PUBLIC PROCUREMENT AND CORRUPTION

1. PUBLIC PROCUREMENT AND CORRUPTION The Portuguese experience Teresa de Almeida

2. Public procurement and the risk of corruption • When: • The legislation is fragmented, complex and scattered over various legislative instruments. • The procedures are complex and time-consuming; • The decision is not transparent, seeming, sometimes, arbitrary; • The decision makers are confined to inner circles, • The external control bodies are fragile or use to have a late intervention.

3. Public procurement and the prevention of corruption The prevention of corruption in public procurement demands the design and the implementation of mechanisms: • With less opacity; • Providing more information to the citizens; • With simplified procedures and acts; • With clear decision making procedure;

4. Public procurement and the prevention of corruption • With public and transparent accountability; • With independent and systematic audits; • With an effective control over the private funding of political parties; • To introduce proper systems of public procurement based on transparency, competition and objective criteria; • To adopt measures in order to exclude or prevent the conflict of interest.

5. Transparency in public procurement • Public control of public spending • Simple rules and clear laws • Codes of conduct and to foster a culture of impartiality and transparency • Audits, inspection and supervision • Alert systems

6. Transparency in public procurementSource – Public procurement Online https://www.base.gov.pt/ • Created in 2008, to fulfil the Public Procurement Code • Invitations to tender • Number of occurrences : 27654 • Description - Type of act - Entity - Basis/ Price - Date of publication: • Aquisição Serviços de Divulgação Turística e Atividade dos Postos de Turismo Anúncio de concurso urgente Município de Figueira de Castelo Rodrigo 122.000,00 € 15-03-2013 • Empreitada de Requalificação da Estrada entre Bemposta e Vale das Mós Anúncio de procedimento Não definido. 399.915,29 € 15-03-2013

7. Transparency in public procurementSource – Public procurement Online CONTRACTS: • Object; price, date; signature; contracting authority; Company Objeto/ Contrato/ Preço/ Contratual/ Publicação/ Assinatura/ Adjudicante/ Adjudicatário • Empreitada de concepção construção das Novas Instalações da Polícia Judiciária/ 85.841.880,00 €/ 11-01-2011 - 07-01-2011/ Instituto de Gestão Financeira e de Infra-Estruturas da Justiça, I.P.OPWAY- Engenharia, SA

8. Transparency in public procurementSource – Public procurement Online • Search for: • Concursos Públicos - Public tender • Ajustes Diretos – Directly award • Os de maior valor – Higher value • Os mais recentes – Most recent

9. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT The Constitution of the Portuguese Republic specifies that the Court of Auditors (Tribunal de Contas) is the sovereign body responsible for the supreme external audit over the financial activity of the Portuguese state. The Court’s organisation and activity are regulated in Law no. 98/97, of August 26 and its respective alterations. • The Court may conduct a priori, concomitant or a posteriori audit.

10. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT • A priori audit: Verifies the legality and the budgetary allocation for acts, contracts or other instruments that generate expenditure or represent direct or indirect financial liabilities for entities of the Central, Regional and Local Public Administration. Specification of the acts that must be submitted to a priori audit by the Tribunal de Contas, together with identification of the entities that must submit such acts, is provided in the law of the Tribunal de Contas, mainly focusing in contracts signed by public bodies whose value lies in excess of €317.160.

11. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT A priori audit is exercised via seal approval concession or refusal. Grounds for seal approval or refusal include illegality of the acts that implies that such acts are null and void, expenses that are not matched by a specific budgetary allocation or direct breach of financial norms and illegality that alters or may alter the respective financial result. Payments related to acts and contracts subject to a priori audit may not be made prior to seal approval concession.

12. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT • Concomitant audit: Is exercised by means of carrying out audits of the administrative procedures related to acts and contracts that do not need to be submitted to a priori audit or of the financial activity of public entities exercised prior to closure of the respective management period. The audit reports include observations and recommendations and may originate proceedings for the enforcement of liabilities. Concomitant audit also permits, in the event of determining the illegality of a pending procedure or an act or contract that has not yet been executed, to order that the respective act or contract be submitted to a priori audit.

13. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT • A posteriori audit: Is exercised in order to evaluate the internal control and decision making systems and appraise the financial fairness and regularity, legality or cost effectiveness, efficiency and effectiveness of the financial management of the entities subject to the Court’s control, including application of funds from the European Union.

14. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT The audit is pursued via verification of accounts or audits of entities of the State, autonomous regions, local councils, public institutes, social security institutions, associations involving public bodies, public-sector companies, companies whose shares are partly owned by the public sector, concessionaire companies, foundations and entities of any nature that have a public shareholding or benefit from public financing, in this case in order to inspect the application of such financing.

15. THE COURT OF AUDITORSTHE AUDIT OF PUBLIC PROCUREMENT The database contains the Audit Reports and the Judicial Decisions. For example: Relatório nº 36/2012 2013-01-04 Gabinetes governamentais Auditoria de seguimento às recomendações do TC Relatório n.º 13/2007 (Audit Report with the follow-up on the 2007 audit on the Ministers’ Offices.) 8/22/2014 15

16. The investigation On corruption cases involving public procurement, the starting point is, often, an administrative illegality and the consequent benefit for a company. • There is no physical victim; • The crime is effective on the satisfaction of the parties involved; • Concentric circles of illegality between corruption, embezzlement, misuse of power and other crimes. • Investigation must understand diverse languages and areas of law, such as, finance, urbanistic rules, public procurement laws, administrative law, etc.

17. The investigation In particular, the complexity of public procurement: • Multiplicity of procurement categories: • Public Private Partnership (DBFT - Develop, Build, Finance and Transfer, DBFM - Develop, Build, Finance and Maintain e DBFO - Develop, Build, Finance and Operate; • Design, project, furnish, build, management, and maintenance • Public-works concession contract and lease, supply and management contract; • and so on, in all kind of different possible formula

18. The investigation • Develop and revision of Project Finance, sharing risks on a geometric progression, in what concerns the financial exposure of the public partner: • Through financial mechanisms, like structuring debt: collateralized debt bonds, bridge loans, combination of medium and long term products. • With the participation of financial institutions, investment banks and consulting firms (law, financial, etc.).

19. The investigation Case selection versus (?) principle of legality • UN Handbook: Not every suspected case can be fully investigated and prosecuted • Investigations are not audits; • To define criteria; • To change information; • The enhancement of the links between the criminal investigation and the administrative inspections, Supervision authorities and the Court of Auditors; • Search and handling of information: who is who; • Joint teams; • To lead the investigation, from the begin, in order to collect the evidences allowing to seize the assets and proceeds of crime.

20. The investigation • Law No 25/2008 of June 5 - Preventive and repressive measures to combat the laundering of benefits of illicit origin and terrorist financing • Law n.º 5/2002 of January 11 - Measures for the combat against organised crime and economic and financial crime: • Confiscation order – The assets are not compatible with the earnings received by the defendant. In these cases the burden of proof is reversed and the defendant should prove the legitimate origin of the assets.

21. The investigation • Law n.º 45/2011 of June 24 - Setting up an Asset Recovery Office (ARO) (Gabinete de Recuperação de Activos (GRA) under the Criminal Police: • This law sets up an Asset Recovery Office, according to Council Decision 2007/845/JAI, of 6 December 2007, concerning cooperation between Asset Recovery Offices of the Member States in the field of tracing and identification of proceeds from, or other property related to, crime. • It also lays down provisions for the management of assets recovered, seized or confiscated to the State, with a view to safekeeping them and, if possible, increasing their value.

22. The investigation The Asset Recovery Office (in short ARO/GRA) is set up under the Criminal Police. It has investigative powers, similar to those of criminal police bodies. • GRA’s mission consists of identifying, tracing and seizing property or proceeds related to crimes, both at internal and international level, ensuring cooperation with asset recovery offices set up by other States and of carrying out any other duties as committed to it by law. • The GRA is also responsible for the collection, analysis and processing of statistical data on seizure, confiscation and destination of property or proceeds related to crime.

23. The investigation The GRA carries out the financial or patrimonial investigation mentioned in Article 3 above by decision of the Public Prosecutor: • Where the instrumentalities, property or proceeds are related to crimes punishable with a custodial penalty of three years or more; and • Where the estimated value of the instrumentalities, property or proceeds is higher than 1000 units of account. The seizure of property is carried out by the GRA under the provisions of the Code of Criminal Procedure. Within 10 days after being notified, the owner of the property or rights may request to the investigating judge to change or revoke the decided measure.

24. The investigation If the proceeds of crime consist, for example, of : - 2 collections of contemporary art - cars like aston martin and porsche, and investment funds, The investigation needs a professional unit to deal with the management of the assets. 8/22/2014 24

25. The international cooperation International Cooperation: • The EJN (European Judicial Network) • Eurojust • Direct and informal contacts. • Using the FIU (financial intelligence unit) for financial information – to block, reject the suspicious transaction or to locate an offshore account in cases of money laundering related to corruption and tax crimes.

26. The international cooperation International Cooperation: The third countries: - “Google” their national law; - Look for links with the EJN; Be diplomatic: it may not result in a first time, but the door will be open. Singapore, for example: “The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, 2nd Schedule” (available on the Internet). 8/22/2014 26