This section provides guidance in relation to the controls which an organisation can put in place to minimise the risk of corruption by, on behalf of, or against the organisation in relation to procurement.  This procurement section forms part of the overall guidance on the organisation’s Commercial Controls.

As explained in What is Corruption, GIACC uses the term “corruption” in the wider sense to include bribery, extortion, fraud, cartels, abuse of power, embezzlement, and money laundering.   Consequently, the discussion in this section applies to all such criminal activity.

In the infrastructure sector, procurement can have the following two different meanings:

• Procurement of an organisation:  This refers to the process of selecting a contractor, consultant, supplier or sub-contractor to execute a particular contract, and determining the terms on which that contract will be executed. The selection process may involve a simple nomination of one organisation without any competition, or it may involve selection from a number of competing organisations who offer to undertake the relevant contract. In the latter case, the procurement process may involve only a tender stage, or both a pre-qualification and tender stage. In a particular project, the project owner may procure consultants to carry out design and other advisory services, and contractors to construct various parts of the works. These consultants and contractors will then procure sub-contractors and suppliers. Alternatively, a project owner may procure a management contractor which will then be responsible for procuring all other organisations.
• Procurement of a project:  This refers to the process whereby a whole project is procured or obtained.  The process would, therefore, include all phases of a project as these will all play a part in providing the completed project.  These phases would include: project identification; financing; the placing of contracts with all contractors, suppliers and consultants; execution; maintenance; and operation.

In this section:

• “procurement” is used in the first sense described above (i.e. procurement of an organisation to execute a contract).
• “contractor” refers to the party selected to execute a contract, and so may include construction contractors, consultants, sub-contractors, suppliers, agents etc.

Anti-corruption procurement controls

There are many different types of procurement controls used in the infrastructure sector. Most organisations have developed their own controls, and these may be very comprehensive. In particular, public sector procurement controls (such as the EU Procurement Directives) can be very comprehensive, rigid and rigorous.  Smaller private sector organisations may have much more simple and flexible controls.  It is not, therefore, possible to summarise all these different controls, nor to prescribe in detail how such controls should be tailored so as to minimise corruption in the procurement process.

It is, however, recommended that the following controls should be applied, as far as reasonable and proportionate, to the procurement process by the relevant procuring entity.  Some controls may be appropriate only for public sector procuring entities and/or for large projects.

The purpose of these controls is much wider than corruption prevention.  However, these controls can also have an anti-corruption effect, and, in designing and implementing these controls, the organisation should consider and take account of their effectiveness in reducing corruption risk.

Some of the measures below refer to publication of information.  In the case of public sector procuring entities, this information should be published to all relevant contract parties, and also to the public.  In the case of private sector procuring entities, the information should be made available to all relevant contract parties.

The following controls are recommended:

(1) Written, fair and transparent procedures

Pre-qualification, tender and selection procedures:

• should be in writing, transparent, and fair
• should not provide an improper benefit or advantage to any individual or organisation
• should be operated in a fair and transparent manner
• should be published.

(2) Open competitive process

Contractors should, as far as reasonable, be selected by the procuring entity using a non-restricted open competitive process whereby the tender is open to any tenderer. However, in many cases, it may be necessary to ensure that all tenderers have sufficient technical or financial strength to enable them to be able to undertake the contract in an appropriate manner.  In these cases, it is common to require tenderers to be on an approved list of eligible tenderers before they are permitted to tender. If this system is adopted, the method by which a contractor can be included on this approved list should be fair and transparent, and all eligible contractors should be entitled to be included on this list.

(3) Restricted competitive process

It may in certain circumstances be justifiable to restrict the number of tenderers who will be invited to tender.  However, in this case: there should be a valid reason for imposing this restriction; the criteria on which tenderers are selected to participate should be fair and transparent; the number of tenderers selected to tender should be sufficient to provide genuine competition in the tender process; and the reason for the restriction, the selection criteria and the identity of the selected tenderers should be published.

(4) Negotiated competitive process and competitive dialogue process

Some procurement procedures permit the procuring entity to invite a restricted number of tenderers to negotiate or to enter into a competitive dialogue prior to submission of tender, or prior to award.  The purpose of this negotiation/competitive dialogue is respectively to attempt to adapt the tenders to the requirements of the intended contract, or to identify the best means for satisfying the needs of the procuring entity.  In the competitive dialogue procedure, a tenderer may be requested to fine tune its tender.  After a successful tenderer has been selected, it may be requested to clarify aspects of its tender.  These negotiations may be commercially desirable, but may also increase the risk of corruption in that they allow communication between the procuring entity and selected tenderers prior to tender submission and/or award, and they therefore provide opportunity for possibly corrupt preferential treatment of a particular tenderer.  The project owner should therefore use these procedures only where:

• circumstances justify doing so
• the negotiation/dialogue process does not give preferential treatment to any tenderer, and is properly monitored
• the full circumstances, process and results are published.

(5) Low value competitive process

Where the estimated contract value is below a prescribed threshold for an open competitive process, quotations should be requested from as many suppliers as practicable, and at least three. This low value process should only be applied to very minor contracts where the value of the contract is sufficiently low to make a fully open non-restricted competitive process not cost effective and unreasonable.

(6) Single-source procurement

Single-source procurement should be used only where:

• work, products or services to be provided are available only from a particular provider, and where the specification has not been manipulated so as to restrict it to the particular provider, or
• there is a need for standardisation or compatibility with existing work, products or services, or
• it is essential for reasons of national security or emergency, and such emergency was not foreseeable by the procuring entity, and not due to delay on its part.  

(7) The procurement subject-matter and its design

The design of the procurement subject-matter should be pre-determined, based on the needs of the procuring entity and the subject matter of the procurement, and described in terms that are objective, functional and generic. The procurement subject-matter should not be designed so as to exclude the procurement from the scope of the procurement regulations, or to favour any particular suppliers, products or services, or to artificially narrow competition.

(8) Timetable

The procurement process should allow tenderers sufficient time to prepare their tenders, and should ensure that no tenderer is given an improper  or unfair advantage by being notified in advance of other tenderers of the impending tender.

(9) Terms of contract

The contract documentation (including contract terms and specification) should, as far as possible, be set out in the tender documentation.  This will ensure that all tenderers are bidding on the same basis.  It will also minimise the risk of corruption which occurs where a tenderer is able to influence the terms of contract.

(10) Independent assessment

In the case of public sector projects over a specified value threshold, there should be an independent assessor who monitors the procurement process to ensure as far as possible that the process is undertaken without corruption. “Independent” means having no connection with any party involved in the procurement process. 

(11) Due diligence

Proper due diligence should be carried out by the procuring entity on each tenderer for contracts over a specified value threshold, and the results should be provided by the procuring entity to the independent assessor, if any, and funders, if any.  The aim of this due diligence should be to establish the risk of corruption in appointing a particular tenderer.  Similarly, the procuring entity should provide information about itself and the project to each tenderer so that the tenderers can form their own assessment of the risk of corruption on the project.

(12) Anti-corruption notification

The tender documentation should notify all tenderers that anti-corruption measures are being adopted by the procuring entity for the procurement and contract management process, that tenderers will be contractually bound to comply with those measures, and that any corruption may have the following results:

• Civil penalties:
  
  • Where the contract has not yet been awarded, any corruption in the award process will result in the immediate disqualification of the relevant tenderer.
  • Where the contract has been awarded, any corruption in the award process will result in that contract being terminated.
• Criminal penalties: Any suspected or actual corruption will be reported to the authorities. The criminal penalties for individuals and organisations in the particular jurisdiction should be specified in the tender documentation.
• Publication:
  
  • All parties who may have suffered loss or damage as a result of the corruption will be informed of the corruption. (This may apply, for example, to tenderers who may have wasted tender costs.)
  • Any corruption conviction will be disclosed to the public.

(13) Submissions should be sealed

All pre-qualification and tender submissions should be sealed, and should be kept sealed in a secure place until the official opening date. (Equivalent security should be implemented in the case of electronic submissions.)

(14) Notice of opening of submissions

Reasonable notice should be provided to all tenderers, funders and the public (in the case of a public sector tender), of the date, time and place of the opening of pre-qualification and tender submissions, and all these parties should be informed that they are entitled to be present at the opening.

(15|) Public and monitored opening

In the case of a public sector tender, at the opening of the pre-qualification and tender submissions:

• The independent assessor (if any) should be present.
• The public should be entitled to be present.
• The names of the tenderers, the titles of each document submitted by them, and the price of each tenderer should be read out .

(16) Careful selection of evaluators

Tender evaluators should be carefully selected so as to ensure that:

• They are properly qualified.
• They have no personal or business connections with any tenderer.
• They have no record of involvement in corruption.
• They are persons of integrity.

(17) Pool of evaluators

In order to minimise the risk of tender evaluators of large public sector tenders being bribed, there should be a large pool of evaluators from which a computer-generated, random and confidential selection can be made at relatively short notice for a particular project. The risk of a permanent evaluator, or a small number of evaluators selected a long time in advance, is that tenderers will know whom to bribe, or may bribe all possible evaluators, or an evaluator may solicit a bribe, or arrange for a related company to tender for a project which she/he knows she/he will be evaluating. This is less likely if there is a large pool of evaluators from which an evaluator(s) is randomly selected at short notice.

(18) Isolation of evaluators

The evaluators should have no ability to make direct or indirect contact with the tenderers during the evaluation process.  In some countries, the evaluators of large public sector projects are kept in isolated conditions during the evaluation process.

(19) Fair and transparent evaluation criteria

The evaluation process should be carried out according to fair and transparent criteria.  The criteria should be publicised to the tenderers and the public.

(20) Disclosure of the evaluation and the award

The evaluation and the contract award should be publicly and promptly published, with details as to identity of the winning tenderer and of the terms of contract.

(21) Challenge to the procurement process or contract award

There should be an effective, fair, transparent, and independent process by which the procuring entity or contractors can seek, either during the procurement process, or following contract award, a review of the procurement process and/or contract award on grounds inter alia that the procurement regulations were not followed or that there is evidence of corruption. 

(22) Reporting

A system should be established whereby persons involved in the procurement process or members of the public may report suspected corruption or breach of the procurement process.

(23) Recording of controls

These procurement controls should be incorporated into the organisation’s procurement procedures, and should be recorded in writing.