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Procurement Perspectives: Corruption thrives on secrecy in government procurement

Stephen Bauld
Procurement Perspectives: Corruption thrives on secrecy in government procurement

As we have seen at the start of 2019 as well as the last quarter of 2018, inconsistency in the procurement process is prevalent. In many published articles on a variety of topics, corruption is much like a mushroom, it thrives in the dark.

The benefit of competition is well recognized by economists, but to a large extent concern in relation to the public procurement process is based more on the concerns of political science rather than those of economics. The goal is to avoid corrupt practice.

As the Organisation for Economic Co-operation and Development explains:

“Corruption thrives on secrecy. Transparency and accountability have been recognised as key conditions for promoting integrity and preventing corruption in public procurement. However, they must be balanced with other good governance imperatives, such as ensuring an efficient management of public resources — ‘administrative efficiency’ — or providing for fair competition. In order to ensure overall value for money, the challenge for decision makers is to define an appropriate degree of transparency and accountability to reduce risks to integrity in public procurement while pursuing other aims of public procurement.”

The extent to which the goals of openness, transparency and fairness are carried into effect is itself a matter of debate. Around the world, auditor generals and other government watchdogs complain about the extent to which government staff employ “work arounds” to overcome the requirements of open competition.

Management supervision of the process is often less than energetic. Not infrequently, the commitment to openness, transparency and fairness proceeds little than including in purchasing policies pious recantations of the usual platitudes associated with procurement activity, such as that:

  • Municipal officials must not make any purchase except in compliance with the Purchasing By-Law, and perhaps some other declared policies. Unfortunately, it is very often unclear which rules are intended to apply in particular circumstances, with the result that the direction given is left obscure.
  • The municipality must obtain “best value for money.” As I have discussed in great detail in previous articles, there are so many ways of computing best value, this declaration is essentially meaningless.
  • Municipal staff must exhibit the highest standards of integrity and should employ “the most efficient and effective processes and practices” in carrying out the procurement function.

One of the most important aspects of any purchasing bylaw is to identify the responsibilities of each municipal officer likely to be involved in the procurement process and to set down a scheme of checks and balances to make sure none of them exercises inordinate influence over the process.

Unfortunately, usually this scheme of checks and balances is negated by the top-down management employed by the municipality, with the result that the apparent power of the “purchasing manager” is under practical control of various directors, assistant commissioners, commissioners and so forth.

When individual councillors involve themselves in procurement decisions — which in too many cases is anything but an unusual occurrence — there is a further subversion of the apparent scheme of control.

However, even if commitments to openness, transparency and fairness were scrupulously observed, there is good reason to believe that the public procurement system would still perform below the level of public expectation. The problem is that a fair system, conducted openly, leading to contracting decisions that are transparent does not in itself result in a procurement process that furthers the goals that governments are seeking to pursue.

In contrast, a strategic approach to procurement requires the municipality to give staff a precise direction as to the overall goals that are to be pursued through the procurement process. A clear strategic direction often makes it possible to determine which of two possible approaches should be used in particular circumstances and when councillors, either individually or collectively, are stepping over the line of giving acceptable direction.

Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com.

Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.

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