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