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Monday, November 15, 2010

Pay to play

The dark side of Public Private Partnerships is populated by private firms that pay public officials and entities for a piece of the procurement pie, and other government advantages, such as licenses, tax perks and the like.

Following in this post, and subsequent posts, are a sampling of recent articles on this subject.

Procurement fraud and inefficiency costs Russia £20bn a year
Russia is losing almost (£20bn) or 1 trillion roubles annually due to corruption and inefficiency in its public procurement process, it has been warned.

According to a BBC report, the 1 trillion roubles figure, which "significantly exceeds" previous official corruption and waste estimates, is immense even for an economy on the scale of Russia.

The report notes that the projected shortfall equates to a fifth of the nation's budget for state and local procurement, or over than 10% of the national income for 2010.

"Gigantic sums of money are being pocketed by officials and dishonest businessmen," Russian President Dmitry Medvedev was reported as saying.

South African Govt to crack down on tender fraud
Companies found guilty of tender fraud will be fined double the amount of the bid, and IT systems will come under “specialised scrutiny”, as government cracks down on wasteful spending.

Finance minister Pravin Gordhan has proposed that service providers that obtain government contracts fraudulently could face a fine of double the contract value. In addition, public officials who assist in tender fraud will be held liable for the losses incurred by government.

“Measures are required to ensure that officials who have breached the buying rules should not remain under suspension, drawing full benefits, while investigations drag on for years,” noted Gordhan.

The five-step plan to clamp down on tender fraud also involves increased monitoring, and National Treasury taking over payments in some instances. Tenders will have to be publicly disclosed at all phases, and reasons for awards will have to be supplied.

Tax compliance measures will also be strengthened and government will look at identifying procurement requirements that could be better managed centrally.

Gordhan adds several areas of reform have been proposed to aid in identifying savings and better organise public services. Among these, he says IT systems and management of consulting services will come under “specialised scrutiny within the supply chain regulatory framework”.

Half of supply cost traced to corruption (Philippines)
The cost of corruption may reach as high as 50 percent of the procurement cost of businesses, an industry leader said yesterday.

"It’s more extreme in certain industries. Government is more susceptible," Charlie P. Villasenor, chairman of the Procurement and Sourcing Institute Asia (PASIA), said.

The estimate of P.50 lost to "unethical practices" for every P1 in procurement was disclosed by Villasenor at a press conference announcing the 1st Philippine Annual Ethics in Procurement Conference on November 3.

Greg Navarro, president of the Financial Executives Institute of the Philippines, said Asian values for which Filipinos are known such as "hiya, utang na loob and pakikisama" have been used for personal gain in procurement.

Villasenor said. PASIA, which is an affiliate of the US-based Institute of Supply Management, will launch what it calls a scientific or forensic approach to detecting fraud, including a whistle-blowing campaign against companies suspected to deal in transactions that are not transparent.

Villasenor said the group will launch ISM standards which will certify companies adhering to principles and standards of ethical supply management conduct. According to Villasenor, 18 companies are ready for certification, the results of which will be made public.

Other PASIA initiatives to be discussed at the conference include the setting up a study center for training in public procurement systems, which is very different from private

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