Project Anti-Corruption System Standards

PS 5: Project anti-corruption commitments

(Note: Please refer to the Frequently Asked Questions (FAQs) at the end of this PACS Standard for further guidance on this Standard.)

This PACS Standard makes the following recommendations in relation to project anti-corruption commitments on public sector projects.

Anti-corruption contractual commitments should be exchanged between:
- the project owner and each tenderer for a major contract; and
- each major contractor and each tenderer for its major sub-contracts.
These commitments should be exchanged at the outset of each party’s involvement in the procurement process. They should continue to apply for the duration of each party’s involvement in the project.
These commitments may be provided as a separate anti-corruption agreement, or as part of the tender documentation and/or project contract.
Where any party is a joint venture, then the joint venture members should each join in the anti-corruption commitments.
Any tenderer who fails to provide these commitments should be disqualified from participation in the project.
The anti-corruption commitments in clauses 7 to 17 below should be given by each party in relation to the project:
Honesty and fairness
- It has acted, and will continue to act, at all times honestly and fairly.
Bribery and improper advantage
- It has not offered or given, and will not offer or give, directly or indirectly, any bribe or other improper benefit or advantage to any individual or organisation.
- It has not demanded or accepted, and will not demand or accept, directly or indirectly, any bribe or other improper benefit or advantage for itself or any individual or organisation.
- It has not made, and will not make, directly or indirectly, any payment except to the extent that such payment is legitimate compensation for legitimate services.
- It has not received, and will not receive, directly or indirectly, any payment except to the extent that such payment is legitimate compensation for legitimate services.
False information
- It has not provided to any party, and will not provide to any party, any written or oral information which it knows or suspects to be false, inaccurate or misleading, or where it is reckless as to whether the information is false, inaccurate or misleading.
- It has not dishonestly withheld from any party, and will not dishonestly withhold from any party, any written or oral information.
Acquiescence
- It has not authorised or acquiesced in, and will not authorise or acquiesce in, any corruption.
Conflict of interest
- Neither it, nor any of its principal shareholders, senior officers or senior managers has any undisclosed actual or potential conflict of interest. It will disclose any future actual or potential conflict of interest.
Acting impartially
- It has acted and will act impartially in carrying out any duty which requires it to act impartially, including:
  - evaluating tenders;
  - certifying payments, extensions of time, variations, or the value or quality of works, services or materials.
Defective work
- In relation to provision of works, materials, equipment or services, it will not deliberately or recklessly, carry out, authorise, condone or be party to:
  - the provision of works, materials, equipment or services which are not of the quality and quantity contractually required;
  - the concealment of defective work, material, equipment or services;
  - application for payment for non-existent or defective work, material, equipment or services.
Claims
- It will submit only those claims which it honestly believes to be true, and which can be reasonably substantiated by accurate written or oral evidence, and to which it believes it has a bona fide legal or contractual entitlement.
- The party receiving a claim will not dishonestly challenge or disregard the claim, and will promptly pay any sums, award any extensions of time, issue any certificates or take other steps which it honestly believes are due in relation to the claim.
Anti-corruption measures
- It will comply with the anti-corruption measures which apply to the project.
Penalties for corruption
- It will introduce and enforce contractual penalties for corruption in relation to its business partners and its officers and employees.
- It is aware that corruption may result in criminal liability for both organisations and individuals and that the penalties for such liability may be severe and may include imprisonment for individuals and fines for organisations.
Passing-down of commitments
- [This commitment should be provided only by each tenderer for a major contract to the project owner.] It will obtain the above contractual commitments from each of its major sub-contractors, agents and related companies and will take reasonable steps to enforce these commitments.
This Standard may be implemented on its own. It is, however, recommended that it is implemented in conjunction with all other PACS Standards, as far as appropriate.

See sample Anti-Corruption Agreement.

For sample Notices of Breach which may be served by the independent assessor on a party who is in breach of its anti-corruption commitments.

Frequently Asked Questions

FAQ (1): Why give contractual anti-corruption commitments?

Anti-corruption commitments will serve a number of purposes:

They will focus the parties’ minds on the question of corruption.
They will be legally enforceable.
Parties will, therefore, take them more seriously.

FAQ (2): Why have detailed anti-corruption commitments?

This PACS Standard recommends detailed anti-corruption commitments for the following reasons:

First, a number of these commitments are designed to give the parties guidance as to the types of activities that are prohibited and also to help them understand that corruption can occur in a number of ways and affect a wide range of activities. For example, individuals may not be aware that the following could give rise to criminal liability:

deliberately or recklessly providing false information;
approving or concealing defective work; and
submitting false or exaggerated claims.

These sorts of activities are expressly prohibited by this PACS Standard (clauses 7 to 14 above).

Second, clause 15 above is designed to ensure that each party is contractually obliged to comply with anti-corruption measures which apply to the project.

Third, clause 16 above is designed to highlight the serious penalties for involvement in corruption. It refers to contractual penalties which can be enforced by the parties, and to the criminal penalties that will apply.

Fourth, clause 17 above is designed to ensure that the major contractors exchange similar anti-corruption commitments with their sub-contractors, agents and related companies.

It is of course possible to reduce the number of anti-corruption commitments given. However, this will also reduce their impact and effectiveness.

FAQ (3): Who should give these anti-corruption commitments?

Corrupt activity may be carried out by any project participant and at any stage of the project. However, it would not be practicable to require detailed anti-corruption commitments to be given by all project participants no matter how small their involvement in the project may be. Consequently, it will be a matter of judgement for the party who is requiring this PACS Standard to be implemented as to which project participants provide anti-corruption commitments.

It is recommended that these commitments should be exchanged, where appropriate, between:

the project owner and each tenderer for a major contract for the supply of works, materials or services, and
each major contractor and each of its agents, related companies and major sub-contractors.

If any of the above are joint ventures, then each joint venture partner should provide the commitments.

Project funders and the project owner should also exchange anti-corruption commitments. This is dealt with in PS 6 Funder Commitments.

FAQ (4): When should these anti-corruption commitments be given?

These commitments should cover the full extent of the party’s involvement in the project. Consequently, in the case of tenderers and the project owner, these commitments should be exchanged at the earliest opportunity during the procurement process. (Each major contractor should do the same with its major sub-contractors.)

FAQ (5): How long should these anti-corruption commitments apply?

These commitments should be expressed so as to apply for the duration of that party’s involvement in the project. So, for example, if a tenderer gives these commitments during the procurement process, then if the tenderer is selected as the winning contractor, these commitments should continue to apply for the duration of the project execution phase. Similarly, the commitments given by the project owner to that tenderer should also continue to apply.

FAQ (6): How will parties be made to comply with these commitments?

There will be no certainty that parties will comply with these commitments. There is always the risk that these commitments will be used simply to give the impression that anti-corruption measures are being taken.

However, compliance by the parties with these commitments is helped by the following factors:

Parties will be made aware that there is a significant risk of criminal prosecution for themselves and their organisations if they become involved in corrupt activity. (See clause 16 above).
Giving these commitments gives the other party the contractual right to take legal action in the event of any breach.
If an independent assessor is appointed on the project, part of his scope of work will be to monitor whether parties are complying with their anti-corruption commitments. (See clause 10 of PS 1 Independent Assessment).
Parties will be aware that this will significantly increase the risk of detection of corruption and so will make them more willing to comply with their commitments.
Parties may wish to act ethically, and so may find it helpful that mechanisms are being set up on the project to try to ensure that all parties act ethically.
If parties are required to raise awareness of the risks of corruption amongst their officers and employees (see PS 8 Raising Awareness), this will help to deter officers and employees from involvement in corruption, and encourage them to comply with these commitments.

FAQ (7): What is meant by “tenderer”? (See clause 1 above)

The term “tenderer” is used as a collective term to refer, where appropriate, to any party which is applying to pre-qualify for, or which is tendering for, or which is a nomination candidate for, a project contract.

FAQ (8): What is a “major contract”? (See clause 1 above)

It would be unduly onerous, and not cost effective, to require anti-corruption commitments to be exchanged with tenderers for all project contracts. Consequently, it is recommended that the project owner should exchange commitments with tenderers for major contracts. The selection of the size of contract which would qualify as a major contract is a decision for the party imposing this PACS Standard, who should assess the corruption risk of a particular contract.

FAQ (9): What is meant by “joint venture”? (See clause 4 above)

“Joint venture” means any joint venture, consortium, partnership or similar arrangement in relation to the project.

FAQ (10): What is a “principal shareholder”? (See clause 11 above)

The decision of what would constitute a principal shareholding in a company for the purposes of the anti-corruption commitments is a decision for the project owner. The commitment should be in relation to any shareholder who could have a significant interest in the outcome of the tender or project. It is suggested that any individual or entity which owns or controls more than 10% of the shares or voting rights in a company is a principal shareholder.

FAQ (11): What is a “senior manager” and a “senior officer”? (See clause 11 above)

“Senior manager” means a person with supervisory responsibility in respect of the project, including, for example, a person with responsibility for contract, project, financial, procurement, commercial or technical management.

“Senior officer” means:

In relation to a company: the chairman, chief executive, and directors.
In relation to a government department: its minister(s) and heads of department.

FAQ (12): What is a “claim”? (See clause 14 above)

“Claim” means any claim, set-off or counterclaim in relation to the project including any application or claim for payment, variation, extension of time, damages, delay and disruption, prolongation or defects.

FAQ (13): Why do these contractual commitments refer to criminal penalties? (See clause 16 above)

A contract between two parties cannot generally impose criminal penalties. However, reference to criminal penalties is used to draw the parties’ attention to the fact that there are severe criminal penalties for corruption under the general law. This will help to focus the parties’ minds on the issue of corruption and to deter them from involvement in corruption.

FAQ (14): What is a “major sub-contractor”? (See clause 17 above)

It would be unduly onerous, and not cost effective, to require anti-corruption commitments to be exchanged by major contractors with all their sub-contractors. Consequently, it is recommended that the each major contractor should exchange commitments with its “major sub-contractors”. The selection of the size of contract which would qualify as a major sub-contract is a decision for the party imposing this PACS Standard, who should assess the corruption risk of a particular sub-contract.