Transparency in Public Procurement
Tendering and contracting is an area where much corruption and abuse of power occur. Procedures ought to be in place from the commencement of the tendering process, selection, and contracting to ensure conflict of interest, bribery, and extortion are avoided. At the same time, there ought to be transparency and full disclosure on the winning bids. The European Commission (2014e) highlighted a concern that there are links between “organised crime groups, businesses and politicians... in public procurement, construction, maintenance services and waste management” (p. 19). The same report noted that approximately 20 percent of the EU’s GDP is spent annually by public authorities in procuring goods and services. It is a cause for grave concern an estimated 20—25 percent and in some cases 50 percent of the total cost of the contract is a result of corrupt practices (European Commission 20l4e, 21).
As just stated, an area where corruption is likely to be found is public procurement. “Integrity Pact” is a tool developed by Transparency International9 in the 1990s to help governments, business, and civil society fight corruption in the field of public procurement. Integrity pacts are intended to be binding on both parties for ethical conduct and to establish contractual rights and obligations of all parties by eliminating “uncertainties as to the quality, applicability, and enforcement of criminal and contractual legal provisions in a given country” (Cragg, Idemudia, and Best 2011, 302). According to Cragg, Idemudia, and Best, “everyone is a winner” with integrity pacts. First, because governments improve their credibility and legitimacy, particularly when there is an avalanche ofcorruption cases being investigated by the authorities implicating public officers. Second, costs are reduced because there is no greasing of the wheel, and there is full disclosure of the tendering procedure. Finally, the bidder commits to a promise that they will not collude with other parties to impair transparency or offer any illicit gratification to obtain unfair advantage and will disclose all payments made to agents and intermediaries.
The Organisation for Economic Co-operation and Development (OECD)10 principles for enhancing integrity in public procurement address transparency, good management, prevention of misconduct, compliance and monitoring, and accountability and control. Weak governance in public procurement not only hinders market competition but also raises the price of the good or service, which the taxpayer will need to cover. Integrity pacts can be used to encourage ethical and transparent procurement.
Halter, Coutinho de Arruda, and Halter (2009, 377) noted that the “growth of transparency in business is one of the factors that can help combat corruption,” and transparency is becoming a most important business rule. Transparency and disclosure should address not only financial data but also nonfinancial information. First, government and legislators ought to be transparent by disclosing the policies, regulation, and legislation enacted, and ensuring a legislative footprint is created for every legislative or policy-making process. Second, by making processes transparent and avoiding opaque decisions, they assist the community in making judgments and decisions. Consumers are interested in the ethical issues involved in the production of goods they consume, and stakeholders voice their concerns if there is a lack of information available. Media and investigative journalism play a crucial role in exposing corrupt behavior and bring to light misconduct that ought to be discontinued. Third, the accounting profession ought to encourage the disclosure of nonfinancial information that would enable investors to make comprehensive decisions by having all the information available to them. Halter, Coutinho de Arruda, and Halter (2009) argued that increasing the ethical culture of a company is essential, and it can be achieved by introducing “more transparency, communication and adherence to its code of ethics, and code of conduct” (p. 384).
Corporations, however, do not exist in a vacuum. They are international and in many cases are investing in an international arena, and their feasibility studies ought to assess the possible level of corruption in candidate countries. In doing so they should assess the society at the macro-level and the persons at the micro-level. At the macro-level, one needs to keep in mind that if a corporation is operating in a country where the institutions have integrity, the educational system likely includes ethical training and political accountability, and civil society participation is probably encouraged. At the micro-level, a corporation ought to review the ethical and moral values of the people in the country.
