Emergency Procurement: How to enhance integrity and transparency

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Corruption distorts markets and can lead to the supply of poor quality or fake products and putting the lives of vulnerable people at risk.

The coronavirus (Covid-19) crisis has underscored the important role of business ethics and integrity in the health sector worldwide. The pandemic has brought about challenges of human suffering, uncertainty and has also revealed substantial weaknesses in governments’ ability to procure items needed in the fight against Covid-19 under emergency procurement. Many countries and institutions are buying and importing medical equipment and supplies through emergency procurement processes, and anecdotal reports of the proliferation of substandard products, price gouging and bribery are growing (OECD, 2021).

The Covid-19 pandemic requires government authorities to procure products and services from the private sector with unprecedented urgency. Quick decisions and resource allocations can often make the difference between life and death. While there may be compelling reasons to relax stringent procurement rules in emergencies to allow for a fast response to address the Covid-19 crisis, it should not be an excuse to divert public fund from its intended purpose. International Organizations and academics have warned about the risk of increased corruption in public procurement during the Covid-19 pandemic (Khasiani et al., 2020; OECD, 2020a).

Historically, emergency procurement has been linked to corruption (Leeson and Sobel, 2008) especially where institutions and oversight are weaker (Barone and Mocetti, 2014). Emergency procurement allows some flexibility for public authorities to procure goods and services to preselected companies, rather than using a normal competitive procedure (so-called open, restricted or competitive procedures with negotiation). This exceptional procedure allows public institutions to acquire supplies and services within the shortest possible timeframe. While flexibility is needed in order to get supplies to those in need, this flexibility should at no cost compromise transparency.

Emergency procurement is more vulnerable to malfeasance, as it often involves sole sourcing, short delivery periods, prepayment and a general rush to secure supplies escaping due diligence and supplier scrutiny. According to Transparency International (TI, 2020), up to 25% of all global healthcare procurement during Covid-19 spending is lost to corruption.

Serious shortcomings in global supply chains and in national public procurement systems have been revealed in several countries in procuring Personal Protective Equipment (PPE), ICU materials and COVID tests. One of the main reasons why corruption has been rampant is due to the increased discretion of public officials in the award of these contracts. Poor quality of procured goods, higher than market prices, scams and inability of bidders to meet the delivery deadlines are some of common issues faced by these countries. The problems often highlighted abuse of discretionary authority, public officials going out of their way, drawing up specifications to suit the firm desired to win the contract, restricting the number of bids, and caving in to political influences, have also been on display during the Covid-19 crisis.

Corruption distorts markets and can lead to the supply of poor quality or fake products and putting the lives of vulnerable people at risk. According to TI (2021), corruption undermine a fair and equitable global response to the pandemic. In emergency procurement, due process is deliberately skipped, and documentation remain incomplete, increasing opacity for the conduct of audits and inspections or investigations. Widespread corruption cases during COVID-19 have been reported in different countries across the globe. Reports on price gouging, that is procuring well above the market prices – are also widespread. Examples of price gouging and investigations by competent authorities can be found throughout Europe and the US, but also in developing countries like Indonesia, Brazil, Thailand, Kenya, and South Africa (OECD 2020b). While there are different causes behind these procurement failures, most of them are directly link to the abuse of the discretion granted by emergency procurement rules to urgently source material and bypass normal public procurement processes. Unfortunately, this increased discretionary power is a fertile ground for abuse to offer contracts to friends and/or political allies or simply to cash bribes.

In the UK, there are great controversies following the award of a non-urgent contract to a firm owned by Michael Gove (a member of parliament) and Dominic Cummings (a former chief advisor to the Prime Minister). There are also cases of bidders with no record of healthcare experience who have been awarded huge contracts related to Covid-19 (for example, a bookmaker in Slovenia, and a farmer in Bosnia). In India, a real estate agent with no previous healthcare experience got a contract to supply as oxygen cylinder and medical beds. There is also the case of the health minister in Bolivia who was arrested in May 2020 after ventilators were procured at an inflated price.

Open source and transparency in the procurement process

A complete and transparent documentation of all the contracts awarded and making these records publicly available during emergency procurement is important. Several countries have been moving in this direction as a response to the crisis. In Ukraine, the authorities require the submission of a report for each contract within a day of its conclusion, which is then made publicly available on an internet platform. In the US, the website USAspending.gov provides data on contracts procured related to Covid-19 and is available for public scrutiny.

Role of whistleblowers

With increased public spending being a cornerstone of the response to this crisis, adequate monitoring of abuse of public funds will become more urgent. The shortcomings of traditional methods of fraud detection may turn out to be especially costly and ineffective during the Covid-19 pandemic. Encouraging whistleblowers to come out is one of the most important tools for detecting and deterring wrongdoing in the public sector. Countries that lack strong institutions, insiders may be the best or only source of conveying accurate and reliable information about malpractices. Through their close contact with the procurement system, they can effectively contribute to the detection of unlawful procedures in public procurement by disclosing information that may not be readily available or evident. In this time of global pandemic, when opportunities for corruption abound and the normal oversight and accountability processes are weakened, whistleblowers are even more crucial (TI, 2021).

Addressing immediate risks in emergency procurement – best practices

It is therefore imperative that fundamental safeguards of the rule of law and public integrity are not weakened or disregarded in both the immediate response as well as the longer-term recovery from Covid-19. Whilst recognising the need to respond to urgent needs, corruption risks should be identified, assessed and mitigated for increased transparency, accountability and integrity. Without the proper integrity and transparency safeguards in place, such emergency processes are highly vulnerable to abuse. To address integrity challenges in the long term, governments should consider reviewing existing emergency procurement legislation/ guideline to ensure that it is relevant in the case of future global health emergencies. Governments may also leverage or expand the functionalities of existing e-procurement platforms to record transactional information on the procurement of emergency items and create digital and easily accessible tools to allow the public to track all emergency purchases. Emergency procurement data should be centralised on national e-procurement portals for public scrutiny.

In the wake of the Covid-19 crisis, some countries have implemented best practices in emergency procurement, that is worth noting, namely:

• Ireland - Development of an information note on good practices for contracting authorities;

• Japan – “Measures to be taken for public procurement by local governments in response to Covid-19”

• New Zealand – Establishment of a parliamentary oversight committee to oversee the government’s response to the current crisis

• Columbia – all data on Covid-19 related contracts are disclosed in an open format using the government’s e-procurement platform

• Ukraine – procuring entities are required to report and publish their orders within one day of the contract being signed and a special Covid-19 dashboard has been set up to aid reporting and analysis

• Portugal – Creation of an open dataset on the national open data portal to publish all the public contract awards using the emergency legal framework

In order to avoid the risk of fueling corruption during the Covid-19 crisis, governments should be encouraged to support efforts in monitoring public service delivery in the health sector, ensuring transparent procurement processes and management of health funds, as well as undertaking other targeted integrity efforts. It is the responsibility of both the public and the private sector to respond proactive to this crisis by ensuring that there are mechanisms in place for preventing and detecting possible cases of corruption. In the long term, identifying and addressing corruption risks will be essential to protect the integrity of public institutions, and to galvanise public confidence in the governments’ ability to mobilise an effective crisis response.

References

• Barone, G; and S Mocetti, 2014. “Natural disasters, growth and institutions: a tale of two earthquakes.” Journal of Urban Economics 84 (2014): 52-66.

• Khasiani, K; Y Koshima; A Mfombouot; and A Singh, 2020. “Budget Execution Controls to Mitigate Corruption Risk in Pandemic Spending”, International Monetary Fund, Special Series on Covid-19.

• Leeson, P. T; and R Sobel, 2008. “Weathering corruption”, Journal of Law and Economics, 51, 667–681.

• OECD (2020a), Public integrity for an effective COVID-19 response and recovery, OECD Publishing, Paris.

• OECD (2020b), Stocktaking Report on Immediate Public Procurement and Infrastructure Responses to COVID-19, OECD Publishing, Paris.

• OECD (2021), Tackling coronavirus (COVID19), Contributing to a global effort.

• TI (2020), Citizen Reports Covid-19 Corruption.

• TI (2021), Why Fighting Corruption Matters in times of Covid-19?

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