| In every national budget, there is a part called | | | | amounts go through a tedious, multi-phase |
| "Public Procurement". This is the portion of the | | | | tendering process. Public competitive bidding is not |
| budget allocated to purchasing services and goods | | | | corruption-proof: many times officials and bidders |
| for the various ministries, authorities and other | | | | collude and conspire to award the contract against |
| arms of the executive branch. It was the famous | | | | bribes and other, noncash, benefits. But we still |
| management consultant, Parkinson, who once | | | | know of no better way to minimize the effects |
| wrote that government officials are likely to | | | | of human greed.Procurement policies, procedures |
| approve a multi-billion dollar nuclear power plant | | | | and tenders are supervised by state auditing |
| much more speedily that they are likely to | | | | authorities. The most famous is, probably, the |
| authorize a hundred dollar expenditure on a bicycle | | | | General Accounting Office, known by its acronym: |
| parking device. This is because everyone came | | | | the GAO.It is an unrelenting, very thorough and |
| across 100 dollar situations in real life - but | | | | dangerous watchdog of the administration. It is |
| precious few had the fortune to expend with | | | | considered to be highly effective in reducing |
| billions of USD.This, precisely, is the problem with | | | | procurement - related irregularities and crimes. |
| public procurement: people are too acquainted | | | | Another such institutions the Israeli State Reviser. |
| with the purchased items. They tend to confuse | | | | What is common to both these organs of the |
| their daily, household-type, decisions with the | | | | state is that they have very broad authority. |
| processes and considerations which should | | | | They possess (by law) judicial and criminal |
| permeate governmental decision making. They | | | | prosecution powers and they exercise it without |
| label perfectly legitimate decisions as "corrupt" - | | | | any hesitation. They have the legal obligation to |
| and totally corrupt procedures as "legal" or merely | | | | review the operations and financial transactions of |
| "legitimate", because this is what was decreed by | | | | all the other organs of the executive branch. Their |
| the statal mechanisms, or because "this is the | | | | teams select, each year, the organs to be |
| law".Procurement is divided to defence and | | | | reviewed and audited. They collect all pertinent |
| non-defence spending. In both these categories - | | | | documents and correspondence. They cross the |
| but, especially in the former - there are grave, | | | | information that they receive from elsewhere. |
| well founded, concerns that things might not be all | | | | They ask very embarrassing questions and they |
| what they seem to be.Government - from India's | | | | do it under the threat of perjury prosecutions. |
| to Sweden's to Belgium's - fell because of | | | | They summon witnesses and they publish |
| procurement scandals which involved bribes paid | | | | damning reports which, in many cases, lead to |
| by manufacturers or service providers either to | | | | criminal prosecutions.Another form of review of |
| individual in the service of the state or to political | | | | public procurement is through powers granted to |
| parties. Other, lesser cases, litter the press daily. | | | | the legislative arm of the state (Congress, |
| In the last few years only, the burgeoning | | | | Parliament, Bundestag, or Knesset). In almost |
| defence sector in Israel saw two such big | | | | every country in the world, the elected body has |
| scandals: the developer of Israel's missiles was | | | | its own procurement oversight committee. It |
| involved in one (and currently is serving a jail | | | | supervises the expenditures of the executive |
| sentence) and Israel's military attache to | | | | branch and makes sure that they conform to the |
| Washington was implicated - though, never | | | | budget. The difference between such supervisory, |
| convicted - in yet another.But the picture is not | | | | parliamentary, bodies and their executive branch |
| that grim. Most governments in the West | | | | counterparts - is that they feel free to criticize |
| succeeded in reigning in and fully controlling this | | | | public procurement not only in the context of its |
| particular budget item. In the USA, this part of the | | | | adherence to budget constraints or its cleanliness |
| budget remained constant in the last 35(!) years | | | | - but also in a political context. In other words, |
| at 20% of the GDP.There are many problems | | | | these committees do not limit themselves to |
| with public procurement. It is an obscure area of | | | | asking HOW - but also engage in asking WHY. |
| state activity, agreed upon in "customized" | | | | Why this specific expense in this given time and |
| tenders and in dark rooms through a series of | | | | location - and not that expense, somewhere else |
| undisclosed agreements. At least, this is the public | | | | or some other time. These elected bodies feel at |
| image of these expenditures.The truth is | | | | liberty - and often do - intervene in the very |
| completely different.True, some ministers use | | | | decision making process and in the order of |
| public money to build their private "empires". It | | | | priorities. They have the propensity to alter both |
| could be a private business empire, catering to | | | | quite often.The most famous such committee is, |
| the financial future of the minister, his cronies and | | | | arguably, the Congressional Budget Office (CBO). |
| his relatives. These two plagues - cronyism and | | | | It is famous because it is non-partisan and |
| nepotism - haunt public procurement. The spectre | | | | technocratic in nature. It is really made of experts |
| of government official using public money to | | | | which staff its offices.Its apparent - and real - |
| benefit their political allies or their family members | | | | neutrality makes its judgements and |
| - haunts public imagination and provokes public | | | | recommendations a commandment not to be |
| indignation.Then, there are problems of plain | | | | avoided and, almost universally, to be obeyed. |
| corruption: bribes or commissions paid to decision | | | | The CBO operates for and on behalf of the |
| makers in return for winning tenders or awarding | | | | American Congress and is, really, the research |
| of economic benefits financed by the public | | | | arm of that venerable parliament. Parallelly, the |
| money. Again, sometimes these moneys end in | | | | executive part of the American system - the |
| secret bank accounts in Switzerland or in | | | | Administration - has its own guard against waste |
| Luxembourg. At other times, they finance political | | | | and worse: the Office of Management and Budget |
| activities of political parties. This was rampantly | | | | (OMB).Both bodies produce learned, thickset, |
| abundant in Italy and has its place in France. The | | | | analyses, reports, criticism, opinions and |
| USA, which was considered to be immune from | | | | recommendations. Despite quite a prodigious |
| such behaviours - has proven to be less so, lately, | | | | annual output of verbiage - they are so highly |
| with the Bill Clinton alleged election financing | | | | regarded, that virtually anything that they say (or |
| transgressions.But, these, with all due respect to | | | | write) is minutely analysed and implemented to |
| "clean hands" operations and principles, are not the | | | | the last letter with an air of awe.Only a few other |
| main problems of public procurement.The first | | | | parliaments have committees that carry such |
| order problem is the allocation of scarce | | | | weight. The Israeli Knesset have the extremely |
| resources. In other words, prioritizing. The needs | | | | powerful Finance Committee which is in charge of |
| are enormous and ever growing. The US | | | | all matters financial, from appropriations to |
| government purchases hundreds of thousands of | | | | procurement. Another parliament renowned for its |
| separate items from outside suppliers. Just the list | | | | tight scrutiny is the French Parliament - though it |
| of these goods - not to mention their technical | | | | retains very few real powers.But not all countries |
| specifications and the documentation which | | | | chose the option of legislative supervision. Some |
| accompanies the transactions - occupies tens of | | | | of them relegated parts or all of these functions |
| thick volumes. Supercomputers are used to | | | | to the executive arm.In Japan, the Ministry of |
| manage all these - and, even so, it is getting way | | | | Finance still scrutinizes (and has to authorize) the |
| out of hand. How to allocate ever scarcer | | | | smallest expense, using an army of clerks. These |
| resources amongst these items is a daunting - | | | | clerks became so powerful that they have the |
| close to impossible - task. It also, of course, has a | | | | theoretical potential to secure and extort benefits |
| political dimension. A procurement decision reflects | | | | stemming from the very position that they hold. |
| a political preference and priority. But the decision | | | | Many of them suspiciously join companies and |
| itself is not always motivated by rational - let | | | | organizations which they supervised or to which |
| alone noble - arguments. More often, it is the by | | | | they awarded contracts - immediately after they |
| product and end result of lobbying, political hand | | | | leave their previous, government, positions. The |
| bending and extortionist muscle. This raises a lot | | | | Ministry of Finance is subject to a major reform |
| of hackles among those who feel that were kept | | | | in the reform-bent government of Prime Minister |
| out of the pork barrel. They feel underprivileged | | | | Hashimoto. The Japanese establishment finally |
| and discriminated against. They fight back and the | | | | realized that too much supervision, control, |
| whole system finds itself in a quagmire, a | | | | auditing and prosecution powers might be a |
| nightmare of conflicting interests. Last year, the | | | | Pyrrhic victory: it might encourage corruption - |
| whole budget in the USA was stuck - not | | | | rather than discourage it.Britain opted to keep the |
| approved by Congress - because of these | | | | discretion to use public funds and the clout that |
| reactions and counter-reactions.The second | | | | comes with it in the hands of the political level. |
| problem is the supervision, auditing and control of | | | | This is a lot like the relationship between the |
| actual spending. This has two dimensions:How to | | | | butter and the cat left to guard it. Still, this |
| make sure that the expenditures match and do | | | | idiosyncratic British arrangement works surprisingly |
| not exceed the budgetary items. In some | | | | well. All public procurement and expenditure items |
| countries, this is a mere ritual formality and | | | | are approved by the EDX Committee of the |
| government departments are positively expected | | | | British Cabinet (=inner, influential, circle of |
| to overstep their procurement budgets. In others, | | | | government) which is headed by the Ministry of |
| this constitutes a criminal offence.How to prevent | | | | Finance. Even this did not prove enough to |
| the criminally corrupt activities that we have | | | | restrain the appetites of Ministers, especially as |
| described above - or even the non criminal | | | | quid pro quo deals quickly developed. So, now the |
| incompetent acts which government officials are | | | | word is that the new Labour Prime Minister will |
| prone to do.The most widespread method is the | | | | chair it- enabling him to exert his personal |
| public, competitive, tender for the purchases of | | | | authority on matters of public money.Britain, |
| goods and services.But, this is not as simple as it | | | | under the previous, Tory, government also |
| sounds.Some countries publish international | | | | pioneered an interesting and controversial |
| tenders, striving to secure the best quality in the | | | | incentive system for its public servants as top |
| cheapest price - no matter what is its | | | | government officials are euphemistically called |
| geographical or political source. Other countries are | | | | there. They receive, added to their salaries, a |
| much more protectionist (notably: Japan and | | | | portion of the savings that they effect in their |
| France) and they publish only domestic tenders, in | | | | departmental budgets. This means that they get |
| most cases. A domestic tender is open only to | | | | a small fraction of the end of the fiscal year |
| domestic bidders. Yet other countries limit | | | | difference between their budget allowances and |
| participation in the tenders on various | | | | what they actually spent. This is very useful in |
| backgrounds: the size of the competing company, | | | | certain segments of government activity - but |
| its track record, its ownership structure, its | | | | could prove very problematic in others. Imagine |
| human rights or environmental record and so on. | | | | health officials saving on medicines, or others |
| Some countries publish the minutes of the tender | | | | saving on road maintenance or educational |
| committee (which has to explain WHY it selected | | | | consumables. This, naturally, will not do.Needless to |
| this or that supplier). Others keep it a closely | | | | say that no country officially approves of the |
| guarded secret ("to protect commercial interests | | | | payment of bribes or commission to officials in |
| and secrets").But all countries state in advance | | | | charge of public spending, however remote the |
| that they have no obligation to accept any kind of | | | | connection is between the payment and the |
| offer - even if it is the cheapest. This is a needed | | | | actions.Yet, law aside many countries accept the |
| provision: the cheapest is not necessarily the best. | | | | intertwining of elites - business and political - as a |
| The cheapest offer could be coming from a very | | | | fact of life, albeit a sad one. Many judicial systems |
| unreliable supplier with a bad past performance or | | | | in the world even make a difference between a |
| a criminal record or from a supplier who offers | | | | payment which is not connected to an identifiable |
| goods of shoddy quality.The tendering policies of | | | | or discernible benefit and those that are. The |
| most of the countries in the world also | | | | latter - and only the latter - are labelled |
| incorporates a second principle: that of "minimum | | | | "bribery".Where there is money - there is |
| size". The cost of running a tender is prohibitive in | | | | wrongdoing. Humans are humans - and sometimes |
| the cases of purchases in small amounts.Even if | | | | not even that.But these unfortunate derivatives |
| there is corruption in such purchases it is bound to | | | | of social activity can be minimized by the adoption |
| cause less damage to the public purse than the | | | | of clear procurement policies, transparent and |
| costs of the tender which is supposed to prevent | | | | public decision making processes and the right mix |
| it!So, in most countries, small purchases can be | | | | of supervision, auditing and prosecution. Even then |
| authorized by government officials - larger | | | | the result is bound to be dubious, at best. |