1. Does Corruption in Procurement have a Cure?
University of Sharjah
1 February, 2018
Lisa Campbell, FCIPS - Chartered Procurement and Supply Professional

2. Presentation Content Slide 3: Definition of Corruption
Slide 4: One View of Corruption
Slide 5: Forms of Corruption in Procurement
Slide 6: Effects of Corruption in Procurement
Slide 7: Cost of Corruption in Procurement
Slide 8: Proven Corruption
Slide 9: The United Nations Convention against Corruption
Slide 10: Possible Indicators of Corruption – Specification and Bid Related
Slide 11: Possible Indicators of Corruption – Collusion
Slide 12: Possible Indicators of Corruption – Conflict of Interest
Slide 13: Mechanisms to Prevent Corruption in Procurement
Slide 14: Fighting Corruption
Slide 15: Acknowledgements, References and Further Reading

3. Definition of Corruption
“Corruption is the abuse of
entrusted power for private gain.
It can be classified as grand, petty and political, depending on the amounts of money lost and the sector where it occurs.”
Transparency International

4. One View of Corruption
AfricLaw

5. Forms of Corruption in Procurement
Bribes and Kick-backs
Bid Rigging
Conflict of Interest
Deliberate Ignorance / Front Companies / Brokers / Fraud

6. Effects of Corruption in Procurement
What does corruption do?
Depletes national wealth
Perpetuates inequality and poverty
Interferes with the development of fair market structures
Distorts competition and deters investment
Lack of enforcement of regulations can affect precious natural resources
Undermines trust in political systems, their institutions and leadership
Public Procurement as a % of GDP:
GCC: 15-20% (World Bank)
OECD: 12%
EU: 20%
A hurdle to challenging corruption can be the very populations that become distrusting and apathetic

7. Cost of Corruption in Procurement

8. Proven Corruption
May 2013
US Department of Justice Investigation into Total
Between 1995 and 2004, Total SA paid $60 Million in bribes to an Iranian official with oil sector influence to win contracts
Total SA agreed to pay US government $398.2 Million
Criminal case to be dropped if comply with independent monitor
Case settled in US but faced additional charges in France
May 2017
US Navy Investigation into Glenn Defense Marine Asia
Between 2006 and 2014, tens of millions of dollars in bribes included luxury travel, hotel stays, elaborate dinners, cash and parties
Submitted low ball bids to win
Created false invoices for services not provided
Overcharged invoices
13 pleaded guilty, 14 cases pending
Admiral Robert Gilbeau 18 months in prison, 3 years of probation, 300 hours of community service and $150,00 restitution
Alex Wisidagama, GDMA exe, 5 years in prison and $34.8 M in restitution
Captain Daniel Dusek, 46 months in prison

9. The United Nations Convention against Corruption
The only legally binding universal anti-corruption instrument
Preventative measures
Criminalization and law enforcement
International co-operation
Asset Recovery
Technical assistance and information exchange

10. Specification & Bid Related
Possible Indicators of Corruption
Use of brand names over generics and the winning bidder’s goods are uniquely similar to specification
Unjustifiably unusual or unreasonable specifications
Significant changes to specification from previous market approaches
Low number of bidders or interested parties
Bid manipulation – changes after submission, voided for errors, unreasonable disqualification
Bidders complaining
Specification & Bid Related

11. Collusion Possible Indicators of Corruption
Prices drop with new entrants
Abnormal bids – just under budget, at budget, etc.
All bidders consistently submit high prices
Winning bid too high compared to cost estimates/published pricing
Losing bidders subsequently hired as sub-contractors
Collusion

12. Conflict of Interest Possible Indicators of Corruption
Employee not completing company Conflict of Interest documentation
Employee turns down promotion
Employee’s unexplained wealth
Acceptance of high prices and low quality
Increasing value of Contract through undocumented or frequent changes
Unexplained favoritism for a specific contractor
Conflict of Interest

13. Directors of Procurement
Mechanisms to Prevent Corruption in Procurement
Directors of Procurement
Whistleblower protections
Transparent Procurement processes
Adequate systems
Adequate and independent audit
Vetting of Contractors and Sub-contractors
Anti-corrupt organizational culture
Specific training to tackle corruption
Procurement Staff
Follow Procurement processes
Procurement qualifications
Remain up to date with ethics certification
Anti-corrupt personal behavior
Guard and protect your integrity
Speak up

14. Remain Non-confrontational
Fighting Corruption
Build Partnerships
Step by Step
Remain Non-confrontational

15. Acknowledgements, References and Further Reading
Burguet, R. and Che, Y-K. “Competitive procurement with corruption” RAND Journal of Economics, Vol. 35 (2004), pp.50-68
Burguet, R. and Che, Y-K. “Corruption and competition in procurement auctions” RAND Journal of Economics, Vol. 36 (2005), pp.1-15
Laffont, J-J. and Tirole, J. “A Theory of Incentives in Procurement and Regulation” Massachusetts Institute of Technology, Cambridge, London, 1993, Lecture Notes Text 14
Celentani, M. “Corruption and competition in procurement” European Economic Review, Vol. 46, n. 7, (2002) pp