transparency. hu

1. Integrity Pacts Transparency International www.transparency.hu

2. Overview • Background & Objectives • The Authority’s Commitment • The Bidder’s or Contractor’s Commitment • Sanctions • Disputes • Monitoring • Transparency • Doubts • Results • Why implement an IP? • Conclusion

3. Background and Objectives • Islands of Integrity developedin the 1990s by Transparency International • Help governments, businesses & civil society in public contracting • Help enhance public trust in government contracting • Contribute to improving credibility of government procedures & administration

4. Background & Objectives (cont.) • IP suitable for contracts with • One party: central / local / mun. govt., govt. subdivision or state-owned enterprise (the Authority) • Other party: private entities interested in obtaining contract (the Bidder / Contractor) • IP aims at enabling • Bidder / contractor to abstain from bribing • Authority to reduce high costs & distortionary effect of corruption

5. Background & Objectives (cont.) • IP establishes mutual contractual rights & obligations • IP may cover different kind of projects • Construction, installation, operation of assets by Authority • Privatization sale of assets • Issuing of licenses, permits, concessions • Related services (consulting, other technical, financial & administrative support) • IP may cover different phases of projects • Planning, design, tendering, evaluation, selection, contracting, implementation

6. The Authority’s Commitment: • Not to demand or accept any advantage in exchange for an advantage in the contracting process, • To make publicly available all necessary technical, legal and administrative information on the contract, • Not to disclose confidential information to a bidder or contractor, • All officials and consultants involved in the contracting process to disclose conflicts of interest in connection with the Contract, • To report any attempted or completed breaches of above commitments as well as any substantiated suspicion.

7. Bidder’s / Contractor’s Commitment Pledge (on behalf of CEO or CEO of the national subsidiary): • Not to offer any advantages to any official in exchange for any advantage in contracting process, • Not to collude with other parties interested in the Contract to impair transparency and fairness of the contracting process, • Not to accept any advantage, • To disclose all payments made to agents and other intermediaries (preferably by all bidders at the time of bidding, but at least by the awardee of the Contract). Highly desirable: contractor provides proof of existence and application code of conduct

8. Sanctions • Violations by Authority: officials and consultants to suffer appropriate disciplinary, civil, criminal sanctions (e.g. removal, dismissal) • Violations by Bidder - some or all of the following: • denial or cancellation of contract, • forfeiture of the bid and/or performance bond, • predetermined indemnisation to Authority and the other bidders, • debarment for future bidding for appropriate time Debarment on the basis of what? Not only suspicion, but not necessarily criminal conviction - guilt generally on basis of a “no-contest” statement by the accused party or if there are no material doubts.

9. Disputes Disputes could / should be resolved through • International or - where appropriate - national arbitration • IP would define the venue and procedure.

10. Monitoring • Civil Society (Transparency International NC) should be Monitor • Monitoring should include all phases of the project • Monitor may appoint external, independent expert • Monitor should be independentfrom all parties • Cost of Monitor covered by Authority and/or bidders

11. Monitoring (cont.) • Monitor has full access to all documents and meetings • Monitor should take suspicion • first to Authority head • if no corrective action taken: to Public Prosecutor or the Public • Finally: a statement that procedure • was clean, did not lead to any incidents • what incidents, how these were dealt with, outcome.

12. Transparency • A maximum of transparency: basis for successful design, setup and implementation of IP • Needed: public access to all the relevant information • Internet: nearly ideal platform (also allows detailed controls) • Access to legitimately proprietary information should remain restricted.

13. Doubts • It´s only another piece of paper! • It´s only another step in the bidding process! • It´s only a private contract! • Not in my backyard!

14. Results • Savings • Colombia reports savings ranging between 5% up to 60 % of contracts´ official budgeted price • Italy: Milan subway costs fell from USD 227 m per km to 97 m • Trust • Bidders interviewed said they lost fairly • Positive changes in local investment climates • Competition • More bidders take part in tenders

15. Why implement an IP? • Makes bidding process more transparent • Reduces transaction costs: corruption is not free of charge or cheap. Winning or loosing fairly is cheaper • Corruption almost always bites back • Safeguards the company´s reputation

16. Conclusion • IPs in operation in ~ 15 countries in Asia, Europe, LatinAm • Successful IPs: from Colombia to Pakistan to Germany • Sectors include information systems, utilities, transportation, school supplies, police supplies, tourism etc. • IPs are not very expensive to operate • IPs have been praised by governments & businesses