ANTICORRUPTION IN AID PROCUREMENT A Survey Lena Diesing

ANTI-CORRUPTION IN AID PROCUREMENT A Survey Lena Diesing, lena. diesing@oecd. org 9 th Annual Conference on Government Procurement in the Americas 17 -19 September 2013

Outline • Context: – 1996 Recommendation – Survey • • Legal and Policy Frameworks Donor-managed procurement Recipient-managed procurement Accountability measures and sanctions

Context • USD 130 billion in aid • 15 – 20 % in procurement • 1996: Recommendation by the Development Assistance Committee • 2013 survey: stock taking among DAC members and multilaterals • 24 DAC members plus multilaterals asked • 16 countries responded, plus Senegal

Survey Respondents Country Australia Austria Belgium Canada Denmark Germany Japan Korea Netherlands Norway Portugal Sweden Switzerland United Kingdom USA Estonia Total Net Official Development Assistance in 2011 (USD million) 4, 983 1, 111 2, 807 5, 457 2, 931 14, 093 10, 831 1, 328 6, 344 4, 934 708 5, 603 3, 076 13, 832 30, 924 N. A. 108, 962 4 Multilaterals Asian Development Bank European Commission Inter-American Development Bank United Nations Development Programme

3 j Are contract awards published above certain thresholds? 3 i. Do guidelines or codes of conduct exist to inform staff of obligations. . . 3 h Do you consider the existence of internal control, ethics and. . . 3 g Is it mandatory to exclude a firm from bidding if the organization. . . 3 f Are due diligence checks undertaken before selecting a firm? If yes, . . . 3 c Legal and Policy Framework Does the legal and regulatory framework (including tender and. . . 3 b - Do specific rules exist defining under which circumstances less. . . 3 a - Is open competitive bidding the default method above certain. . . Are the laws, regulations, policies, code of ethics and practices. . . 1 19 0 21 4 15 5 15 2 18 0 20 0 19 0 21 0 NO YES 5 10 15 20 25

Donor-managed procurement • 5 respondents verify bidder claims – Canada, Belgium, Estonia, Germany, UNDP • 4 respondents do not conduct routine verification of bidder claims – Australia, Norway, Sweden, UK • 4 respondents have limited checks – Belgium, Portugal, ADB, IDB

Donor-managed procurement Yes Percent No Percent Strengthened oversight of aid-funded procurement? 90% 10% Independent complaints system in place? If so, decision published? 95% 41% 5% 59% Debarment in the past? 47% 53% Regular audits, implementation of recommendations? 79% 21% Obligation to report… - To law enforcement authorities? - Internally (management, committee, ombudsman…) 63% 100% 37% 0% Protection of whistleblowers? 83% 17%

Recipient-managed procurement Procurement rules of donor/Agency Country procurement systems and procedures Hybrid system OECD-DAC Member Countries Australia (Aus. AID) ✓ ✓ Austria (ADA) ✓ Belgium (BTC) Belgium (FPSFA) ✓ ✓ ✓ ✓ Canada (CIDA) ✓ Denmark Germany (BMZ. GIZ, Kf. W) Japan ✓ Korea KOICA ✓ ✓ Netherlands ✓ Norway Portugal ✓ Sweden (Sida) ✓ ✓ ✓ Switzerland ✓ USAID ✓ ✓ ✓ USA (MCC) ✓ ADB IDB ✓ ✓ ✓ UNDP ✓ ✓ International organizations Other organizations ARMP, Senegal ✓

Recipient-managed procurement Accountability Measures Do you fully rely on the other government’s procurement system? Yes No Minimum requirements Prior reviews (“No objection” procedures) Spot checks 52% No Most common additional safeguards Post reviews 48% Yes Audits Social audits Do you use a red flag indicator system? 33% 42% 67% 58% 33% 63% 4% 21% 67% 37% 96% 79% 82 per cent assess relevant national procurement systems

Recipient-managed procurement Sanctions Which sanctions are applied? Responses Cancellation of aid programs/projects/contracts Suspension of aid programs/projects/contracts Termination of aid programs/projects/contracts Other sanctions/reactions 12 15 14 10

Main Messages and Conclusions • Donors aware of corruption risks • Safeguards and sanction policies in place • Goal: close gap between policy and practice • Additional emphasis needed on verification, due diligence systems, and sanctions