Public procurement – which includes spending on construction and maintenance of schools, hospitals, and infrastructure – is a key vehicle for investment in each country’s development. Yet procurement remains among the most corrupt areas of government spending around the world.
Estimates show that corruption adds as much as 15-25 percent to the cost of procurement, leading not only to enormous waste but also significant social costs. CIPE cooperated with Transparency International-USA (TI-USA), TI chapters in Indonesia, Mexico and Peru, and the TI National Contact in Vietnam to examine the state of anti-corruption mechanisms in public procurement in those four Asia-Pacific Economic Cooperation (APEC) countries.
The focus on APEC came from the Transparency Standards on Government Procurement voluntarily adopted by those countries in 2004 in addition to broader international agreements on anti-corruption in procurement already in place. The APEC Standards comprise 11 transparency principles meant to foster a level playing field in government procurement. But to what extent have they been implemented in law and in practice in Indonesia, Mexico, Peru, and Vietnam? That is the question that CIPE and its TI partners set out to answer.
In each country, CIPE and TI examined the level of introduction of the APEC Standards into local laws and, through consultations with the private sector, whether these laws are applied on the ground. The results show that although most of the relevant legal frameworks are in place, practical implementation lags behind.
For one, even though national-level laws are supposed to apply at all levels of government, local officials often follow their own rules and do not have adequate training to ensure transparency of procurement. Introduction of e-procurement technology has helped make calls for tenders and evaluation criteria more transparent but it can still be manipulated by insiders to benefit certain bidders. State-owned enterprises especially pose serious problems regarding inside information and conflict of interest.
At the same time, many companies are not fully familiar with procurement laws and procedures, or remain reluctant to exercise their rights to transparent information and decision-making in procurement believing that this would jeopardize their chances of winning future bids.
CIPE and TI gathered the issues raised in each country into reports that outline legislative compliance with the APEC Standards, highlight key lessons learned from the consultations with private sector, and offer recommendations for the governments, business communities, and civil societies. Full implementation of the APEC Standards remains a work in progress but, if implemented in practice and not just on the books, those standards have a great potential of improving public procurement transparency – and the development potential of the signatory countries.
The reports, launched at a joint CIPE and TI-USA event hosted by the World Bank Institute, are available at www.cipe.org/publications/papers/index.php.