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