Anti-Corruption Summit - Is Afghanistan's Procurement Strategy right for others?

Linked to today's Anti-Corruption summit in London, the Prime Minister's Office have published 'Against Corruption: A Collection of Essays.  One of the essays, by Afghanistan's President, specifically addresses procurement.

In that essay President Ghani argues that a failure of individual and institutional accountability is at the heart of corruption; that is compounded by fragmented institutions. The panacea, to Ghani, is strong political leadership:

In fragmented systems, only strong, national political leadership can tackle corruption at its roots. This is because only the top leadership can look across the different areas and ministries where corruption happens, in order to provide an effective agenda for reform. By demonstrating top commitment through positive action, even fragmented systems can build coalition with internal and external reformers.

 Ghani reports that public procurement in Afghanistan suffers from:

• bid rigging, including, bids received from non-existent companies; 
• buyers sharing cost estimates 'for a fee'; 
• conflicts of interest in the decision making process; 
• coercion of bidders to alter or withdraw competitive bids;  
• specifying for sole supply; 
• acceptance of deliveries which are not of the specified quality.

Let's be honest, these are not problems unique to Afghanistan, nor the public sector alone - they are common in many businesses throughout the world and few can be sure they are completely immune or risk free. 

The Afghan strategy to combat the above is "formation of a National Procurement Council (NPC) to review all high-value contracts and the consolidation of construction contracts through two specialised agencies."  The National Procurement Council is chaired by the President himself!  This overseeing is claimed to have saved $350m in the first year.  Ironically we are told though that punishment of those guilty of corruption in procurement has been almost negligible. 

No-one could deny that public procurement in Afghanistan has become a 'top table' issue and I congratulate the President on his commitment.  However, I do question the strategy: 

1. Responding to institutional corruption through concentrating oversight on a few at the top table, or even two 'centralised buying bodies' is well meaning but the Brazilian President's current predicament may be worth considering and learning from?  What if corruption is at the top?  Perhaps Afghanistan could consider what risk management approach is applied and how there can be independent scrutiny of 'the executive'?
2. I also think it is naive to think all procurement can be addressed or policed by 'the few'.
3. I don't actually believe fragmentation of governance is a cause, in fact, the tiered government system of the UK between Central, Devolved and local government may serve as a useful demonstration that it is not. Local democratic accountability may well provide part of the solution.
4. Ghani implies a culture change is required - how is that actually being addressed and managed?
5. Simplifying, standardising and automation of procurement processes, led by the Top, is an essential part of the solution, but that has to include clearly defined segregation of duties. That is not referred to by Ghani but perhaps is on the agenda.  
6. The procurement systems need to be fit for purpose, make compliance easy and abuse hard - better use of eProcurement tools can spread the load and enable the NPC to focus where it is necessary.
7. I didn't see any mention in the essay of the performance management structure, given that personal accountability is identified as part of the solution. I think that should be addressed otherwise rhetoric and an essay will be the only legacy.
8. Ghani has implied that the consequences of being caught need to be addressed; I would argue that unless the risks, penalties and probability of being caught outweigh the potential rewards of fraud, bribery and corruption, the Afghan strategy is merely chasing the wind and unlikely to succeed.

I am genuinely impressed that Ghani has been prepared to lead the reform of procurement in Afghanistan, and I wish him well, I look forward to hearing of progress in a few years time. Hold on, what are the plans to review the effectiveness of his strategy?

Have the NAO got it wrong on gifts & hospitality?

I read the National Audit Office report on the 'Investigation into the acceptance of gifts and hospitality' with interest but have to say I am mystified. While the EU and United Nations are against the receiving of gifts within a procurement context, the NAO appear to have come to a view that:

While barring UK officials from accepting gifts and hospitality is an option, it would run the risk of hampering the legitimate activities of the departments and officials, including engaging with stakeholders.

How could the refusal of a gift hamper (excuse the pun) business? I am also mystified at the lack of explicit recommendations.

Hospitality and gifts are only targeted at those who are likely to have influence over a decision, and there should be no 'ifs' or 'buts', they are offered to distort decision-making. Of course, the NAO have referred to avoiding perceived conflicts of interest - sorry perception of hampering business is unavoidable when gifts and hospitality are received in the procurement process.

Let's also remember that any gift or hospitality offered is not free from cost - that cost has to be recouped from somewhere and in all probability is an overhead cost included in all public sector contracts.

So what were the examples of gifts received:

These included: tickets to professional sports and cultural events, sometimes accompanied by a spouse and/or children; bottles of champagne; wine for a team’s Christmas lunch; iPads; Fortnum & Mason hamper, a painting valued at £300.

That list is of course constrained by the fact that the systems for recording gifts are not robust and not adhered to anyway.

I didn't pick up anything which specifically addressed staff involved in procurement, but let's remember that if they are MCIPS/FCIPS the CIPS Code of Conduct applies.

Regardless, I think the NAO have missed a mark on this one, a robust approach to the acceptance of gifts and hospitality is not just about the perception of conflicts of interest, it is about protecting staff from potential allegations of bribery and corruption - it should not only be a risk management issue but a health and safety issue too.

FIFA corruption and bribery tells us warning shots just aren't enough

How on earth could the gift of a watch valued at £15,000 be viewed  as 'symbolic or trivial value'?  Of course, what value is considered 'trivial'? Well, thanks to another exposé in today's Sunday Times we now know that all but three of FIFA's leadership are so out of touch with reality, greedy and/or so immune to probity that they seem to think acceptance of such gifts within 'goody bags' is fine. We don't know what else was in the 'goody bags' perhaps a pencil, a memory stick which set out FIFA's ethics policy and a eraser?

FIFA had previously become completely discredited after the farce of the Quarter World Cup award, so you may have assumed they'd have been wary of a further scandal, but that just doesn't seem to have registered with them.

It's strange but 'goody bags' seem to be expected - should event organisers now state they are no longer to be issued or should the contents of the bags be published on event websites? Should all 'goody bags' include a declaration relating to potential conflict of interests? Let's face it those who sponsor the items in 'goody bags' would not do so if they had not first of all established the business benefit anticipated.

Yet, we see similar attitudes in the world of procurement. Stand outside any procurement conference and observe the 'goody bags' walking away!

But like FIFA, I have seen organisations where there had been corrupt behaviour in procurement, yet they believed they have 'lanced the boil' and all is now well. FIFA's greed reminds us of the need that such complacency is unfounded. We just can't assume all will be well. We just can't assume it won't happen again. We just can't assume our organisation will be immune. I just wonder how often we highlight the need for vigilance and caution.

Ecclestone issues for procurement bribery

"Broadly, the [Uk's Bribery] Act defines bribery as giving or receiving a financial or other advantage in connection with the "improper performance" of a position of trust, or a function that is expected to be performed impartially or in good faith."

Given that definition it seems somewhat ironic that the German courts have accepted a payment of $100m to end the Bernie Ecclestone bribery trail!  That means no decision was reached on the allegations and Ecclestone is considered neither guilty nor innocent.  It is the ultimate 'Get out of jail' card with a potential ten years imprisonment wiped off the slate. Of course, in the eyes of UK law he is obviously innocent as not proven guilty.

While $100m seems like a gigantic amount of money, when that is set against Eccleston's estimated wealth of  $4.2bn, it is a mere drop in the ocean, but a gross waste of money if he would have been proved innocent. 

What interests me though is whether this creates a precedent for future bribery trials? Would a proportionate amount be acceptable to 'close' the case in a procurement bribery case? Would it be worth corrupt firms setting aside such monies rather than going through the courts and being 'blacklisted' from future contracts? Would the precedent apply to individuals facing allegations of bribery? 

Royalty vulnerable to procurement fraud, bribery and corruption

One of my enduring memories of The Tutors TV series was the gruesome tortures meted out for any form of causing Henry VIII displeasure - a quite literally had to turn my head away from the screen on occasions. In medieval times I suspect the mere thought of the potential punishment and extraction of evidence was an effective deterrent to procurement fraud, bribery or corruption.

Today's Monarchy do not lead in such a culture of fear but news of a palace official facing £100,000 bribery trail demonstrates that even some of the most security conscience 'firms' can be vulnerable to procurement fraud, bribery and corruption.

The allegations are that building ,heating and energy contracts for royal palaces were awarded as a result of bribes. The bribes didn't were not just cash but work done at employees homes 'free of charge'. Needless to say the work, is alleged, to have been completed at inflated rates, some of which subsequently channeled to the defendants.

This case demonstrates no-one is invulnerable to procurement fraud, bribery and corruption. You can read more about your vulnerability here.

Plot gets thicker on police procurement

On Tuesday I discussed potential procurement corruption in the award of a contract for vehicles with the Police Service of Northern Ireland.  Now it looks as though the investigation has been extended to another contract and spread and led to the suspension of West Yorkshire"s Chief Constable. 

Those leading the investigation need to recognise that the reputation of the police in the UK is at the present quite low. They also need to avoid falling into the trap of not being seen to be doing the right thing or providing an easy exit for those implicated.

However, if it is subsequently established that there has been procurement bribery, fraud and corruption, it will be most unlikely that it will be isolated to just vehicle contracts.  The investigation will need to review:

1. The procurement governance structure;
2. Which other areas of spend the culprits have been involved with and how vulnerable those areas were to abuse;
3. Which other public sector organisations have been supplied by the supplier/s involved - it is unlikely that the supplier only found one area of vulnerability;
4. Consider the history of dealing with the supplier/s involved and how long the abuse has been going on;
5. Which other police forces, and indeed public sector organisations, may have been following the same 'failed' preventative systems;
6. etc..

There also needs to be a due diligence of the procurement processes to establish vulnerability to procurement fraud, bribery and corruption. The Bribery Act requires organisations to put in place processes to prevent bribery anyway.

But if it is subsequently proved that contracts have been wrongly awarded as a result of corruption other relevant issues may arise. For example, 

1. Assuming the contracts were awarded through the Public Contracts Regulations, surely there must have been a breach of those laws?
2. What about the suppliers who would have been awarded the contracts had there not been corruption? Would those potential suppliers not be entitled to compensation for loss of profits? That would open a major can of worms as all those award evaluations would potentially be exposed to scrutiny and who knows how robust they would have been.

What will the next instalment be?

The arresting case of police vehicles and procurement

The UK fight on procurement fraud, bribery and corruption moved up a notch today following the arrest of six involved in the award of contracts for police vehicles in Northern Ireland. As part of the investigation the police have also seized computers.

It is interesting that the PSNI have made reference to trying to establish whether there has been a breach of their Code of Ethics. of course it is good that they have a Code of Ethics, but sometimes I wonder what purpose such a Code has if it is not widely communicated and, dare I say, 'policed'.

As a profession we need to understand what went awry with this procurement. We need to understand the lessons and we need to take those lessons home to our own organisatons. So let's hope that the findings of the investigation are shared.

If it is subsequently proved that there has been a breach of the PSNI Code and we have a case of procurement bribery, and potentially fraud and corruption, surely the case cannot be dealt with under the Code but needs to be dealt with under the Bribery Act - who would bring forward such a case?

Then again will PSNI be subject to the strict liability of the Bribery Act for failing to put in place measures to prevent bribery?

Then of course we have to see how CIPS will react if any subsequently found to be guilty turn out to be CIPS members. Will they be subject to CIPS discipline? If that is the case CIPS will be able to use that as a warning to its membership around the globe.

I will watch this case with interst - it has the potential of a precedent for the Act and CIPS.

PS you may find my related paper published in EDPACS, which can be downloaded here of interest.