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Strengthening Transparency & Accountability in Public Procurement: Competition is a Key

Strengthening Transparency & Accountability in Public Procurement: Competition is a Key. Presentation by Rughvir ( Shyam ) Khemani, PhD (LSE) Email: sk@micradc.com Microeconomic Consulting and Research Associates (www. micradc.com ) 3 rd Biennial International Conference on:

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Strengthening Transparency & Accountability in Public Procurement: Competition is a Key

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  1. Strengthening Transparency & Accountability in Public Procurement: Competition is a Key Presentation by Rughvir (Shyam) Khemani, PhD (LSE) Email: sk@micradc.com Microeconomic Consulting and Research Associates (www. micradc.com) 3rd Biennial International Conference on: Competition Reforms: Challenges in a Globalizing World New Delhi, India 18-19 November 2013

  2. Importance of Public Procurement • Government/Public Procurement: Purchase of goods and/or services on behalf of a public authority e.g., government department at national, regional or municipal level. • Estimates of Public Procurement: 10-15% of GDP in industrialized economies, up to 20% in developing countries. Also accounts substantial part global economy. • Most countries have laws, regulations and institutions relating to public procurement/tenders. • Fraud, waste, corruption, favoritism, protection of local interests among widespread problems.

  3. Sensitive Industries/MarketsProne to Abuses in Public Procurement • Public health, energy supply, public transportation, construction….supply of various goods and services to public authorities. • Adverse impact on government budget, tax-payers….in developing countries on poorer segments of society. • Challenge: Curb abuses and maximize value for taxpayers/government budget

  4. Instruments for Effective, Efficient Public Procurement-1 • Competition Law & Policy (CLP) -Provisions relating to collusion (price-fixing), bid-rigging • Complements other policies but insufficient: -Focus on competition and not on combatting fraud, corruption, bribery…. -Detecting collusion/bid-rigging difficult, evidentiary problems • Cogent arguments can be advanced that intense competition can create “incentives” for engaging in corruption, bribery….especially in opaque public procurement systems, since detection is difficult

  5. Instruments for Effective, Efficient Public Procurement-2 • CLP provisions need additional “levers” e.g.: -Leniency program/whistle blower protection and requisite incentives • CLP may be useful instrument in combatting competition related abuses in public procurement ex ante and ex post with above “levers”. • BUT SOEs also participate as bidders/suppliers in public procurement. • Raises issues of “incumbency advantages”, “competitive neutrality”

  6. Instruments for Effective, Efficient Public Procurement-3 • Ex post abuses(project implementation stage) especially re: fraud, corruption, bribery…..need separate instruments. • Increasingly, in public procurement  shift to ex post abuses: extraction of payments, harassment, inspections, delays in approvals of project stages, kick-backs, …by public officials. • Require enactment/strengthening existing laws/measures dealing with corruption, bribery, etc

  7. Other Instruments-1 • WTO: Plurilateral Agreement on Government Procurement (GPA)—Effective 15 December 2011 -Agreed framework of rights and obligations w.r.t. national laws, regulations, procedures & practices. Publication requirements. -Principles of non-discrimination and transparency. - Prohibition of use of “off-sets”: domestic content, local development, BoP, investment requirements….. --Access to foreign suppliers, “national treatment”

  8. Other Instruments-2 • Public Procurement Law and Institutional Structure -Many countries lack national/general public procurement law. -Public procurement fragmented, different public bodies, different procedures, delegated authority etc. -Lack of prudential controls, accountability, transparency. Recognized need for central public procurement law-policy

  9. Other Instruments-3 • E-procurement. Measures e.g.: -Single sign-on, single portal, -on-line access to policies, regulations, tenders/ purchase orders, etc. -Standardized documentation, -pre-registration, qualification of bidders, ensuring minimum number of bidders etc. -Electronic up-loading of bids, on-line acknowledgement of receipts, anonymous evaluation, etc……..among other features

  10. Concluding Remarks • Government/Public Procurement is plagued with widespread fraud, corruption, bribery….in both industrialized and developing countries. • CLP isbut one instrument that can foster a level playing field, “competitive neutrality” in public procurement in so far as collusive behavior, bid-rigging are common practices…. and where SOEs are ‘players’ but much depends on design of CLP • Other policy instruments are required to combat fraud, corruption, bribery confronted in public procurement…..that adversely impact on government budget, tax-payers and various segments of society

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