Integrity pacts: keeping public contracts corruption-free

Integrity pacts: keeping public contracts corruption-free

Every year governments spend trillions of dollars of taxpayers’ money to buy goods and services for the public; from books for schools to large scale projects like airports and dams.

As well as involving huge sums – the Sochi Winter Olympics, for example, cost US$51 billion – these public purchases are technical and highly competitive. And despite public money being at stake, key decisions are often taken behind closed doors.

It is unsurprising, then, that no other government activity creates greater temptation or offers more opportunities for corruption than public contracting.

Collective action to keep contracts clean

Cover image of guide

Integrity pacts in public procurement: An implementation guide is a hands-on practical resource that explains how integrity pacts help governments, bidders and civil society to work together to prevent corruption in public contracting. It introduces the integrity pact’s approach and presents a step-by-step guide to using a pact, giving tools and ideas for its application, as well as illustrative case studies, templates and good practice examples of integrity pacts in action.

By bringing transparency, integrity and oversight to public contracts, integrity pacts can help protect public resources from waste and mismanagement. Figures show that around the world on average between 10 to 25 per cent of a public contract’s overall value may disappear into the pockets of the corrupt. The European Commission estimates in the European Union member states alone around US$163 billion of public money for procurement is diverted through corruption – nearly as much as the EU’s annual budget.

Image of El Cajon dam

Mandatory monitors in Mexico
In 2002 following instruction from the Mexican federal government, the federal electricity commission approached Transparencia Mexicana, our chapter in the country, to implement an integrity pact in the contracting process for the costly El Cajón hydroelectric project in north-western Mexico. With the pact in place, construction took place as scheduled and free from corruption scandals. El Cajón began operating in March 2007.

In 2004 it became mandatory in Mexico to have an external monitor in place for all public contracts valued over a certain threshold. With this comes an obligation to respect basic access to information standards so that monitoring can take place effectively.

How do integrity pacts work?

The binding contract or ‘pact’ at the heart of the integrity pact process requires governments and participating bidders in a specific contract to commit to high levels of transparency, integrity and accountability and to abstain from corrupt conduct. With the help of civil society organisations, an independent monitor oversees the whole process making sure these promises are kept. Breaches are costly, and can result in serious sanctions, including contract termination and blacklisting.

By communicating findings publicly, the monitor brings transparency and invaluable oversight to all the actors in the process, from the contracting authority to the public at large.

Bribes, breaches and cancelled contracts
In January this year the Indian Ministry of Defence cancelled a huge contract for helicopters with an Anglo-Italian manufacturer worth over US$750 million because they “breached a pre-contract Integrity Pact”. The pact obligated the parties to abstain from all forms of bribery and after serious allegations emerged that the company had paid big bribes to Indian officials to influence the deal, the ministry relied on the pact’s terms to unilaterally terminate the contract. This is not the first time that companies bidding in India have faced sanctions following integrity pact breaches.

When public contracting is participatory and transparent, key stakeholders including civil society and citizens are better able to monitor the procurement process. When binding commitments to high standards of integrity are made by the bidders and government authorities a level playing field is set, reassuring all involved that their counterparts will also abstain from malpractice.

Tried and tested

Developed in the 1990s, integrity pacts have stood the test of time. Our updated integrity pact implementation guide brings together the Transparency International movement’s wealth of experience and expertise collected from applying pacts in over 15 countries worldwide in more than 300 contracting processes across a variety of sectors – from international airport construction and large scale hydro-electric projects to deals for military equipment.

Preventing corruption from distorting public procurement protects the public purse from waste and theft, and helps ensure good quality and value for money, increasing the chances of sustainable and safe public projects and services.

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