Anticorruption measures under the new Public Procurement Directives

Anti-corruption measures under the new Public Procurement Directives Budapest 11. 12. 2015 Bogdan STEFAN European Commission Directorate General Internal Market, Industry, Entrepreneurship and SMEs Directorate G – Single Market for Public Administrations

Introduction/structure Public procurement has been covered by a special chapter in the first EU Anti-Corruption report issued in 2014. Significant importance due to: A. crucial leverage in the Internal market B. "Hot spot" for corruption, subject to significant corruption risks C. covered by extensive EU legislation D. in addition to the main aim to open the market, the new public procurement rules contribute to q Preventing corruption q Detecting corruption q Redressing corruption. 24/02/2021 2

A. Public Procurement is of crucial importance for the Internal Market § 1/5 of EU GDP (2. 3 trillion EUR) spent by European contracting entities on goods, works and services above and beyond thresholds for the application of EU rules. § Total value of calls for tenders above thresholds (incl. utilities and defence): 421. 31 Billion in 2014 (401, 72 in 2012). § Hungary: Increasing trend - public procurement (excl. utilities and defence) worth 16. 1 Billion EUR in 2014 (compared to 13, 3 Bn EUR in 2011). Public works, goods and services constituted 15. 5 % of GDP in 2014 (13, 2% in 2011) § Number of contract notices published in TED at EU level (including utilities and defence) - 169 687 in 2014 (168 160 in 2011). Decreasing trend for Hungary (2640 in 2011, 1941 in 2014) 24/02/2021 3

B. Public Procurement is covered by extensive legislation o o Classic Public Procurement and Utilities (water, postal, energy, transport) Directives + new Concessions Directive – to be transposed by MS by April 2016 Remedies Directives for classic and utilities procurement allowing judicial oversight of the procurement process Defence procurement Directive to regulate procurement in a high price and formerly intransparent sector. Public procurement framework in Hungary: § The new public procurement act and the related government decrees transposing the 2014 EU PP directives were adopted and entered into force on 1 November 2015 § A major reorganisation took place in 2014, centralising public procurement regulatory, implementation, control and monitoring functions in the Prime Minister’s Office § National Anti-Corruption Programme for the period 2015 -2018 promotes the concept of ‘open contracting’- increased disclosure and participation in public contracting. § In the framework of the Partnership Agreement for the 2014 -2020 programming period, Hungary committed to implement specific measures in the field of public procurement, to respond to the applicable PP ex-ante conditionality. 24/02/2021 4

C. Public Procurement is a "Hot spot" for corruption • High level of financial interests at stake, in various sectors (e. g. energy and transport infrastructure, construction, defence). • The costs of corruption are difficult to quantify. However, it is a fact that corruption in PP impedes on the sound management of public money, competition and undermines the trust of citizens in democratic institutions • Situation in Hungary: According to the 2013 Eurobarometer Business Survey on corruption, 47% of the Hungarian respondents consider that corruption is widespread in public procurement managed by national authorities (EU average: 56%) and 48% in that managed by regional or local authorities (EU average: 60%). 24/02/2021 5

D. Public Procurement rules prevent corruption by enhancing Transparency I o Rules for public procurement are in place to guarantee transparent and nondiscriminatory procedures o Transparency is the worst enemy of corruption, if followed in their letter and spirit, public procurement rules can prevent corruption and malpractices. o Contracting entities play a key role in ensuring transparency of the procedure. Transparency would help them getting the best value for money and remain the master of the process by applying the "fair" rules of the game, set by the PP directives, such as: 24/02/2021 6

Public Procurement rules prevent corruption by enhancing Transparency II q Prior publication of tenders q Clear and unbiased technical specifications q Equal treatment of bidders in all stages of the process q Objective evaluation of tenders § according to an appropriate methodology § unbiased award criteria § avoidance of conflicts of interests q Conclude the contract as tendered q Execute the contract as concluded 24/02/2021 7

Public Procurement rules prevent corruption by enhancing Transparency III – the new directives q Besides enhancing transparency, the reform of the public procurement directives and the new concessions directive are major leap forward by: o creating the framework for effective procedures for purchases at best value for money o tailored to all possible needs of contracting authorities o Promoting streamlined rules avoiding complex, bureaucratic processes which usually extend the opportunities for corruption. q MS should use the transposition period of the new directives (18 th April 2016, 2018 for e-procurement) as an opportunity to: o to raise awareness of the rules amongst all public procurement actors, including the judiciary o to overhaul the organisation of their public sector and adapt the institutional structures and internal mechanisms to the requirements of the new directives o to reconsider in depth the efficiency of their public procurement and anti -corruption policies. 24/02/2021 8

Public Procurement rules prevent corruption by enhancing Transparency IV– the new directives q Novelties in the new directives, directly enhancing transparency : 1. E-procurement is generalised and becomes mandatory 2. Separate legal framework for concession contracts enhances transparency in this field 3. Introduction of a standard form self-declaration for bidders, the "European Single Procurement Document"- it more difficult to exclude tenders in the selection phase 4. Copies of 10 Mio EUR works + 1 Mio EUR supplies and services contracts must be made available on request; exceptions allowed only in the case of commercially sensitive information 24/02/2021 9

Public Procurement rules prevent corruption by enhancing Transparency V– the new directives 5. The scope of the public procurement directives is extended to the post-award phase (particularly vulnerable to corruption; the modification of contracts during their term without a new tender procedure is now regulated. 6. Guidance for contracting authorities by Member States and administrative exchange of information e. g. on exclusion grounds are required. 24/02/2021 10

New Public Procurement rules – a stronger anti-corruption focus New Directives strengthen the anti-corruption purpose by introducing: 1. Stronger • • • exclusion grounds, extended to situations where bidders: have entered into agreements have tried to influence or mislead the contracting authority have tried to obtain confidential information. 2. The notion of "conflicts of interests" is for the first time defined at EU level 3. The obligation for the Member States and contracting authorities to take appropriate measures to effectively prevent, identify and remedy conflicts of interests 4. Member States must monitor and report on measures to prevent and detect procurement fraud, corruption and conflicts of interest and other serious irregularities. 24/02/2021 11

Tools available in the MS to prevent and detect corruption Examples q PSD Croatia: o NGO runnning a database, free of charge, open to the use of the public, gathering information on public procurement procedures, companies, assets and interests of officials o allows for cross-checks by connecting the database of the authority reponsible to check conflicts on interests and the e-procurement data base q PREVENT system/Romania o As part of the public procurement strategy agreed with DG GROW and REGIO, Romania will implement a system (PREVENT) aiming at preventing conflicts of interests o The system will automatically detect whether the bidders are relatives or are connected to people from the contracting institutions' management. o The system cross-checks instantly 3 national data bases: trade register, population register and the e-procurement data base q The Red Flag Signalling System developed by Transparency International Hungary, K -Monitor and Peta. Byte - monitors documents and information uploaded to public procurement databases and indicates corruption suspicious cases, went live on 9 th November 24/02/2021 12

Public Procurement rules to detect corruption – Monitoring q The new directives provide for the obligation for the MS to monitor the application of the public procurement rules q To respond to this obligation, the Commission encourages Member States to develop an efficient monitoring system based on relevant indicators (red flags, anomalies detection tools) and a solid national database on irregularities in PP, building on similar examples such as ARACHNE, TED or contract registers existing in various MS q A solid data base and relevand red-flags/anomalies detection tools in place would also facilitate the task of the Member States to respond to the obligation of reporting on fraud, corruption and conflicts of interest and other serious irregularities linked to public procurement 24/02/2021 13

Public Procurement rules to redress corruption q Effective review procedures • • • according to the rules of the Remedies Directives by independent and professional review bodies to reflect on the possibility to grant active legitimacy for NGOs or citizens ? q Effective monetary follow-up of corrupt practices • • by applying financial corrections to EU funds reflect on the possibility to annul affected contracts ex-tunc? q Effective sanctioning of corruption in procurement • • • 24/02/2021 in a procedure of appropriate length by an independent judiciary which masters the public procurement rules and is vigilant to corruption 14

Additional ways to address corruption in public procurement q Businesses should have meaningful compliance programs in place. q Adopt increased whistleblower protection, including leniency schemes q Encourage contracting authorities to adhere to integrity pacts developed by DG REGIO q As all controls have limits, what is mainly needed is to develop the right attitude, a culture of integrity - Public service should aim at o Better quality – procurement officers will ultimately have to work with their purchases o Increased public savings – therefore, budget for higher salaries o Improved business environment – results in more local taxes collected, hence the possibility to build better infrastructure q Procurement officers should take ownership from the very beginning of the process until the very end. q Political leaders leading by example 24/02/2021 15

Thank you for your attention All information can be retrieved at our website: http: //ec. europa. eu/growth Contact: Bogdan. STEFAN@ec. europa. eu 24/02/2021 16