Public Procurement Due Diligence Tool
Bidding on public tenders is always based on a cost-benefit analysis with the costs arising from the bid on the one hand and the size of the contract and likelihood of obtaining it on the other. Corruption is a major risk factor in public procurement and this tool is meant to enable companies to assess and avoid corruption in a procurement process.
Public procurement is a high-risk area for small and medium sized enterprises and the risk of encountering corruption can be large. This means that many companies either put themselves at risks of extortion, blacklisting, and legal prosecution by getting involved in corruption, or incurring losses and/or not submit bids on otherwise lucrative tenders.
The arising costs as well as the likelihood of being awarded the contract can be extremely difficult to assess in markets with weak legislation, implementation, and institutions on public procurement which may also be weak and/or host corrupt practices. What can be done, though, is to look for indicators or "red flags" in the different phases of the process and devise a strategy based on this. Furthermore, being well-informed and taking the relevant precautions are very important in order to reduce risks when engaging in bids for public procurement.
Where to Seek General Information
Although legislation on public procurement and contracting is often present, the implementation and practical conduct of tender authorities can be very different. Legislation and practice therefore have to be investigated as an initial assessment step. The "Public Procurement and Contracting" section in the Country Profiles on the Business Anti-Corruption Portal can be used as a point of departure and additional and regional/sector specific information can be obtained through exploring the Information Network in the country in question and/or through the local trade associations and trade councils at the relevant embassies.
A Simple Model
The main characteristics of a tender which from a procedural point of view may be worthwhile are:
- Fairness: A fair tender ensures that all interested and competent companies have an equal chance to participate. From the procurer's side, this is to make sure that the best price and quality is achieved.
- Transparency: A transparent tender ensures that all participating companies are treated on equal terms and that all procedural steps are based on written and known procedures. Furthermore, the criteria for the award of contract is know and do not favour any particular company. Transparency also entails that the process can be backtracked through a paper trail and that the award of contract is done in an open way.
- Recourse possibility: A public procurement system should be open to contestation and an independent system of recourse on procedural matters as well as the contract award should be in place.
The risks arising from corrupt practices in public procurement can range from simply not being awarded a contract to being subject to extortion. Corruption is not the only risk faced by bidding companies and other commercial risks need to be assessed as well.
The Public Procurement Due Diligence Tool
The Business Anti-Corruption Public Procurement Due Diligence Tool consists of 3 documents and an interactive tool. Together they constitute a tool to assess the risks of corruption in a given specific instance of public procurement:
- Guidance Document (Pdf-Document): The guidance document briefly describes the overall principles for sound public procurement and the risks associated with lack of transparency, fairness and recourse possibilities.
- Procedure Document (Pdf-Document): The procedure document guides through the questions posed in the tool and the evaluation matrix.
- Risk Assessment Document (Pdf-Document): The risk assessment document provides a flow-chart of the questions posed in the Procurement Tool and the phases in the procurement process that they relate to.
- Public Procurement Tool (Interactive Excel-Sheet): The interactive Public Procurement Tool can be used to determine the risks arising from procedural steps in a public procurement process. Based on the answers given, a general risk profile is given and point to an evaluation matrix for either a case of good or bad recourse possibilities.