1. Anti-corruption measures under the new Public Procurement Directives
Zagreb
Marion Finke
European Commission
Directorate General Internal Market and Services
Directorate C - Public procurement

2. Introduction/Structure
Public procurement was the subject of the Special chapter in the first EU Anti-Corruption report, published on 3 February 2014.
Public procurement was chosen as the first thematic chapter because it is
of crucial importance for the Internal market
covered by extensive EU legislation
a "Hot spot" for corruption.
Public procurement rules, besides the main aim of opening the market, contribute to
Preventing corruption
Detecting corruption
Redressing corruption.
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3. Public Procurement is of crucial economic importance
1/5 of EU GDP (= 2.3 trillion Euro) spent by European contracting entities on goods, works and services.
Total value of calls for tenders above thresholds for the application of EU rules: approx. 425 Billion in 2011.
Croatian data: Public procurement worth about 5.4 Billion in 2009 and 3.3 Billion in 2010.
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4. Public Procurement is covered by extensive legislation
Classic Public Procurement and Utilities Directives, revision just entered into force on 17th April 2014.
+ New Concessions Directive.
Remedies Directives for classic and utilities procurement to exercise judicial control over the procurement process.
Defence Directive to regulate procurement in a high price and therefore corruption prone sector.
Croatian legislation:
2012 new Public Procurement Act:
all public contracts to be published,
central public procurement portal,
e-procurement since 2012,
public contract≠conflicts of interests provisions->void
DKOM (State Commission for Monitoring Public Procurement Procedures) publishes all its decisions.
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5. Public Procurement is a "Hot spot" for corruption
High level of financial interests at stake.
The costs of corruption are difficult to quantify, but they are too high (estimated at 10 to 15 % of the value of public contracts in Croatia).
There is a number of high-level corruption cases involving one or more countries.
Situation in Croatia: According to the 2013 Eurobarometer business survey, 64 %/63 % (EU average: 56 %/60%) consider corruption widespread in public procurement at national/local level.
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6. Public Procurement rules to prevent corruption – Transparency I
Rules for public procurement are there to guarantee transparent and non-discriminatory procedures and therefore, if followed, prevent corruption.
Contracting entities should make use of
Prior publication – to invite highest possible number of interested bidders for an open competition to get the best value for money without undue and distorting influence.
Clear and open tender specifications – to get the works/products/services they want and to have a choice without being forced to accept overpriced or inadequate works/products/services.
Equal treatment of bidders in all stages of the process – to get the best value for money.
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7. Public Procurement rules to prevent corruption– Transparency II
Contracting entities should also make use of
Objective evaluation of tenders with an appropriate methodology – to get the works/products/services they need without being influenced to accept overpriced or inadequate solutions.
Concluding the contract as tendered – to get what they originally wanted for the most advantageous price.
Executing the contract as concluded – to reach the aim envisaged with the tender without being forced to accept underperformance or additional costs.
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8. Public Procurement rules to prevent corruption – Examples I
An example how these rules could be better applied:
Croatian Health Sector:
Follow-up of relationship between company donating medical equipment to public hospitals, in particular public contracts granted to the company should be monitored.
Whistle-blowers could be better protected (example of Institute of Immunology Zagreb).
Agreement on Ethical Advertising of Medical Products (healthcare workers should not be encouraged to procure/prescribe certain drugs) as step in the right direction.
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9. Public Procurement rules to prevent corruption–Transparency III
Modernised and simplified public procurement directives and new concessions directive.
The reform should ensure more effective procedures, guaranteeing purchases at the best price, tailored to the needs of contracting authorities and well integrating other policies, in particular environmental and social policies, with reduced administrative burden.
The Member States will have 2 years to transpose these rules into their national legislation and 3 to 4,5 years to make e-procurement mandatory from now.
The transposition of the new directives gives Member States the opportunity to reconsider in depth the efficiency of their current anti-fraud and anti-corruption policy.
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10. Public Procurement rules to prevent corruption–Transparency IV
The new directives enhance transparency:
E-procurement is generalised and becomes mandatory.
The setting of a legal framework for concession contracts enhances transparency in this field.
A standard form self-declaration for bidders, the "European Single Procurement Document" is introduced, which makes it more difficult to exclude tenders in the selection phase.
The scope of the public procurement directives is extended to the post-award phase, which is particularly vulnerable to corruption, as the modification of contracts during their term without a new tender procedure is regulated.
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11. Public Procurement rules to prevent corruption
New Directives strengthen the anti-corruption purpose:
The exclusion grounds for bidders are strengthened and extended to situations where bidders:
have entered into agreements
have tried to influence or mislead the contracting authority
have tried to obtain confidential information.
The notion of "conflicts of interests" is defined on EU level and Member States and contracting authorities asked to take appropriate measures to effectively prevent, identify and remedy conflicts of interests.
Member States will have to report on measures to prevent and detect procurement fraud, corruption and conflicts of interest and other serious irregularities.
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12. Public Procurement rules to prevent corruption – Examples II
E-procurement, Portuguese programme: The portal allows downloading the entire bid documentation and specifications free of charge. It disseminates calls for tender, receives suppliers' queries and manages all aspects of information exchange online. A Contract Management Tool ensures uploading of public contracts, allows monitoring of concluded contracts and enables e-invoicing. The Information Management System helps collect, store and systemise statistics on the procurement process.
Prevention of conflicts of interests, Croatian database: The database, which is run by an NGO and available free of charge to the public, gathers information related to the implementation of public procurement procedures, companies, assets and interests of officials. It allows cross-checks.
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13. Public Procurement rules to detect corruption – Red flags
There are numerous possible red flags for indicating corruption.
Some red flags are more relevant than others.
Some red flags are an immediate alert, some require further investigations.
Some only work in combination with other red flags, some stand alone.
Commission services continue working on identifying the most relevant red flags for corruption in public procurement.
The aim is to develop mechanisms to better detect and address corruption.
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14. Public Procurement rules to redress corruption
Effective review procedures
according to the rules of the Remedies Directives
by independent and professional review bodies
which also contributes to preventing corruption.
Effective sanctioning of corruption in public procurement
in a procedure of appropriate length
by an independent judiciary
which knows the public procurement rules.
Effective follow-up of corrupt practices
by annulling affected contracts ex-tunc?
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15. Public Procurement rules to address corruption
What is mainly needed is a change of culture: Culture of Integrity - Public service for
Better quality
Increased public savings
Improved business environment.
Procurement officers should take responsibility from the very beginning of the process until the very end.
Political leaders should lead by example.
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16. Thank you for your attention
All information can be retrieved at our website:
Contact:
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