Professional Documents
Culture Documents
Public Procurement
Against Corruption
IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures” 1
Corruption in public procurement
and how to avoid it
Public procurement is one of the key areas where the public sector and the private sector in-
teract financially. Normally, the volume of public procurement corresponds to some 10-20 % of
the GDP in European countries. In Croatia, the public procurement value was 40,6 billion kuna
in 2009 and 24,8 billion kuna in 2010. This is why public procurement is one of the prime can-
didates for corrupt activities as well as other undesirable practices like favoritism and bribery.
The procurement process should have as an objective the following:
• Satisfying the needs of the public sector while at the same time obtaining value for
taxpayers money
• Opening up public spending to economic operators on equal, transparent and fair basis,
to stimulate growth and create new jobs
• Equal treatment, by protecting the rights of participating bidders in an effective and
efficient way
For countries committed to the European Union Directives on Public Procurement, the rules
and institutional setting to ascertain transparency are additionally given in the specific Review
and Remedies Directives, applicable for all different types of public sector procurement; clas-
sical public procurement, procurement in the utilities sector, and for defense and national
security procurement. The collective rules on public sector procurement are aiming at fulfilling
the objectives above, but also at preventing corruption and collusion.
However, these objectives cannot generally be met unless contracts are awarded on a truly
competitive basis under a system that has clear guidelines incorporating transparency, scru-
tiny/appeals, efficiency, economy, accountability and fairness into the public procurement sys-
tem as a whole. Although EU public procurement legislation is fairly complex and can be im-
plemented differently in various jurisdictions, the three main phases of the public procurement
process are:
1. Procurement planning, budgeting and preparation
2. Notification, information and evaluation of tenders
3. Award and contract performance
Corruption can arise in various forms in each of these separate phases of the procurement
process, as indicated below.
IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures” 3
would like to spend (the budget). In both of these cases, there are opportunities for corrup-
tion. Preparing budget for the procurement, identification of contracting authority/s needs and
a design of tender documentation are all vulnerable to corruption since some corrupt practices
that will occur later in the procurement process can be planned already at that stage.
For example the budget for the particular procurement can be set artificially high so that
excess allocations could be stolen or diverted. In addition budget could be devised in such a
way that there are overlapping budgetary allocations among separate departments that could
also be applied in a corrupt manner. In determining the contracting authority/s requirements,
reports could be prepared that falsely justify current or future authority/s needs, falsely inflate
actual needs or falsely report damaged equipment in order to create an excess supply that
could be used for corrupt purposes. The procurement requirements could also be written to
favor or disfavor particular suppliers. For instance, hidden mistakes and/or fictitious positions
can be built into the project calculation and design, affecting the technical specification, which
at the selection stage can influence evaluation process and/or at a contract performance stage
leave open space for account for increased costs.
Award criteria and scoring methods in tender documents are particularly sensitive because
they can be drafted to favor a particular supplier or service provider or likewise could be
drafted to emphasize weaknesses of a particular competitor. Last but not the least, simply
selecting a type of procurement process itself may influence the occurrence of corruption. The
procurement process may be more exposed to corruption when procurement procedures such
as negotiated procedure without prior publication, contract awards within framework agree-
ments, or negotiations within the system of competitive dialogue are chosen.
4 IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures”
techniques such as failing to include all the qualified providers (wrongfully restricting a range of
providers), soliciting providers known to be inferior to a favored supplier, simply misaddressing
tender documents etc., are techniques that can be utilized to corrupt the procurement process.
Market intelligence
The more knowledge about the market, the lesser the risk of being manipulated. Therefore,
IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures” 5
knowledge on e.g. the number of actors, their respective size and market share, price levels
and development, their competitive advantages, etc., is crucial to avoid becoming mislead and
subject to collusion. Having regular contact with other contracting authorities and/or private
buyers is one way of obtaining some of this information.
Ascertain competence
When drafting the specifications, make sure that either internal resources or hired consultants
have sufficient knowledge and that they are totally independent. Confidentiality and Conflict of
interest certificates should be signed.
Subcontracting
Be aware that subcontracting may be a way to delude the contracting authorities to avoid e.g.
social security contributions and taxes, for money laundering, etc. Thus, always ascertain that
subcontractors are stipulated in tenders and listed in the contract, and that they may not be
altered without prior approval from the contracting authority.
Awareness
Raise awareness with the people within the contracting authority on the risks of corruption in
the tender procedure. Reward staff reporting suspicious supplier behavior (whistleblowers).
6 IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures”
Recommendations to suppliers
IPA 2008 twinning light project “Strengthening capacities to remedy irregularities in public procurement procedures” 7
IPA 2008 twinning light project “Strengthening capacities to remedy irregularities
in public procurement procedures”
This publication has been produced with the assistance of the European Union. The contents of this publication are
the sole responsibility of BBG and the Ministry of Economy, Labour and Entrepreneurship and can in no way be taken
to reflect the views of the European Union.