Center for Applied Ethics University of Stellenbosch South Africa Under Contract to:

1. FINAL REPORTPreparation of Guidelines on How to Prevent Corruption and Promote Integrity in the Selection and Employment of Professional Consultants Center for Applied Ethics University of Stellenbosch South Africa Under Contract to: The World Bank December 20, 2006 Lead Consultant: Chloe Schwenke Ph.D.

2. “Ideals become concrete reality when people live by them, but to live them consciously we have to understand the role they play in moral life.” • David Cooper

3. The “elephant in the living room” • The capacity of Borrowers to: • Identify technical & management problems • Describe the desired solutions • Write terms of reference to control consultant performance to achieve desired solution • Monitor the integrity of the entire process of consultant procurement & performance Is already weak - and growing weaker...

4. Is a public service ethos important to consultant procurement & performance? • Increasing global reliance by governments on professionals and expert consultants has made Borrowers and the World Bank aware that legal, regulatory, and ethical concerns attend this trend • Growing problems of corruption and unfairness in procurement practices by the Bank’s Borrowers arguably need to be resolved in partnership with consultants

5. What the study examined ~ 1 • Whether scope exists for an appeal to professional ethics and public service ideals? • Whether continuing to ignore the aspirational context of consultant procurement and performance is sustainable or sensible? • Whether exclusively compliance-based procurement systems even work?

6. Models of Ethical Performance

7. What the study examined ~ 2 • Three professions in sub-Saharan Africa • Medicine • Engineering • Accounting/Auditing • Positive and negative aspects of experience of both consultant procurement and performance • Whether fostering an ethical orientation in consultant procurement and performance is viable and in the public interest

8. What is “professional ethics”? • Sub-set of ethics generally • Has particular relevance to the specialized focus and concerns of any given profession • Justice: legal profession • Care: social work profession • Does not supplant “ordinary” ethics • An additional (and, arguably, a priority) moral resource for members of a profession to base their actions on, and to be held accountable by

9. The argument ~ 1 • Public procurement systems in sub-Saharan Africa have serious problems • Too complicated • Easy prey to corruption and rent-seeking • The public sector has a strong stake in how badly consultants behave - and in how well they behave • Mistrust and suspicion currently characterize procurement and consulting relationships

10. The argument ~ 2 • It is in the interest of the World Bank and its Borrowers to create an environment of rational trust between Borrower and consultant, while continuing to guard against illicit and unethical behavior • Professionalism and integrity go hand in hand • Partnership with consultants is both possible and potentially beneficial • Existing compliance based approach must be augmented by a robust and serious aspirational-based component.

11. Three key assumptions: • The World Bank is concerned about ethics • A growing problem exists in the ethical and technical quality of the procurement and performance of professional and other expert consultants in sub-Saharan Africa • The current procurement process fails to ensure or sufficiently foster ethical procurement and performance by the stakeholders and roleplayers concerned

12. Roleplayers ~ 1

13. Roleplayers ~ 2 • Public Sector Officials • Often unscrupulous, incompetent, or unethical • Distort or corrupt the procurement process • Fail to monitor consultant performance

14. Roleplayers ~ 3 • World Bank • Setting standards and expectations • Providing oversight • Limitations: • Staff • Finances • Mandate

15. Problem definition ~ 1: unrecognized developmental stake • Professionals and expert consultants in Kenya and South Africa have done little to: • promote their legitimate corporate interests • demonstrate their commitment to their professional values and ideals • associate themselves with larger public interest issues • educate the public on the important developmental role that they play • Yet professions claim to be ideals-based and aspirational

16. Problem definition ~ 2: transparency • The World Bank argues that transparency should go further • Respect and acknowledge the “rules of the game” • Cultivate a healthy client-consultant relationship characterized by trust, accountability, and good communication

17. Potential and partial solution: empowered professional associations • The World Bank accepts that professional associations have an important function in the establishment of “standards and norms from the best practices that develop in their specific fields”, yet: • Professional associations (and registration boards) have not made their ethical norms explicit, nor have they fostered ethical performance • Professional associations are generally weak • Many consultants do not belong to “professional” associations

18. Role of the Borrower? • Assumptions: • Borrower objectively represents the interests of both the public and the professionals/consultants in the procurement process • Borrower serves as the disinterested intermediary between these two entities • Borrower (government) in turn obliged to be transparent in its procurement and contracting to demonstrate that public interest is properly pursued • Create a “two-way street” between government and the consultants

19. Consultant procurement problems ~ 1 • No separate process for professional or expert services procurement • The procurement process (under World Bank’s Guidelines) is inefficient, expensive and takes too long • Asymmetry of information exists: • Defining the need for professional services, and the quality of services provided • Evaluating the proposed standards and scope of the consulting services offered

20. Consultant procurement problems ~ 2 • Lack of ethics criteria for procurement • Lack of ethics criteria for performance • Assumption of mistrust at the heart of contractual relationships

21. Can these problems be solved? “The conceptual premise of this study, based on testing this assumption in the field is that the current vitality of “professionalism” as an ethical ideal, while weak, is not beyond redemption in sub-Saharan Africa” • Final Report

22. Interviews: Purpose ~ to gain an understanding of the Bank’s procurement procedures As implemented by Borrowers As experienced by consultants Some questions: Can Borrowers put together good evaluations? Can Borrowers run a credible procurement procedure? Is there room for incentives? Are they effective? Can professional associations play a positive role? How should their role fit larger procurement process? Fieldwork

23. Important points of the interviews ~ 1 • Procurement processes in developing countries are complex and involve many different roleplayers and stakeholders • Consultants view the lack of professional/technical expertise of many evaluation committees as problematic • Consultants balk at the default premise of Borrowers that they are not to be trusted

24. Important points of the interviews ~ 2 • Cost is seen as a necessary but not sufficient condition when it comes to selecting professional services consultants • Race to the bottom • The issue of “essential” or “key” personnel is central to selection by the Borrower and provides opportunities for unethical behavior on the part of consultants • Bait and switch

25. Procurement process in Kenya ~ 1 • Neither the World Bank nor Borrowers single out ethical considerations for evaluation • The World Bank’s regulations: • Do not clearly distinguish professional or expert consultants from other consultants • Once procured by Borrower, Bank has neither the staff resources nor mandate to monitor consultant performance

26. Procurement process in Kenya ~ 2 • Problems exist of illicit and legitimate financial benefits overshadowing ethics and integrity in the procurement process and performance • No professional boards’ or associations’ advice is sought by Borrowers in the procurement process

27. Procurement process in South Africa ~ 1 • The recent overhaul of public procurement regulations in South Africa, following the Country Procurement Assessment Review (2002) largely adopts World Bank best practice guidelines i.e. a compliance-based model • The Office of Supply Chain Management within the National Treasury has facilitated training for public procurement officials

28. Procurement process in South Africa ~ 2 • Professional associations in South Africa are strong and well-organized, largely to serve the interests of their members. • Disciplinary committees exist with respect to compliance with ethical norms, for example the “Perverse Incentives” committee of SAMA. • There is potential interest among professional associations, for example the accounting profession, to become more involved in training around ethics and professional consulting services

29. Recommendations from fieldwork ~ 1 • Provide more comprehensive training to both Borrower and professional bodies on Bank procurement procedures and standards • Make procurement procedures more transparent • Formulate special policies focusing on specialized providers of expert services (including professionals)

30. Recommendations from fieldwork ~ 2 • Enhance the role of professional and expert associations to provide leadership and advocate for reform and ethics • Provide support to appropriate civil society organizations so they act to hold the Bank, Borrower, and consultants accountable • Identify and implement suitable measures to strengthen the integrity of professional and expert associations in order to increase their ethical and functional effectiveness

31. Fieldwork conclusions • Kenya and South Africa differ in terms of their government procurement processes, regulations, and institutional strength • In both Kenya and South Africa, a potential role exists for strengthening professional and expert associations in ethics and procurement issues

32. Overall Recommendations ~ 1 • Inculcate notion of ethics as “good business” • Identify moral resources to support improved ethical performance • Strengthened professional associations and boards • Link associations and boards with stronger counterparts in more developed nations • Stronger networks between ethics advisors in North and South • Bank to provide guidance on improving Codes of Ethics ~ Borrowers and consultants

33. Overall Recommendations ~ 2 • Strengthen collaboration between procurement agencies and professional associations/boards to cultivate a rational basis of trust • Support public officials to resist inappropriate pressures from unethical political powers • Make explicit use of ethical standards in procurement process

34. Overall Recommendations ~ 3 • Recognize and reward exemplars of integrity ~ procurement officials and consultants • Explore an expanded “convenor” role for the World Bank between Borrower and bidding consultants • Advocate for expanded use of independent expert observers in evaluation panels

35. Recommendations ~ 4 • Require appropriate standards of professional indemnity insurance • Do not expect “quick solutions”!

37. Micro Level Procurement

38. Macro Level Procurement

39. Characteristics of Contractual Relationships