Defence spending: how to reduce corruption risks

When a company lands a contract with a government for supplying goods or services without competing against bidders, there’s a real risk of corruption and overpricing. The company – as the sole provider – may feel that it can charge what it wants without worrying about the competition, weakening the incentive to be efficient and provide a good deal.

These kinds of deals, which fall into the category of single source or non-competitive procurement, are prevalent in the defence sector – and were on the rise between 2008 and 2011 in the US and UK, according to a new report by Transparency International UK’s Defence and Security Programme (TI-DSP) and the International Defense Acquisition Resource Management Programme.

The award of single source contracts in the defence sector has attracted growing critical attention in the last few years. In an era of austerity and public spending cuts, many have turned their attention to how governments can do more with less.

Sometimes there is justification for a Ministry of Defence to sign a single source contract: if an item is under copyright, for example, or only one company has the technology to meet a specific military need. But there have been too many examples when single sourcing has been a factor contributing to corruption at worst or simply a bad deal for taxpayers.

TI-DSP’s report calls for a greater emphasis on open competition and greater transparency in procurement.

Single sourcing: a multi-country analysis

TI-DSP contacted 45 countries to request data on their single source contract awards in compiling the report. Of those 45, only seven had publicly available data on single source defence procurement, or were willing to release it.

The countries that responded were Bulgaria, Latvia, Poland, Slovakia, Slovenia, the UK and the US. Strikingly, the European Defence Agency, which publicly commits to transparency, declined to share data, stating that it needed to have the permission of the countries involved.

Research showed that almost half of the defence contracts awarded in Poland, the UK and the US were single-source contracts. Since a similar study was released in 2008, the percentage of single source procurement in the US and UK has increased substantially. In Poland and Bulgaria, however, it has decreased, possibly because of reforms that focused on improving competition and introduced e-procurement.

The graph below shows the reported levels of awarding single source contracts from 2009 to 2011:

Here’s how to tackle the problem

1. Defence ministers and defence procurement chiefs should publish the number of single-source contracts awarded and the justifications for awarding them.
2. National legislators and legislative defence committees should demand open reporting from the Ministry of Defence and regularly request data on single-source percentages.
3. Civil society should demand defence procurement information from the Ministry of Defence and monitor defence policies and practices.
4. The European Defence Agency should embrace its commitment to transparency, and member states should grant organisations like the academy permission to publish their competitive procurement levels.

To find out more, view the report here.