The Indian Oil and Natural Gas Corporation - a state-owned enterprise or Public Service Undertaking (PSU) - applied the first integrity pact in the country in 2006. It included integrity commitments for the contracting authority and bidders and the involvement of an independent external monitor for addressing violations. The same year, the Indian Ministry of Defence adopted the Defence Procurement Procedures Act, which made IPs mandatory for all defence procurement above US$15 million.

Between 2007 and 2009, India’s Central Vigilance Commission (CVC) issued various circulars recommending the use of IPs in all major procurement of PSUs in the country. The 2009 circular outlines the “Standard Operating Procedure” for the IP, spelling out the essential elements and clauses, providing guidelines regarding implementation arrangements, as well as role, function, and appointment procedures of external monitors, and establishing a periodic review system.

In India, the adoption of integrity pacts by a PSU is voluntary. Once they use the tool for the first time, they must include it in all contracting projects above a certain threshold value. The threshold is determined so that IPs cover 90-95 per cent of the total monetary value of the organisation’s procurement. The PSU management can also decide to apply the IP to contracts below the value thresholds if these are of strategic importance or have a particular complexity.

The procurement department of a PSU is the focal point of IP implementation, while the internal Chief Vigilance Officer (CVO) is responsible for the review, enforcement, and reporting on issues. CVOs must carry out periodical assessments of the impact of the IPs and report them to the Central Vigilance Commission.

The standard integrity pact (IP) model in India involves three actors – the contracting authority, the bidders, and an independent external monitor. The signature of the agreement by bidders, which is made in the name of the CEO, is a mandatory requirement for participating in a tender and remains in force from the pre-tendering stage until the completion of the contract, where the agreement continues to apply to the successful bidder.

For the contracting authority, this means refraining from the exchange of bribes, disclosing all commissions, payments, and documents concerning the contract, punishing officials who breach the agreement with appropriate disciplinary or criminal sanctions, treating bidders fairly, informing its Chief Vigilance Officer (CVO) in a timely manner about breaches, and providing the monitor with sufficient and timely information as well as access to meetings related to the contracting procedure.

At the same time, the IP bidders must refrain from exchanging bribes, disclose all payments related to the contract, respect the confidentiality of information obtained by the Public Service Undertaking (PSU), submit a declaration that no transgressions of the law have occurred in the previous three years, and give the monitor access to bid documents and records. In addition, foreign bidders must disclose the names and addresses of their agents in India, and Indian bidders must do the same with foreign agents.

The external monitor, an individual with relevant expertise for a specific contract, oversees the contracting authority’s and the bidders’ compliance with the IP agreement. Another critical role they perform is investigating complaints issued by the other two IP parties – they investigate each complaint and submit a report to the PSU management within 8-10 weeks. The monitor can approach the Central Vigilance Commission if they don't respond adequately. Where they deem appropriate, the external monitor can also recommend changes to the procurement process, recommend training for officers, and provide support in conflict mediation.

External monitors for each contracting project are decided by the Central Vigilance Commission (CVC) following suggestions from the contracting authority and are normally appointed for three-year terms. If their work is satisfactory, their mandate can be renewed after consultations with the CVC, which is also authorised to remove them if it finds faults in their performance. External monitors are paid for their work by the PSU, and the remuneration must be equivalent to that of an Independent Director of that PSU.

As of January 2022, the selection pool for candidates for the role of external monitors included retired top-level officials in a range of different posts, former CEOs of public sector banks, insurance companies and other financial institutions, as well as former officers from the police, armed forces, and forest service.

Despite Transparency International India* playing a prominent role in promoting the use of integrity pacts (IPs) in the country, civil society was never given a formal role in monitoring procurement processes. A provision related to non-governmental organisations serving as monitors was initially considered but later dropped. Nevertheless, over time TI India provided relevant technical support to Public Service Undertakings (PSUs) adopting the IP through ad-hoc Memorandums of Understanding. As of 2015, 48 central PSUs, one state-level PSU, and one municipal council had signed such agreements with TI India.

As part of the package, TI India would provide a template IP agreement and assistance in adapting it to the context of the specific PSU, help them draft offer letters to potential monitors and meet with them, assist the PSU in preparing tender documents, and carry out staff training and capacity buildings for IP stakeholders. As part of the agreement, TI India would also support monitors in addressing complaints submitted by different parties.

*Since the end of 2015, the organisation Transparency International India is not an accredited chapter and part of the Transparency International movement anymore.

Integrity pact (IP) implementation in India is an ongoing process and has been adopted by over 100 Public Service Undertakings (PSUs). However, the methodology, process, and impact of its application have differed.

In a 2010 review, Transparency International India* found that, in general, IPs had been effective in contributing to enhanced transparency, efficiency, and value for money in public procurement processes, a better level playing field among competitors, a reduction of the number of lawsuits and false complaints, as well as a boost to bidders’ and contractors’ confidence and positive public perception of PSUs adopting them.

In the defence sector, in particular, IPs have been very impactful. In 2012, following breaches of the IP, the Ministry of Defence cancelled procurement contracts with an Israeli defence firm, cashed a bank guarantee put forth by the firm, and blacklisted six other companies. In 2014, the ministry terminated a €556 million contract with the Italian-British contractor Agusta-Westland following bribery allegations. Similarly, the PSU Hindustan Aeronautics cancelled a contract with Rolls Royce after the latter admitted having paid and not disclosed commissions to hired agents.

Another review in 2016 found that IPs were particularly helpful in providing solid grounds for charging and seeking compensation from corrupt players in public procurement and compensating for the confused, inefficient, incomplete, and decentralised procurement and anti-corruption rules in India. Moreover, the monitoring system offered a credible accountability and reconciliation tool, with many PSUs reporting that the monitor helped reduce the number of cases ending up in courts – a significant advantage given India’s slow judicial system.

The review also found that reports of the success of IPs in discovering and penalising corruption helped create a better awareness of governance problems in public procurement and possible remedies. Most PSUs introduced their IPs at well-publicised events attended by media and civil society actors and published details on the website.

At the same time, the reviews emphasised some problems and concerns. According to TI India, the fact that IPs had to cover 90-95% of all procurement value of a PSU - corresponding to hundreds of procedures - meant that the number of monitors and their resources may not be adequate to ensure effective oversight of all of them. The time allocated to observation varies considerably, and certain tenders would inevitably be given less attention than others. In addition, mandatory signature risked making the IPs a mere formality for bidders.

Furthermore, in some cases, TI India observed a “tremendous” duplication of tasks because aggrieved parties would simultaneously complain to different parties – external monitors, Central Vigilance Commission (CVC), courts, Chief Vigilance Officers (CVOs) - resulting in the same issue debated across different fora and consequent waste of time and resources. In other cases, getting foreign suppliers to accept the IP had been difficult due to doubts about their implications. When PSUs did not manage to get it signed, they lost important suppliers and faced questions from the CVC.

In general, there were concerns about the fact that PSUs are commercial organisations judged by their performance and profitability rather than their contribution to the public good. As such, integrity incentives for employees are low, and requiring all of them to sign the IP could lead to inefficiencies, delays, and loss of competitive value. Another problem was getting IPs up and running in organisations with no experience and little trust among stakeholders.

According to the expert Ashutosh Mishra, the impact seen in the Ministry of Defence work might have been an outlier, characterised by good leadership and intense media scrutiny. The firms penalised were foreign operators with less political influence and more robust disclosure requirements than domestic firms. His biggest concern is the IPs are being used as a “band-aid” and might distract attention from the need to adopt more ambitious reforms to address procurement corruption.

*Since the end of 2015, the organisation Transparency International India is not an accredited chapter and part of the Transparency International movement anymore.