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Below are four options that companies have pursued, with varying degrees of success, when faced with corruption in government procurement.
1. Engage With Your Competitors Beforehand
Since the mid-1990s, companies have begun to willingly enter integrity pacts, which involve a public declaration and a legally binding contract containing ethical and transparency standards applicable to all parties to a specific tender. Governments also are parties to these pacts and are responsible for ensuring a level playing field among competitors, including the participation of an external monitor responsible for verifying compliance during the procurement process.
Experience has shown that integrity pacts are not always foolproof solutions and can raise concerns around proprietary information, but they do tend to engender more confidence in the overall transparency of the procurement process.
2. Appeal the Decision
Many international procurement systems include a process for challenging decisions on public contracting and include serious penalties for offering or receiving bribes. Losing bidders in Europe, for example, have the right to appeal tender decisions within 10 days of a decision. Similar provisions usually exist in countries using theUNCITRAL Model Procurement Laws or in World Bank-funded projects.
Formal appeals can be costly however, and often are difficult to win as it is very hard to prove that a company has been treated unfairly. One 2012 study in Montenegro, for example, found that reform in the procurement appeals process had done little to stem corruption risks in the country.
3. Speak Out
Many times, companies don’t enjoy drawing attention to the fact that they suspect corruption in a tender process, even if they themselves resisted bribery demands. Nonetheless, there are international groups, local organization, embassies, NGOs and other stakeholders that help companies report bribery allegations anonymously. The trick when approaching these stakeholders is to receive a guarantee that the company’s name won’t be in the news, in order to minimize potential retaliation from government officials.
In 2012, several international groups, including Sherpa, a Paris-based think tank, and Bankwatch, which focuses on monitoring the activities of international financial institutions across Eastern and Central Europe, pressured the European Bank for Reconstruction and Development to halt a loan for the construction of a thermal power plant in Šoštanj, Slovenia. The winning bid by Alstom was widely suspected to have been obtained through corruption. Two years and over $770 million in penalties later, the project has been deemed a failure and Alstom remains under investigation by the Slovenian National Investigations Office.
Other times, companies may want to engage directly with the press. History shows that investigative journalists can be essential to bringing bribery schemes to light, as was true of the Bofors bribery defense scandal in India in the mid-1980s.
If you do decide to approach a media source with information, you will want to make sure that there’s an explicit agreement between your company and the reporter investigating the story to maintain anonymity. One way to do that is to provide information “on background” so the information provided to the reporter can’t be tied to the individual who provided it or the organization they represent. A more common tactic is to provide information entirely “off the record.” whereby the reporter agrees to independently verify the allegations. This latter approach was famously used by The Washington Post in its uncovering of the Watergate scandal in the early 1970s. In either case, you’ll want find a reporter who’s already writing about the issue in order to ensure that they’ll know how to pursue the story to the fullest extent and understand the underlying issues.
4. Seek Alternative Legal Recourse
Because formal appeals are problematic, others seek alternative legal avenues entirely outside of the procurement process. Many countries have created independent investigative bodies with the explicit mandate of pursuing government corruption.
In Uganda, for example, the Inspector General of Government (IGG) has broad constitutional authority to investigate cases of suspected bribery in government procurement. In 2013, the IGG released a report regarding allegations of corruption in the bidding process for the Karuma Hydropower Plant after an anonymous whistleblower sent a dossier of allegations to the IGG’s office. Another whistleblower, CCII Systems (Proprietary) Ltd., publicly complained to the South African Special Investigating Unit and the Office the Auditor-General regarding corruption involving a multibillion dollar 1999 South African arms deal. Fifteen years later, however, that investigation is still ongoing.
Others have sought direct civil action against their competitors. While there is no private right of action under the U.S. Foreign Corrupt Practices Act (FCPA), other statutes have been invoked to pursue cases where competitors are suspected of bribery. In the U.K., a group of Iraq-based fuel additive companies brought an unlawful means conspiracy claim against Innospec Inc., claiming its additive would have been used by the Iraqi authorities but for the corrupt conduct of Innospec. Although the plaintiffs lost on the facts, the commercial court’s decision seems to indicate that that claims against bribing competitors are available under English law.
What can we learn from these past efforts by private entities to fight corruption in government procurement situations? By now, many companies understand why antibribery compliance is important, but that’s unfortunately not true of everyone competing for lucrative government contracts. Companies that want to do business “the right way” have an increasingly wide range of options available to them in cases when they suspect wrongdoing by competitors. While this may not quite count as a “competitive advantage,” it at least helps move us toward a more level playing field.
Alexandra Wrage is the president of TRACE, an antibribery business organization offering practical tools and services to multinational companies to support their goals of rigorous compliance and good governance.
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Read more: http://www.corpcounsel.com/id=1202718752242/4-Ways-to-Fight-Corruption-in-Government-Procurement#ixzz3SwTg5j93
