The Integrity Pact

Introduction

The field of public procurement has been a battleground for corruption fighters. It is in public procurement that most of the "grand corruption" occurs with much of the damage visibly inflicted upon the development process in poorer countries and countries in transition. Although initially there were sceptics who fought against the "islands of integrity" approach, successes are increasingly being recognised. "Islands of integrity" is a process in which voluntary agreements are made, involving bidders and the government, to restrict opportunities for corruption in a particular project. The use being made of the Internet for public procurement by the city of Seoul (Korea), Pori (Finland) and in Mexico is likewise promising (see also 2.11 E-government).

The Integrity Pact (IP) was designed and launched by Transparency International in the 1990s with the primary objective of safeguarding public procurement from corruption. It has been formulated as a tool that can be used by a government agency, indeed, any procurement body, in its procurement practice. The Integrity Pact has already been implemented in several countries and in large-scale infrastructure projects ranging from telecommunications to public transport.

Purpose

The goal of the Integrity pact is to reduce any (and almost ensure no) chances of corrupt practices during procurement through a binding agreement between the agency and bidders for specific contracts.

The IP is intended to accomplish two primary objectives:

To enable companies to abstain from bribing by providing assurances to them that
their competitors will also refrain from bribing, and
government procurement, privatisation or licensing agencies will undertake to prevent corruption , including extortion, by their officials and to follow transparent procedures; and
To enable governments to reduce the high cost and the distortionary impact of corruption on public procurement, privatisation or licensing.

Linkage to Transparency

The Integrity Pact is a specific tool used to build transparency in public procurement. By declaring up-front that the procurement, bidding or licensing process will be free of any form of corruption, both public institutions and private agencies open up their operations for public scrutiny. The establishment of a fair and transparent basis for awarding contracts not only ensures efficiency but also helps in building public trust in government and the private sector.(52)

How it Works – The Key Elements

The Integrity Pact is a binding agreement between the agency and bidders for specific contracts in which the agency promises that it will not accept bribes during the procurement process and bidders promise that they will not offer bribes. Under the IP , the bidders for specific services or contracts agree with the procurement agency or office to carry out the procurement in a specified manner. The essential elements of the IP are enumerated below:(53)

a pact (contract) among a government office inviting public tenders for a supply, construction, consultancy or other service contract, or for the sale of government assets, or for a government license or concession (the Authority or the "principal") and those companies submitting a tender for this specific activity (the "bidders");
an undertaking by the principal that its officials will not demand or accept any bribes, gifts, etc., with appropriate disciplinary or criminal sanctions in case of violation;
a statement by each bidder that it has not paid, and will not pay, any bribes;
an undertaking by each bidder to disclose all payments made in connection with the contract in question to anybody (including agents and other middlemen as well as family members, etc., of officials); the disclosure would be made either at time of tender submission or upon demand of the principal, especially when a suspicion of a violation by that bidder emerges;
the explicit acceptance by each bidder that the no-bribery commitment and the disclosure obligation as well as the attendant sanctions remain in force for the winning bidder until the contract has been fully executed;
undertakings on behalf of a bidding company will be made "in the name and on behalf of the company’s Chief Executive Officer";
a pre-announced set of sanctions for any violation by a bidder of its commitments or undertakings, including (some or all):
denial or loss of contract;
forfeiture of the bid security and performance bond;
liability for damages to the principal and the competing bidders, and
debarment of the violator by the principal for an appropriate period of time.

Bidders are also advised to have a company Code of Conduct (clearly rejecting the use of bribes and other unethical behaviour) and a Compliance Program for the implementation of the Code of Conduct throughout the company.

In some cases, for instance in Nepal, the Integrity Pact has been adapted to suit local conditions and priorities. In Nepal, it not only involves improving the procurement process, but it is a much more comprehensive effort on the part of the municipalities to eschew corrupt activities. What is most original about the TI-Nepal approach and the participating municipalities is that it involves solemn pledges on the part of elected officials and staff in the municipalities to foreswear being involved in corrupt practices. It also involves establishment of public grievance mechanism as well as an effective monitoring and evaluation system within the municipalities.

Country/City Examples

Combination of Public Hearings and Integrity Pacts to ensure transparent procurement in Argentina