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

Irregularities Risk Barometer and Integrity Pact – two tools that connected CSO, business and government in struggle for transparency in public procurement in Poland dr Grzegorz Makowski, Fundacja im. Stefana Batorego Kiev, May 25th, 2017

Corruption and public procurement  Broad perspective on corruption – all forms of particularistic allocation of 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, i n 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  Average IRB value between 2010 and 2015 is 0,31 – relatively good result, but negative trend. 0.43 43 0.41 41 0.42 .42 0.42 0.40 0.39 39 0.39 0.39 0.39 0.37 37 0.35 35 0.35 .35 0.33 33 0.31 31 0.31 0.31 0.31 0.31 0.29 29 0.30 0.27 27 0.25 25 2010 2011 2012 2013 2014 2015 IRB SB SB

Irregularities Risk Barometer (IRB) – some examples of analysis  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) 0.58 0.53 0.48 0.43 0.38 0.33 0.28 0.23 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

Irregularities Risk Barometer (IRB) – some examples of analysis o Mos ost of of the iss ssuers get t the 0.39 associations of local self-gov. 0.48 sc score abo above the mea ean - 0.31. 0.38 CSOs 0.51 0. 0.36 other issuers 0.37 0.36 other public issuers 0.50 0. o Spe Specific ri risk gr group: public 0.35 regional self-gov. companies 0.38 companies, in particular 0.35 organizational unit of local self-gov. (impossible to assign) 0.41 0. 0.35 county (powiat) self-gov. companies dependent on local self- 0.59 0.35 local self-gov. companies (impossible to assign) 0. 0.52 governments and state owned 0.35 courts 0.36 companies. 0.34 other public company 0.57 0. 0.33 county (powiat) local self-gov. including organizational… 0.34 0.33 public university / academic institution o In Interesti ting cas ase – health care 0.49 0. 0.32 church 0.38 institutions are not at the 0.32 gmina self-gov. companies 0.40 highest risk, but are dominated 0. 0.32 state owned company 0.41 0.32 private company by single bidders. 0. 0.49 0.31 AVG. 0.40 0.31 public health care system unit 0.57 o In Interesti ting cas ase – high risk of 0. 0.30 state administration 0.35 0.30 non-governmental gmina local self-gov. including organizational units 0. 0.31 0.30 defence sector issuer organizations, especially 0.37 0.29 regional self-gov. including organizational units 0.32 related to local self- 0.29 prosecutors' offices 0.13 government (e.g. sport clubs, 0.24 cooperative / housing association 0.24 firebrigadws, etc.) 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 IRB SB

Irregularities Risk Barometer (IRB) – some examples of analysis Expenditure by the Expenditure of municipality (gmina) for municipalities for purchases, e.g. Office investments, e.g. in assets, materials and shares, bonds, equipment, software, contributions and The average The average value of food, equipment, investment reserves 2010- value of IRB IRB 2010-15 energy, etc 2014 2010-14 The average value of IRB Pearson correlation 1 ,189 ** Expenditure of Pearson correlation 1 -,177 ** 2010-15 Significance (2-tailed) ,000 municipalities for Significance (2-tailed) ,000 N 2181 2181 investments, e.g. in N Expenditure by the Korelacja Pearsona ,189 ** 1 assets, shares, municipality (gmina) for Istotność (dwustronna) ,000 bonds, 2181 2181 purchases, e.g. Office N contributions and materials and equipment, investment reserves 2181 2181 software, food, 2010-2014 equipment, energy, etc. The average value Pearson correlation -,177 ** 1 ** Correlation is significant at the 0.01 level (2-tailed) of IRB 2010-14 Significance (2-tailed) ,000 N 2181 2181 **Correlation is significant at the 0.01 level (2-tailed) The scale of municipal s’ (gmina) debt, as compared  Municipalities of higher IRB are more in The average value of IRB to the total of revenues, 2010-15 in% 2010-2015 debt. ,067 ** The average value of IRB 2010-15 Pearson correlation 1  Municipalities of higher IRB spend more on Significance (2-tailed) ,000 N 2181 2181 basic purchases. ,067 ** The scale of municipal s’ (gmina) Korelacja Pearsona 1  Municipalities with a higher IRB less invest. debt, as compared to the total of Istotność (dwustronna) ,000 revenues, in% 2010-2015 N 2181 2181 ** Correlation is significant at the 0.01 level (2-tailed)

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. Possible explanations: Controversies:  System makes them do it.  96% of bidders come from the same region  The issuer simply doesn’t know PPL  bidders win 2/3 of tenders  They use open tendering just to cover up  91% tenders are single-bidder irregularities, collusion, corruption

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)