In the introductory piece on Corruption in Public Procurement, we mentioned that for procurement management to meet international best practices, certain principles must necessarily be in place and respected in its processes and procedures. These principles, among others include competition, openness and transparency. Whether we are talking of local, domestic or international procurement, these three must be seen to be available by all the stakeholders. They are essential principles that should guide all thirty-nine steps of procurement from planning to commission. However, this forum may not be the best to discuss into details all these steps. What we will do therefore here, is to highlight some few key steps in public procurement that should be driven by integrity, accountability and value for money outcome.
Competition in Public Procurement means that all contracts must be awarded only after comparing bids or offers from all available number of interested contractors without any encumbrances or limitations. This, will help determine which of these competing contractors have provided the most favorable terms and conditions to deliver according to agreeable or stipulated requirements.
A direct corollary to competition is openness, which simply emphasize that every contractor who is interested in contracting or applying to bid must be given the opportunity to know or have all the related information on the availability, requirement, specification, closing date, address and methods of submission and date of tender opening. The term 'bid' or 'tender' can be used interchangeably as they mean the same thing. This is the most crucial and crucial public driven initial stage of procurement which can be the hotbed of and for corruption in public procurement if not ethically or properly handled.
Then, the third principle transparency flows from the bidding process and required for all other processes and procedures of public procurement if it will be integrity and value for money driven. Transparency is a procurement principle that emphasizes that every process and procedure in all the cycles must be predictable and enforceable, with unambiguous rules that provide for verifiable ways of rule compliance.
Our main focus in this series is Corruption in Procurement. It may therefore be very germane at this point, to have an operational definition or conceptual clarification of Procurement and Corruption as the key concepts or terms in this write-up.
Literarily, Procurement is the acquisition of works, goods and services including consulting and non-consulting services, the purpose of which might be for direct consumption, investment or value added. These items range from the simple to the complex - pens and books for schools, syringes and MIR machines in the hospitals, lawnmowers and military hardware, automobiles and aircrafts, railcars and ocean liners, roads and bridges, power stations and refineries, oil and gas, consulting and non-consulting services for engineering designs, financial, legal and training.
Professionally, Procurement is the planning and design, preparation and award, monitoring and administration of contracts for works, goods, services including and non-consulting services. Procurement includes processes and procedures that must be put in place and implemented to guarantee international best practices and value for money outcome. When the acquisition is organized by governments, its ministries, departments and agencies (MDAs), parastatals or publicly owned companies, it's tagged "Public Procurement" which is what this write-up has as its focus as against procurement in the private sector.
The other arm of our topic that calls for operational definition is Corruption. So, for the purpose of this write-up Corruption is defined as the abuse and misuse of office and power for private gains. We must note immediately that Corruption is not only about money or monetary gains but includes misuse of power and undue influence. Also private gain is not limited to one person but includes gains for close and extended family members, political party associates or members, companies and business organizations with financial, social and economic interests. On a very broad and wider perspective, corruption includes: bribery (the giving and receiving of money, gifts and gratifications), fraud, embezzlement, theft, and collusion by bidders.
TYPES OF CORRUPTION IN PUBLIC PROCUREMENT
There are many forms of corruption in public procurement, though with some variations from country to country or political culture. What is considered or perceived as corruption in some countries may be seen as a normal way of life in others. Few examples will suffice here.
Bribes and Facilitation
Generally and even in some specific terms, bribes usually involves movement of large sums of money (mostly cash to hide transaction) or checks, bonds, moveable or immoveable items and financial instruments. These are given to senior public officials that could influence decisions in favor of an undeserving and unwarranted action and privileges. Facilitation as the name implies, involves a smaller amount of money paid to junior officials with the intention that such payment will facilitate, ensure or quicken actions or decisions that ordinarily would have been taken as a matter of right to the payer but maybe with longer time. For example, a payment for processing any legitimate claim or payment to contractors or licensee which should normally be made without hesitation but which may be delayed or withheld without such forms of payments to some junior staff to move files around faster.
Cartel or Collusion
Corruption by cartels or through collusion is a form of corruption in public procurement that is associated with the bidding or tendering process. Here, bidders often form a Cartel - a league or alliance for the purpose of manipulating bid processes and award of the contract to their clique or any of their members which then try to manipulate the award decision in favor of one of their members. This may or may not necessarily involve public officials. This qualifies as corruption in the sense that no one outside the group can win fair and square. There is usually a Collusion Agreement that rotates winning bids among members only or having a sharing or compensation formula for submitting failed bids.
Structural and Situational
When corruption is well calculated and planned in a business setting or Public Procurement, it is referred to as Structural or Operational or even Strategic. It is not random or accidental but like procurement itself, it is well planned, prepared and carried out with systematic precision. An example is when a contractor submits a tailor-made bid with a percentage of the quoted price or cost earmarked for bribes. On the other hand, Situational Corruption is an accidental, unplanned and unexpected offer and acceptance or giving and receiving bribes in the course of an official failing to do his/her job as a result of sudden inducement. For instance, a bidder suddenly found out his bid submission time was over by some minutes but insisted and submitted the late bid by bribing the desk officer who received the late bid. That bribe is Situational and not Structural.
There are about thirty-nine steps or stages for Public Procurement (from pre-bidding to commission) each of which is susceptible to Corruption; meaning, all the stages are vulnerable to corruption. Since we cannot discuss all the stages here, we have selected a few common stages as examples for the purpose of this write.
PRE-BIDDING AND RISKS OF CORRUPTION
Needs Assessment Phase and Determination Demand
For every procurement, there is the initial stage where needs are assessed and demand determined by the procurement officers in a procuring entity. This also, can be part of the very foundation of procurement, yet very vulnerable to corruptive tendencies. The corruption risks at this very early stage include:
Acquisition may be very unnecessary but demand for it might be made so that a particular supplier or company might be brought in, even if the procurement is without economic value to the client and the people. So the procuring entity is fully aware that such procurement cannot be economically justified. Or even when and where they can be justified, the works, goods and services procured are usually over-valued or overestimated in favor of a pre-selected supplier or provider. To this end, undue favors are given because of anticipated kickbacks through a prearranged contractor even during budget preparation. Conflict of interest is a corruptive design resulting into making decisions from which predetermined people benefit from the proceeds.
For proper and easier facilitation of such preconceived or determined corruption, bidding documents especially requisitions, specifications, Request for Proposal (RfP) and Terms of Reference (ToR) are deliberately designed and prepared having a particular contractor in mine. By so doing the so-called competitive tender is no longer competitive but restrictive. This doctoring of the bidding documents deliberately introduce unnecessary confusions and complexities for the other bidders while the favored or intended bidders are fully briefed to easily scale through. It is in the same way that a design consultant will be made to produce designs which a favored or targeted bidder will understand and therefore becomes a winner. By these, every inch of the hallow ground of Public Procurement and Contract award is abused and desecrated by corruption or corruptive motives by corrupt minded public officials.
Bid Document Preparations and Process Design
In the bidding stage of public procurement, information is vital to all stakeholders especially every interested party to the bidding process. But because of inherent corruption like bribes, kickbacks, 'kickfronts' where upfront inducement are offered and received, bid information will be skewed and made available to favored bidders while other innocent bidders may be receiving or having inconsistent information in the Invitation to Bid (ITB). For instance, information may not be adequately provided in a way consistent with openness, transparency and competitiveness, like through widely publicized advertisements in local or national media.
Also because of the tendencies toward corruption; integrity, transparency and competitiveness may be thrown out of the window entirely. In other cases, procuring entities may result into sole-sourcing or selective bidding under some very spurious excuses like emergency or security. This is where very unnecessary and abusive exceptions are given to public bid opening whereas, all bids in public procurement should be publicly opened with very rare guided exceptions. Still, another corruptive option is collusive bidding with manipulative quotation and pricing.
Public officers charged with processing bid documents and design become very biased due to anticipated benefits. They deliberately make selection criteria subjectively skewed to their candidates and partners in the crime of corruption. They give undue advantages to their cronies by divulging official and confidential bidding information like 'reserve or engineering' prices to favor a pre-conceived bidder but not to all the bidders. Unfortunately, this illegalities make challenges to award almost a closed issue, thorough and effective contract monitoring becomes very difficult or almost impossible. Then, value for money outcomes for government becomes value for money for the corrupt officials who benefit from overpricing and over invoicing because of lack of or limited competition. In some cases, it is possible to have one and the same bidder providing multiple bids or quotations thereby ingeniously competing with self. This is how far public corruption in Public Procurement has been driven low.
Bid Evaluation leading to contract approval and award, also provides opportunities for corruption minded officials to display their modus operandi. This is clearly the case when the officials charged with evaluation of bids clearly show or display conflicts of interest between their official duties and responsibilities and their personal interests and gains fueled by bias and corruption. This is where exactly he who pays the pipers dictate the tune to play, and unfortunately where the contract approval process is devoid of integrity, transparency and competitiveness.
Because the processes and procedures that brought out a bid winner is not transparent enough, because integrity has no place in the contract award procedure, there will be no clean records of proceeding which losing or unsuccessful bidders can use to challenge the procurement final award decision, if and when there is a need for that as provided by law. In some of the cases only the so-called winner is notified of the outcome of the bidding process without briefing the other bidders.
The conclusion of the bidding processes and procedures leading to the award of contract opens another vista or panorama of corruption risks especially in the stage or phase of contract management and payment. This will easily manifest where there is lack of appropriate and adequate monitoring of the contractor. Some contractors, after signing the contract agreement and issued with the award certificate sees themselves as 'lords' of the minor. No. This shouldn't be. This is when or the point at which through adequate and transparent supervision, every provision of the requirements and specifications must be seen to be implemented to the letters. Contracts that of a necessity bring in subcontractors and partners, and many do, are more prone to corruption at this point especially where there is lack of transparency in the choice of such subcontractors and therefore there is vivid demonstration of lack of accountability and integrity.
Another area of greatest grave concern for corruption in public procurement is in the payment of contractors, which is a critical part of Contract Administration. This is where public officials should display unmatchable integrity and transparency. The hallmarks of the success or failure of the implementation of a contract rest in the total contract sum paid compared to the quantity and quality of the total work done. Yes, each laborer deserves his or her pay but only a good job should deserve any pay at all; since one of the characteristics of public procurement is value for money outcome enjoyed by the client and members of public whose money is spent.
There are different forms of payment in contract management. There is the payment of the mobilization fee to a contractor who has not even visited his site and later lump sum payment is made even for work not done at all or done without meeting the requirements or specifications. This, in my opinion is an incubator for corruption. Another method supported by this writer and used as the Director General, Bureau of Public Procurement (DG,BPP) in Ekiti State under Governor Segun Oni, is where contractors are encouraged to move their equipment and men to site and do an appreciable job, which will then qualify them for initial payment of the twenty percent of the total contract sum.
The original purpose of mobilization fee is to enable a contractor move men and equipment to site. If a contractor cannot do this without been paid or induced by the client or government in this case, then, the contract may not have been financially viable enough for the execution of the project and may therefore not be qualified for the job in the first instance. The initial and subsequent payments were made on milestone basis of the percentage of job done, inspected, confirmed or certified to meet approved quality, requirement and specifications by a qualified team of professionals. This process is then covered by Certificate of Payment, without which no contractor is paid.
To be continued
Dr. Bayo Arowolaju Sr. is the President and CEO of ProcureConsult Ltd; a Contract and Procurement Specialist, a Political Analyst and Commentator
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