www.transparencyindia.org. what is an integrity pact formal agreement between government authority...
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www.transparencyindia.org
What is an Integrity Pact
Formal Agreement between government authority and bidders for public contracts
– Establishes rights and obligations between parties
– Provides enforceable sanctions in case of violation
Process occurring during all stages of procurement
– Increased Transparency
– Independent External monitoring
– Detection of risks/red flags, facilitating corrective measures
Applicable to all sectors & type of contracts
What is the Integrity Pact for?
Objectives: enables companies to abstain from bribing and malpractices
– level playing field: discourages others from corruption/malpractices
– authority curbs corruption/extortion enables departments to reduce high costs and distorting impact
of corruption, to achieve social, economic and development goals
builds up public confidence on the procurement system and the government/authority and improves reputation and image
improves investment climate
Conditions Necessary for Success
Political will to reduce corruption and promote integrity Maximum transparency via public access to relevant
information Third party independent monitoring to verify fulfillment
of obligations by the parties, to provide trusted channel for complaints and to facilitate stakeholder involvement
Multi-Stakeholder Involvement by Civil Society Organizations, government and private companies
Need for Integrity Pact in India
India is perceived to be among the most corrupt countries. It
ranked 87th among 178 countries in CPI-2010.
Such corruption results in major drain of valuable resources. It
impedes the development process, corrodes the moral fiber of the
society and affects the BPL most.
Large scale corruption occurs particularly in Government and
PSUs’ procurement programs and works’ contracts, mostly those
funded by international financial institutions.
Efforts to adopt IP
Second Administrative Reforms Commission - Following the TI India’s
presentation on Dec 1st, 2006, the 2nd Adm. Reforms Commission in its
IV Report on ‘Ethics in Governance’ has recommended the adoption of
IP.
CVC Circular – CVC issued ‘Standard Operating Procedure’ on May 18,
‘09 (appending copies of its earlier circulars of 4 Dec., ‘07, May 19, ‘08,
Aug. 5, ‘08, etc.) laying guidelines for IP’s adoption.
DP&T vide its Circular No. 372/13/2009-AVD-III dt. 16.6.09 suggested to
all State Chief Secretaries to consider IP adoption in respect of SPSUs
as outlined by CVC
Prime Minister’s address for CBI and State Anti-Corruption
Bureaux [26 August 2009] at Vigyan Bhavan, New Delhi
Integrity Pact in India
So far, 39 CPSUs are committed to adopt IP both in letter and sprit – Oil &
Natural Gas Corp.- being the first (April 17, 2006). List includes IOCL, CIL and
its subsidiaries , BPCL, HPCL, SAIL, NTPC, BHEL etc.
Ministry of Defence : It was included in 2006 in Defence Procurement Policy.
However, In 2008, its threshold limit was reduced to Rs 100 crores & above, and
Rs 20 crores in its Enterprises
Independent External Monitor
IEMs major role is to oversee the IP’s implementation to prevent/eliminate corruption, bribes and other unethical practices in the Principal because only they have the wide access to both the parties.
According to CVC Guidelines, IEMs jobs are voluntary and non-salaried.
IEMs’ remuneration may be similar to Independent Directors in the concerned organization.
IEMs will have stature/ benefits similar to those of the Chairman of the Board Audit Committee.
Though IEMs do not have any administrative, implementation or enforcement responsibilities, they are to coordinate with other anti-corruption organizations
Independent External Monitor
The Principal, in consultation with CVC and TI India, will appoint IEM to
oversee IP implementation & effectiveness
IEM will coordinate with other anti-corruption organizations such as CVC.
He may engage services of outside agencies such as accounting firms, law
firms, etc., if required, in discharge of his responsibilities.
If he observes or suspects any irregularity, he will inform appropriate
senior most officer of the Principal, CVC and TI-India. He can also make the
information public.
He will have the right to attend any meeting between the Principal and the
Counterparties as well as internal meetings of the Principal.
He can be removed from his office only with the consent of CVC and TI-India
through an open and transparent process
Independent External Monitor
IEM will be a person of high impeccable integrity and experience in
the relevant fields.
A maximum of three IEMs would be appointed in Navratna PSUs
and up to two IEMs in other PSUs.
While recommending the names for IEMs to CVC, their detailed
bio-data, including details of their postings during the last ten
years before superannuation, in case the names relate to persons
having worked in the government sector, should be sent to CVC.
The bio-data should also include details regarding experience
older than ten years before superannuation of the persons
proposed as IEMs, if they have relevant domain experience in the
activities of PSUs where they are considered as IEMs.
Advantages of Integrity Pacts
Feasible – Integrity Pacts can often be implemented without legislative reforms
Collaborative - Built on trust and support among parties Preventive - Tackles corruption risks from the outset Inclusive - Involves Civil Society as active contributor and
as channel to increase legitimacy and public trust in authority/government
Saves costs Saves time – Faster processing of bid and contract,
reduces frivolous interventions and false complaints
Violations and consequences
If a Counterparty commits any violation of the Integrity Pact, it may loose Bid Security and Performance Bond. In addition, the Principal will terminate any current contract and business relationship with such Counterparties and their associates.
The Principal would black list and exclude the Counterparty from future dealings until the IEM is satisfied that the Counterparty will not commit any violation in future.
The Counterparty will be liable to damages as determined by the IEM.
The Principal may initiate criminal proceedings against violating Counterparties
Possible risks of Integrity Pacts
Corruption can be controlled
– Effective detection and enforcement mechanisms by relevant agencies also needed
Misused as window dressing
– Independent External Monitoring is crucial
Increased costs and delays
– If properly implemented, costs and delays due to lack of transparency, corruption and malpractices are minimised
Violation of confidentiality and intellectual property
– Protection and remedies provided in IPs
Project Cycle: when & where can IPs work best
• There are contracts at different phases
• Each contract faces particular risks
• IPs should be used at earliest possible phases, corruption/malpractices are possible at every phase, and effects can multiply with later phases
Policy Making/Project Planning
Project Design
Project Implementation
Operation
Taken from : How to implement IPs in the Water Sector, a guide for government officials, by Juanita Olaya
Contracts
Contracts
Contracts
Contracts
When & where can IPs work best?
Contract Execution
Contractor Selection, Contract Award & Signing
Preparation Phase,
organisation & Bid
Documents Preparation
Final Accounting,
Audit
Needs AssessmentIdentify Demand
Procurement Process
•IP should cover all phases of
procurement process
• If not possible, should start – earliest
– with invitation to bid
• In this case, independent vetting
of bidding documents is crucial
Why implement an IP?
As Public Official
– Saves public money/Increases value for money and quality
– Helps increase credibility and legitimacy of the process
– Reduces frivolous complaints/unnecessary problems.
As Private Bidder
– Levels the playing field
– Obligations and responsibilities are upfront and transparent
– Protection against corrupt, illegal and improper demands
– Trusted channel for complaints
Why implement an IP?
As NGO (Civil Society)– Opportunity to participate in short and long term changes by
contributing to integrity in public procurement
– Support increased trust & credibility on public procurement - defend public interest
As anyone interested in better governance/performance (e.g., Donors)
– A way to start from facts and not theory or law: “roll up sleeves” to change actual behavior
– A way to improve aid effectiveness and contribute to deliver better services to the needy and deserving
Elements – Parties & Roles
Independent Monitor
(CSO)
• Not to demand/accept bribes• To disclose all relevant information• To guarantee protection of restricted information• Use of Internet and Public Hearings
• Not to pay bribes, facilitation payments, etc.• Not to collude with other bidders• Disclose information on payments to middlemen• Code of conduct & compliance program
• Reviews and provides expert feedback on all documents and steps of procurement process
• Monitors access to information• Deals with complaints by bidders• Keeps public & authorities informed• Contributes to raise overall confidence in
the process
Public Authority
BiddersContractors
Integrity Pact
Commitments
Role
Commitments
Elements – Enforcement Mechanisms
Sanctions Civil, criminal, administrative sanctions Loss of contract Forfeiture of bid security/performance bond(s) Liability for damages (to principal and competitors) Debarment/Blacklisting
Main activities to implement an IP
Planning and design of IP process with input from all stakeholders Ensure there is proper infrastructure for access to information Facilitate logistics: public hearings, workshops, etc. Draft IP and Monitoring Agreements Select and support the Monitor, ensuring accountability Get Monitoring Agreement and Integrity Pact signed by parties Supervise compliance with the monitoring agreement Explain the IP fully, how it works and its effects Contribute to find and channel necessary resources Manage the IP implementation with credibility & independence
Implementation Arrangements (1)
Civil Society Organisation
(NGO)
Public Authority
Monitor
Monitoring Contract
Memorandum of Understanding
NGO undertakes most implementation activities
Implementation Arrangements (2)
Civil Society Organisation
(NGO)Public Authority
Monitor Monitoring Contract
Memorandum of Understanding
Authority undertakes most implementation activities
Qualities of a good monitor
Independence and commitment– Objective monitoring with public good as guidance
– Strength of character and impeccable behaviour Expertise
– Adds value to the project and better equipped to uncover corruption/malpractices
Capacity– Individual monitor or organization, depending on project
Accountability– Accountable to all parties and the public in varying degrees
Selection Criteria for IP Projects
Public Agency has many projects
– Projects with more relevant social or economic impact
– Projects that use combined funds
– Projects where risks of corruption threaten its viability
– Projects suffering from corruption in the past
– Complex Projects
– Projects that are sensitive in terms of public opinion
– Large scale projects that take a large part of the budget
Procedure for adoption of IP The process starts with the commitment from all Senior-level
officials of the Principal to implement the program.
To select and appoint IEMs in consultation with CVC & TI-India.
To develop detailed implementation plans and modify IP document in consultation with the TI India, senior staff members, major contractors/Venders and/or IEM.
Depending on their business environment, IP adopters should initially fix a threshold limit to cover around 95% of contracts. Later on, this limit can be revised.
Drafts of the MoU and the proposed Integrity Pact have to be approved by CVC and the TI India. Model Drafts can be had from the CVC’s website www.cvc.nic.in or from TI-I.
Signing of MoU between TI India and the Principal.
Put plans to implement IP Program and IEM’s contact details on the Principal’s web-site and publicize it through the media
Experiences of Various PSUs
Processing of contracts is faster
Improvement in the image and general perception about the company
Reduced lawsuits and arbitrations .
Frivolous interventions and false complaints ceased.
Competitive rates – no delay in payments, no bribing etc from vendors, improved vendor satisfaction, ensuring overall efficiency and low cost of production
Periodic review and implementation
It is recommended that the Principal will periodically review the progress
and effectiveness of IP Program through all or some of the following :
IEM to submit a Quarterly Report on the IP’s functioning.
The IEM and senior leadership of the Principal do a self-assessment of
Integrity Pact Program’s effectiveness and identify areas/ways to
improve.
The Principal to conduct periodic reviews by outside agencies (including
Government officials, suppliers, independent observers) on IP’s
effectiveness in reducing corruption.
The Principal along with IEMs to meet with CVC and TI-India on an
annual basis to discuss the above.
Role of TII : Problems in implementation of IP
Advocacy
Monitoring : IP cell
Thank You