Integrity pacts around the world - Integrity pact – A global standard for safeguarding strategic public investments

The Integrity Pact is one of the most popular types of multi-stakeholder collective action initiative against corruption in public procurement, developed by Transparency International in the 1990s. It takes the form of a public agreement in which public contracting authorities, suppliers, and civil society commit to jointly create an environment of good governance in one or more public contracts. In specific, the public agreement includes:

• A public integrity pledge, by which contracting authorities commit to provide comprehensive and accessible information on the public contract(s) and take measures to ensure integrity, such as reporting of conflict of interest, disclosure of public officials’ private interests and assets, strengthening of internal control systems, including whistleblowing mechanisms, and provision of integrity trainings.
• A business integrity pledge, by which suppliers commit or are required to: i) disclose relevant information such as compliance history, beneficial ownership, environmental, social, and governance reports (ESG), and political engagement activities; and ii) establish or have in place anti-corruption programmes or specific measures, such as risk management policies, whistleblowing systems, integrity trainings for employees, and due diligence procedures for sub-contractors.
• A civil society monitoring agreement, by which a civil society organisation, typically with the support of technical experts: i) reviews the procurement procedures, verifying compliance with applicable laws and reporting potential irregularities; ii) verifies and supports the implementation of commitments by contracting authorities and suppliers; and iii) fosters transparency and citizen engagement around the project. To fulfil these duties, the civil society organisation has the rights to access all project information and communications (subject to confidentiality clauses), promptly alert oversight authorities, and withdraw from the process if ignored or obstructed in its work.
• The Integrity Pact can also include additional elements, such as i) grievance redress mechanisms to swiftly resolve complaints or disputes related to the public contracts; ii) sanctions for violations of applicable laws and regulations; iii) incentives to foster meaningful implementation of commitments by suppliers, such as preferences in contact award, whitelists, and public recognitions for integrity efforts.

Given the wide variety of climate finance and related public procurement operations, there is no one-size-fits-all recipe for the implementation of the IP as a collective action initiative. Nevertheless, it is possible to delineate three main stages through which it typically unfolds:

Initiation phase – a group of “proponents” – including governments, contracting authorities, climate finance providers, civil society, and potentially business associations – collaborate to set up the IP initiative. This includes deciding on the scale of the initiative, identifying and selecting the projects and contracts the IP will be applied to, estimating and allocating financial resources for civil society monitoring and implementation of commitments and activities, and selecting one or more civil society partners who could act as facilitators and monitors.

Preparation phase – proponents collaboratively develop the public agreement formalising the commitments under the IP based on the objectives of the initiative and in line applicable laws and regulations, international standards and good practices. As the IP is intended to work as a corruption prevention and risk mitigation tool, its preparation should take place during the upstream phase of the public investment management process, and be tied to project design procedures, which typically include risk assessments and public procurement plans.

Execution phase – contracting authorities and suppliers implement the commitments foreseen by the IP, while the civil society monitors, with the support of technical experts, provides them with technical assistance, reviews the procurement procedures – ideally from planning to contract implementation – and carries out activities to foster transparency and citizen engagement around the project or contracts.

In principle, an Integrity Pact can target any type of public contract involving a competitive tendering process. In practice, it is best indicated for those holding a strategic value, which can be identified by looking into factors such as:

1. Expected contribution to achieving policy objectives (policy value)
2. Financial value, in absolute term or as a proportion of the contracting authority’s budget
3. Estimated number of beneficiaries and expected impact on the quality of their daily life

Along with a contract’s value, proponents must also assess regulatory and compliance risks which could negatively affect or compromise its outcome, and the likelihood of their occurrence. It is important to focus on:

1. Weak governance risk – The risk that public contracting organisations and officials carry out inadequate procurement planning, incompetent management of tendering procedures, and poor contract administration. This may happen due, for example, to lack of adequate capacity or resources, or of appropriate rules and mechanisms to ensure effective decision making.
2. Corruption and collusion risks – It is particularly important to look into: i) risks of undue influence or bribery to steer the procurement rationale, specifications and award decision in favour of a supplier; ii) risks of conflict of interests, for example if public officials have business connections with suppliers, and iii) risks of collusion, fraud and anti-competitive behaviour by suppliers to obtain a contract or share the profits.

Integrity Pacts are typically funded by one or more entities that wish to use it as a risk mitigation measure for public investment projects or contracts they own, provide financing for, or care about. This mainly refers to government and contracting authorities (including state-owned enterprises) and, in the context of development finance, multilateral development banks, foreign aid agencies, and philanthropic organisations. The latter group is best positioned to fund ambitious Integrity Pact initiatives as part of aid programmes to a country.

These entities can fund IPs from their own budget – for example, by setting aside a sum of money and then selecting relevant procurement projects - or by including the IP cost in specific project budgets. Governments and international donors may also create dedicated “civic monitoring funds” that could be used to finance IPs in strategic projects, with financial resources calculated as a proportion of total aid programme costs. The allocation of funds to different IP projects could be discussed and decided by multi-stakeholder boards or committees.

Integrity Pacts do not have a fixed price tag. Their cost can vary depending on the objectives and ambition of the initiative. A typical IP budget comprises the following lines:

• Set-up costs – These refer to costs for activities in the initiation and preparation of the IP, such as introductory meetings and consultations with multiple stakeholders, fees for legal experts, and communication activities. They may be higher or lower depending on whether proponents and stakeholders in the country already have experience with the IP.
• Implementation costs – These include administrative and staff costs for management of the IP initiative as a whole; communication costs, such as webpages or public events, and costs related to the implementation of specific IP commitments and activities.
• Monitoring costs – These include salaries and fees for the in-house or technical experts in the monitoring team, as well as costs for specific monitoring activities, such as travel to the project location, equipment and development of specialised monitoring tools.