12. Corruption IN Public Procurement PDF

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Warning: TT: undefined function: 22TOPIC TWELVECORRUPTION IN PUBLIC PROCUREMENTLearners being able to:- a) Describe different types of corruption in public procurement. b) Explain the impact of corruption in procurement to the public organizations and country as a whole. c) Describe the indicators/r...

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BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

TOPIC TWELVE CORRUPTION IN PUBLIC PROCUREMENT Learners being able to:a) Describe different types of corruption in public procurement. b) Explain the impact of corruption in procurement to the public organizations and country as a whole. c) Describe the indicators/red flags of corruption in procurement activities. d) Describe the activities vulnerable to corruption in the tendering process and their occurrence. e) Explain controls that can be instituted in public organization to curb corruption. 12. PROCUREMENT AND CORRUPTION Introduction Public procurement is one of the government activities which is highly open to corruption. Reasons being volume of procurement and interface between the public and the private sectors. Definitions: World Bank defines fraud and corruption as “solicitation, payment or receipt of bribes, gratuities or kickbacks, or the manipulation of loans or WB – financed contracts through any form of misrepresentation. Any situation in which staff members have abused their position or misused WB funds or other public fund or private gain •

Transparency International defines corruption as misuse of entrusted power for private gain.

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The Public Procurement Act 2011 defines corrupt practice as offering, giving receiving or soliciting of anything of value to influence the action of public officer in procurement process or contract execution.

Causes of Corruption •

Poverty

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Social pressure/peer pressure/everyone is doing it

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Supplier pressure/influence

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Cultural factors

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Greed and selfishness

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Distorted policy

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Laxity in enforcing controls

BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

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Feeling of not hurting anybody

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When those in power are also corrupt

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Reward structure. When salaries are low

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Opportunities to be corrupt exist

Types of Corruption •

Corrupt practice

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Fraudulent practice

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Collusive practice

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Coercive practice

Corrupt Practice Corrupt practices refer to ‘offering, giving, receiving, or soliciting, directly or indirectly, anything of value to influence the action of a public official in the selection process or in contract execution’. Fraudulent Practice •

Fraudulent practice refers to ‘a misrepresentation or omission of facts in order to influence a selection process or the execution of a contract’.

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In this situation a person misuses his influence over the decision-making process for a third party (person, institution or government) in return for his loyalty, money or any other material or immaterial undue advantage’.

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These acts can be power-oriented, which focuses on winning offices and influencing those who hold them, but also in pursuit of wealth, which is targeted at public contracts or policy implementation.

Collusive Practice Collusive practice refers to ‘a scheme or arrangement between two or more respondents with or without the knowledge of the procuring entity, designed to establish prices at artificial, noncompetitive levels’. Example of collusive Practice bidders form a horizontal relationship determining who amongst themselves should be awarded the contract. Coercive Practices Coercive or obstructive practices refer to ‘harming or threatening to harm, directly or indirectly, persons or their property to influence their participation in a procurement process, or affect the execution of a contract’. Indicators of Corruption BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

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deviations from correct procedures

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overcharging by the suppliers

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poor record keeping and missing files

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poor or no separation of duties (for example, the same person issues the order and approves the payment)

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poor control (for example, only one person signs a contract)

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Immediately change life style of officials

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Absenteeism of procurement official from the office

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excessive hospitality to suppliers

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resistance to audit

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reluctance to delegate

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excessive secrecy

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dictatorial management style

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unnecessary meetings with suppliers

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not allowing other staff to deal with certain suppliers

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Reluctance applying competitive tendering

Activities Vulnerable for Corruption in Procurement Corruption may occur in any stage of procurement process •

Identification of requirement – the requirement may be overstated

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Project design/specification may be manipulated to benefit particular suppliers’ contractors’ consultants, or private parties. Supply lower than specified quality

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During tender advertisement of tender or giving short notice for submission of tender

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During tender evaluation

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Over billing/overpayment

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Certification for payment

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Contract amendment

Impact of Corruption BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)

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Poor quality delivery of goods and services

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Delay of delivery of goods and completion of the projects.

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Contributes environmental degradation

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Hampers economic growth

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Raises transaction costs and creates uncertainty in economy inefficiency

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distorts competition

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limits market access for firms who refuse to engage in corrupt activities,

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Discourage foreign suppliers

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Discourages growth of domestic firms

Combating Corruption •

Reject award contract to bidder who has been engaged in corruption or fraudulent practices

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Declare the firm ineligible

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Create political will to combat corruption

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Create anticorruption watchdog bodies

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Reform public sector

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Enhance corporate governance

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Strengthen the legal and justice systems

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Introduce whistle blowing systems

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Create public awareness on evil of corruption

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Be honest and open

BY ABUBAKARI MRISHO/ O717 58 14 04/ [email protected] KP- PROFESSIONAL SERVICES (KPS)...