Irregularities Risk Barometer and Integrity Pact two tools that - - PowerPoint PPT Presentation

dr Grzegorz Makowski, Fundacja im. Stefana Batorego Kiev, May 25th, 2017

Irregularities Risk Barometer and Integrity Pact – two tools that connected CSO, business and government in struggle for transparency in public procurement in Poland

Corruption and public procurement

 Broad perspective on corruption – all forms of particularistic allocation

• f public resources (see e.g. Mungiu-Pippidi, A., Uslaner, E., Conley, R.,

Parson, T., Shils, E.).

 Factors limiting access to public resources in areas that should in

principle be open (e.g. in the public procurement systems) are treated as a manifestation of corruption / abuse risk.

 Therefore, in case of public procurement systems (markets), factors

making them less open and competitive shall be seen as corruption risks indicators (see M. Fazekas).

Irregularities Risk Barometer (IRB) – a tool for estimating corruption risks



IRB – a composite index made up of nine components ("red flags"), indicating that given tender – from the moment of publication to the decision on the selection of the bidder – is under the risk of irregularities.



The indicators are: 1. tender procedure, 2. length of the description of the subject of the tender, 3. length of the description of the eligibility criteria, 4. number of required certificates, 5. weight of the non-price criteria, 6. number of days from announcement to closure of bidding phase, 7. number of days from closure of bidding phase to selection of contractor 8. single bidder.



IRB reaches values between 0 and 1 where 0 means no risk and 1 is highest risk of corruption.

Irregularities Risk Barometer (IRB) – some examples of analysis

0.30 0.31 0.31 0.31 0.31 0.35 .35 0.42 0.42 .42 0.39 0.39 0.39 0.40 0.25 25 0.27 27 0.29 29 0.31 31 0.33 33 0.35 35 0.37 37 0.39 39 0.41 41 0.43 43 2010 2011 2012 2013 2014 2015 IRB SB SB

 Average IRB value between 2010 and 2015 is 0,31 – relatively good result, but negative trend.

Irregularities Risk Barometer (IRB) – some examples of analysis

0.23 0.28 0.33 0.38 0.43 0.48 0.53 0.58 Jan. Feb. Mar. Apr. May Jun. Jul. l. Aug. Sep. Oct. Nov. Dec. IRB SB SB Length advertise sement period Length of f decis ision period Weig ight of non-price ass ssessment criteria

 The risk is growing at the end of the year - haste, the need to close the budget, temptation of discretionary

decisions (at the same time number of orders is not significantly different from other months)

Irregularities Risk Barometer (IRB) – some examples of analysis

0.39 0.38 0. 0.36 0.36 0.35 0.35 0. 0.35 0.35 0.35 0.34 0. 0.33 0.33 0.32 0.32 0. 0.32 0.32 0.31 0.31 0. 0.30 0.30 0.30 0.29 0.29 0.24 0.48 0.51 0.37 0. 0.50 0.38 0.41 0.59 0. 0.52 0.36 0.57 0.34 0. 0.49 0.38 0.40 0.41 0. 0.49 0.40 0.57 0.35 0. 0.31 0.37 0.32 0.13 0.24 0.1 0.2 0.3 0.4 0.5 0.6 0.7

associations of local self-gov. CSOs

• ther issuers
• ther public issuers

regional self-gov. companies

• rganizational unit of local self-gov. (impossible to assign)

county (powiat) self-gov. companies local self-gov. companies (impossible to assign) courts

• ther public company

county (powiat) local self-gov. including organizational… public university / academic institution church gmina self-gov. companies state owned company private company AVG. public health care system unit state administration gmina local self-gov. including organizational units defence sector issuer regional self-gov. including organizational units prosecutors' offices cooperative / housing association

IRB SB

• Mos
• st of
• f the iss

ssuers get t the sc score abo above the mea ean - 0.31.

• Spe

Specific ri risk gr group: public companies, in particular dependent on local self- governments and state owned companies.

• In

Interesti ting cas ase – health care institutions are not at the highest risk, but are dominated by single bidders.

• In

Interesti ting cas ase – high risk of non-governmental

• rganizations, especially

related to local self- government (e.g. sport clubs, firebrigadws, etc.)

The average value of IRB 2010-15 Expenditure by the municipality (gmina) for purchases, e.g. Office materials and equipment, software, food, equipment, energy, etc The average value of IRB 2010-15 Pearson correlation 1 ,189** Significance (2-tailed) ,000 N 2181 2181 Expenditure by the municipality (gmina) for purchases, e.g. Office materials and equipment, software, food, equipment, energy, etc. Korelacja Pearsona ,189** 1 Istotność (dwustronna) ,000 N 2181 2181 **Correlation is significant at the 0.01 level (2-tailed)

The average value of IRB 2010-15 The scale of municipals’ (gmina) debt, as compared to the total of revenues, in% 2010-2015 The average value of IRB 2010-15 Pearson correlation 1 ,067** Significance (2-tailed) ,000 N 2181 2181 The scale of municipals’ (gmina) debt, as compared to the total of revenues, in% 2010-2015 Korelacja Pearsona ,067** 1 Istotność (dwustronna) ,000 N 2181 2181 ** Correlation is significant at the 0.01 level (2-tailed)

Expenditure of municipalities for investments, e.g. in assets, shares, bonds, contributions and investment reserves 2010- 2014 The average value

• f

IRB 2010-14 Expenditure of municipalities for investments, e.g. in assets, shares, bonds, contributions and investment reserves 2010-2014 Pearson correlation 1

• ,177**

Significance (2-tailed) ,000 N 2181 2181 The average value

• f IRB 2010-14

Pearson correlation

• ,177**

1 Significance (2-tailed) ,000 N 2181 2181 **Correlation is significant at the 0.01 level (2-tailed)

 Municipalities of higher IRB are more in

debt.

 Municipalities of higher IRB spend more on

basic purchases.

 Municipalities with a higher IRB less invest. Irregularities Risk Barometer (IRB) – some examples of analysis

Short characteristics of the exemplary issuing body – a regional execlence center for teachers’ (2010-2015):

 1187 tenders, for 1,5 million EUR  Avg. value of a tender 1000 EUR  99% – are open tenders (sic!)  97% – are tenders for services  Only 11 free orders in this period.

Controversies:

 96% of bidders come from the same region  bidders win 2/3 of tenders  91% tenders are single-bidder

Possible explanations:

 System makes them do it.  The issuer simply doesn’t know PPL  They use open tendering just to cover up

irregularities, collusion, corruption

Irregularities Risk Barometer (IRB) – some examples of analysis

Integrity Pact – the general idea and genesis

 Integrity Pact (IP) – a contract between a contracting authority and economic operators

bidding for public contracts that they will abstain from corrupt practices and will conduct a transparent procurement process. IP also includes a separate contract with a civil society organization which monitors that all parties comply with their commitments.

 The overall purpose of IP is to strengthen the guarantee that no party of the

procurement proceeding will engage in fraudulent, corrupt practices.

 Key element! IP implies the involvement of an external civic observer – from the

initiation of the procurement process, until its completion.

 Genesis – concept of „Islands of Integrity” – one of the first anticorruption "tools"

created by Transparency International and applied in countries / societies heavily affected by systemic corruption (covering all sectors / areas of public life), often customary.

Integrity Pact – main functions

 Prevention of abuse in the process of public procurement, which

might result in higher costs of public tasks that could raise due to corruption and related to this court cases, compensations, etc..

 Integration – correctly implemented IPs can be an effective

instrument for building standards within the public procurement system as well as in concrete institutions (especially issuers, but also bidders).

 Information and education – IPs can be also a tool to build

confidence in specific public institutions and the public procurement system as such.

Integrity Pact – Polish example

Agreement between the Stefan Batory Foundation and PKP Polish Railways S.A on the implementation of the "Integrity Pact" in the framework of a public procurement project for the design and build of the Częstochowa – Zawiercie section of line No. 1 between Warsaw and Katowice … is designed to: 1) Examine the applicability of Integrity Pacts as a means of protecting EU funds against abuse and corruption while ensuring a robust, efficient and timely implementation of the projects covered by the Pact; 2) Examine the applicability of Integrity Pacts as a means to improve transparency and accountability of spending EU funds, including structural and cohesion funds; 3) Ensure savings by strengthening competition in public procurement; 4) Improve public confidence in government and public procurement; 5) Build a good reputation of contracting institutions and contractors; Provisons cover such a questions as:

• standards and rules of monitoring;
• conflict of interest;
• whistleblowers protection requirements

…

Integrity Pact – European pilot 2016-2019

 17 pilots in 11 European Union

countries by the end of 2019;

 Tenders in 11 different sectors,

including public transport, culture, health care, education;

 The value of all tenders covered

by the pilot – 920 million euros;

 15 CSOs selected as the

monitoring parties (Stefan Batory Foundation in Poland)

Curbing corruption together – main ways of succesful cooperation between governments,CSOs and business community

 Openness – access to public information, opening public

data.

 Exchange of information.  Cooperation between experts.  Openness to recommendations and use of the results of

joint projects.

 More information on the Irregularities Risk Barometer and the IP pilot:

• IRB website (in Polish) – http://barometrryzyka.pl/
• Information on IP pilot in Poland –

http://www.batory.org.pl/programy_operacyjne/przeciw_korupcji/pakty_uczciwosci

• Polish IP –

http://www.batory.org.pl/upload/files/Programy%20operacyjne/Odpowiedzialne%20Panstwo/PAKT %20UCZCIWOSCI%201%20MODUL%20SKAN.pdf

• Information on IP pilot in the EU – http://ec.europa.eu/regional_policy/en/policy/how/improving-

investment/integrity-pacts/

Stefan Batory Foundation www.batory.org.pl e-mail: gmakowski@batory.org.pl v