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Transparency International issues Minimum Standards

Transparency International (TI), the global anti-corruption organisation, launched the Minimum Standards for Public Contracting today. Research by the global anti-corruption organisation shows that construction, a vast industry worth US $3.2 trillion annually, is perceived to be the most corrupt of all business sectors.

Bribery in the building and engineering industries is costing taxpayers tens of billions of dollars annually, wasting vast sums of development assistance with fatal consequences.

"Our studies point conclusively to the vital need for building companies worldwide to accept credible transparency standards, and for public authorities everywhere to embrace these," said TI Chairman Peter Eigen today.

The new TI standards call for competitive bidding for all public contracts of any significant value, and debarment from tendering for a specified period of time for companies that have been involved in corrupt activities. They also call for the use of project integrity pacts, which bind the contracting authority and bidding companies into a no-bribes commitment.

The standards also call for public procurement authorities to implement codes of conduct that commit the contracting authority and its employees to a strict anti-corruption policy. Staff should be well trained and paid, and responsibility for assessment, selection, supervision and control of projects should fall to separate bodies.

Adopted and properly enforced, these standards will help clean up the construction sector and help prevent the most egregious cases of corruption. Examples of 'monuments of corruption' from TI's Global Corruption Report 2005 include:

  • The Yacyretá hydropower project on the border of Argentina and Paraguay, built with World Bank support and dubbed a "monument to corruption" by ex-President Menem (himself now facing corruption charges). The damn is flooding the Ibera Marshes and due to cost overruns, the Yacyretá power plant is a financial sink-hole requiring government subsidies.
  • The Bataan nuclear power plant in the Philippines, built at a cost of more than US $2 billion. The contractor, Westinghouse, admitted paying US $17 million in commissions to a friend of former president Marcos. The reactor sits on an active fault line, creating a major risk of nuclear contamination - if the power plant ever becomes operational.
  • The Bujagali dam in Uganda, which is currently being investigated for corruption by the World Bank and four different governments, after a British subsidiary of the Norwegian construction company Veidekke admitted paying a bribe to a senior Ugandan civil servant. The cumulative environmental impacts of Bujagali and other dams on the Nile have never been assessed.

The standards are being launched in conjunction with the Global Corruption Report 2005, which focuses on corruption in construction and post-conflict reconstruction. The report brings together expert articles on: the mechanics of corruption in the construction sector; the responsibility of export-credit agencies and international financial institutions, including the World Bank and regional development banks, in financing projects known to be vulnerable to corruption; and the financial, environmental and human costs of corruption.

The Global Corruption Report 2005 also contains in-depth reports detailing corruption-related developments in 40 countries, and a selection of the latest research in the field. The report is available online.

Transparency International's Minimum Standards for Public Contracting

Public procurement authorities should:

  • Implement a code of conduct that commits the contracting authority and its employees to a strict anti-corruption policy. The policy should take into account possible conflicts of interest, provide mechanisms for reporting corruption and protect whistleblowers.
  • Allow a company to tender only if it has implemented a code of conduct that commits the company and its employees to a strict anti-corruption policy
  • Maintain a blacklist of companies for which there is sufficient evidence of their involvement in corrupt activities. Debar blacklisted companies from tendering for the authority's projects for a specified period of time
  • Ensure that all contracts between the authority and its contractors, suppliers and service providers require the parties to comply with strict anti-corruption policies.
  • Ensure that public contracts above a low threshold are subject to open competitive bidding
  • Provide all bidders, and preferably also the general public, with easy access to information about all phases of the contracting process, including the selection and evaluation processes and the terms and conditions of the contract and any amendments.
  • Ensure that no bidder is given access to privileged information at any stage of the contracting process, especially information relating to the selection process.
  • Allow bidders sufficient time for bid preparation and for pre-qualification requirements when these apply.
  • Ensure that contract 'change' orders that alter the price or description of work beyond a cumulative threshold are monitored at a high level, preferably by the decision-making body that awarded the contract.
  • Ensure that internal and external control and auditing bodies are independent and functioning effectively, and that their reports are accessible to the public. Any unreasonable delays in project execution should trigger additional control activities.
  • Separate key functions to ensure that responsibility for demand assessment, preparation, selection, contracting, supervision and control of a project is assigned to separate bodies.
  • Apply standard office safeguards, such as the use of committees at decision-making points and rotation of staff in sensitive positions. Staff responsible for procurement processes should be well trained and adequately remunerated.
  • Promote the participation of civil society organisations as independent monitors of both the tender and execution of projects.

This is an edited version of the Standards. The complete text can be found in the Global Corruption Report 2005, pp 4-6.

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