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.]
(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.)
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:
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.
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:
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:
‘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.
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.
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.
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:
PS 3: Procurement
Updated on 18th October 2021