PACS Standard 3, a corrupt public official or manager may ensure that these procedures are by-passed.  This risk is limited in PACS by:

  • the obligation on the Project Owner’s top management and compliance manager (who should be independent from the procurement process) to ensure that all Project Procedures are effectively implemented (PACS Standard 1)
  • the raising of awareness among Project personnel of the importance of preventing and dealing with corruption through the Project Code of Conduct (PACS Standard 8) and training (PACS Standard 9)
  • the monitoring of the procurement process by the independent monitor (PACS Standard 11)
  • the ability of aggrieved bidders, Project personnel, and the public to report suspected corruption or breach of procedures (PACS Standard 13)
  • the obligation on the Project Owner to publish to the public all relevant information in relation to the procurement process and subsequent contract award (PACS Standard 15).

Other Resources

  • Benchmark 13 (Procurement) and Guidance to Benchmark 13:  Commonwealth Anti-Corruption Benchmarks 2021.  The provisions in Benchmark 13 are more extensive than those in PACS Standard 3 above as Benchmark 13 applies to procurement in all types of public sector projects, whereas PACS Standard 3 applies only to infrastructure projects.  Apart from this, the relevant PACS and Benchmark provisions are consistent with each other.

Updated on 18th October 2021

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