www.transparencyindia.org Transparency International India - - PowerPoint PPT Presentation

www.transparencyindia.org

Transparency International India

• Transparency International-India is the accredited Indian National Chapter of

Transparency International. It was established in 1997.

• Transparency International India endeavors to eradicate corruption by promoting

and supporting transparent and ethical practices in governance in collaboration with government, business groups, corporate and civil society organizations.

• Acknowledging the vastness of the country, TI India has established its

Chapters in several States for effective drive against corrupt practices. Besides, TI India endeavors to extend its reach by collaborating with like minded civil society organizations and creating more chapters with those demonstrating their determination, diligence and competence to combat corruption. However, the major challenge is the identification of transparent partners having credible integrity.

Projects

• Integrity Pact
• Development Pact
• Pahal
• ALAC

What is an Integrity Pact

• Formal Agreement between government authority and

bidders /beneficiaries for public contracts/funds disbursement

– 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 & types 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 governments to reduce high costs and distorting impact
• f corruption, to achieve social, economic and development

goals

• builds up public confidence on the procurement /disbursement

system and the government/authority and improves reputation and image

• improves investment climate

Conditions Necessary for Success

• Political will of authority to reduce corruption and

promote integrity

• Maximum transparency via public access to relevant

information

• Third party independent monitoring to verify fulfillment
• f 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 85th among 175 countries in CPI-2014. It is at the 19th position in BPI among the 22 major exporting countries

• 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.

• It is felt that the higher the level of corruption in an organization,

the greater will be the resistance to IP Program as it directly affects the financial interests of corrupt officials

Efforts to adopt 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.

Ministry of Finance and Ministry of Public Enterprises have issued

• ffice memorandum recommending adoption of Integrity Pact in their

department (July 2011) 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 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.

Prime Ministers address for CBI and State Anti-Corruption Bureaux [26 August 2009] at Vigyan Bhava

Integrity Pact in India

• Ministry of Defence : In its 2008 Procurement Policy, it has proposed to adopt

IP in defense deals of Rs 100 crores and above, and Rs 20 crores in its Enterprises

• So far, 48CPSUs one state PSU and one Municipal Council 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.

Advantages of Integrity Pacts

• Feasible - IPs 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

Possible risks of Integrity Pacts

• Corruption not 100% ruled out

– 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,

• rganisation

& Bid Documents Preparation Final Accounting, Audit Needs Assessment Identify Demand

Procurement Process

• IP should cover all

phases of procurement /disbursement process

• If not possible,

should start – latest – with invitation to bid

• In this case,

independent vetting

• f 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 unnecessary complaints/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 government performance

(eg Donors)

– A ay to start fro fats ad ot theory or la: roll up sleees to hage atual ehaior – 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 Bidders Contractors 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

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

Experiences of Various PSUs

ONGC

• Processing of contracts is faster
• Improvement in the image and general perception

about the company

• Reduced lawsuits and arbitrations .
• All frivolous interventions and false complaints cease.
• Competitive rates – no delay in payments, no bribing

etc from vendors, improved vendor satisfaction ensuring overall efficiency and low cost of production

RINL

 Improved the image as an ethical

• rganisation

 Eliminated corruption in Procurement  Improved Vendors Satisfaction  Speeded up tender & procurement

processes

 Lowered the cost of doing business  Reduction in no. of complaints

IOCL

 Impartial & objective assessment of critical issues  Minimisation of delay due to quicker resolution of

tender issues/complaints

 Enhanced transparency oriented perspective as

regular reporting to IEMs is a standard protocol

 Indirect cost-saving through minimisation of delays

in tender finalisation

 Occasional direct cost saving through finalisation of

tender at a lower value

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

• fficials,

suppliers, independent

• bservers) 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.

Findings of Impact Assessment Survey

• Private sector must adopt IP
• Rampant corruption in private sector .
• Bribery among private –private players
• Bribe is routed through sub-contractors .
• Almost all PSUs , IEMs and substantial number of

Bidders feel that IP has helped in making procurement process more transparent.

Continued

• We have received success stories from Central Coal

Fields Limited (CCL), BPCL, Shipping Corporation of India(SCI).

• SCI, is the first PSU which has taken action against

their officials for violation of provisions of IP.

• Two private firms who have violated clauses of IP

have been blacklisted by PSUs. Recently an Israeli firm has been also blacklisted by the Ministry of Defence.

• IPs have improved the credibility of the public

procurement system. Both vendors and management of the company feel empowered to follow proper and transparent procedures.

Continued

• Strengths of Integrity Pact : Definitely Adds to the

transparency of the system and helps an ordinary vendor to register his concern on any aspect of procurement process.

• Success stories
• 361.62 Crores saving by GAIL
• Procurement of bare line pipes for VDPL project :

Fresh bids resulted in a reduction of bid by Rs 297.05 Crores against the initial offer.

• Procurement of Carbon steel bare line pipes for

Dahej-Vijaipur upgradation project : Re tendering resulted in reduction of cost by Rs 64.57 crore

Scenario

• India
• Abroad

 Germany Rwanda Hungary Pakistan

Integrity Pact in India

• MoU vs. Non MoU
• Effective Monitoring of IP
• Challenges
• Collusion and cartel
• Management IEM relation

INTEGRITY PACT: RESEARCH FINDINGS

Bidders

• In case of complaints registration- 80% with the

vigilance department, 12% of the approach (IEMs) and the remaining register their case with an Anti- Corruption Agency. PSUs

• Room for negotiations and changes in IP, IP should

be standardized.

• 88% said that sub-contractors should be included in

IP

Independent External Monitors (IEMs)

• 83% IEMs said that IP made procurement process

transparent.

MERITS OF SIGNING INTEGRITY PACT

• Create Brand Image- ONGC, has created a reputation
• f being transparent in their procurement process

through adoption of Integrity Pact.

• Confidence to new bidders
• Confidence among investors
• Commercial benefits to IP signatories
• Save Litigation cost
• IEMs- first line of audit for tenders under IP

CHALLENGES IN IP IMPLEMENTATION

• General
• After the contract is awarded IP does not oversee the

implementation of the contract

• IP is restricted to a transparent bidding process.
• IP is being implemented as a complaint based

mechanism, i.e. once a complaint is received IEMs come in the picture. Also the vendors do not, in most cases, get an opportunity to place their side of the story, which leads to their victimization.

TRANSGRESSION

• In case the company has an internal policy of banning

the company guilty of transgression for ten years, which period should be followed – one given under IP

• r company policy.
• Integrity Pact is not very clear about 'previous

transgression

• . Until a certain level of evidence is given or charges

are proven, the company should not be banned and they should not incur any loss of business

• Mitigation measures to overcome the ban

Inclusions, exclusions and Clarifications on IP Clauses

• the sub-contractors for any contract are not disclosed

before the contract is awarded,

• In instances of a complaint received by an IEM,

bidders should be give equal opportunity to -present their case.

• CVC has yet to give direction on investigations and to

what extend an IEM can / should get involved. Private sector feels that IP should be made equitable as it currently favors the contracting companies and is disadvantageous towards the bidders and sub- contractors

RECOMMENDATIONS FROM STAKEHOLDERS

• ADOPTION OF IP
• Rigid format/ structure of Integrity Pact
• Blank Implementation of Integrity Pact
• Sectoral adoption of IP- Certain important sectors

such as chemical, cement, infrastructure, oil and gas, banking, among others that have complex procurement processes, should comply with IP

• Flexibility in Structure
• IP could be designed for certain specific strategic sectors

example chemical, cement,oil and gas, banking to name a few

• IP could be designed for complex and noncomplex

contracts.

• Changes in Implementation Process
• Information to bidders
• Cartelization
• Empowerment of Contractors
• Accountability-defunct companies and special vehicles do

not participate in the tendering process

• TRANSGRESSION
• Only half of PSUs (50%) have policies on

transgression.

• OVERALL RECOMMENDATION
• 78% of Vendors said that PSUs should be ranked for

effectiveness of Integrity Pact implementation

• a process of making disclosures of any irregularities

in conducting business by companies

• empowers the vendors (bidding in a tender) to

approach an independent authority with their grievances.

• Transparency International Malaysia : one of the

essential ingredients of successful implementation of IP is a whistle blowing line and process.

WHISTLE BLOWING MECHANISM AND INTEGRITY PACT

CODE OF CONDUCT

• one of the essential ingredients for the successful

implementation of IP.

• Integrity Pact provisions advise the bidders and sub-

contractors to have compliance process in place along with a code of conduct.

• However, there is no mechanism for overseeing the

adoption of code of conduct by the suppliers.

• Also, it is not a mandatory provision for the

implementation of Integrity Pact

Activity Plan 2015-16

• Effective monitoring
• Training Programs in different part of the country .
• Reaching out to state PSUs and departments .
• Engaging with private sector
• Assessment of IP : Ranking of the Organizations

Conclusion

If Integrity Pact is adopted sincerely in business dealings of Ministries & PSUs, it would certainly -

• introduce greater honesty, integrity and transparency
• enhance the credibility of the organization
• facilitate considerable reduction in the overall cost of

the projects

• reduce considerable possibility of conflict between the

Principal and the bidders

• Minimise litigations due to IEM’s involvement

Issues

• Complaint handling Mechanism
• Subcontractors
• Collusion
• Role of IEM
• Execution stage
• Advocacy of IP among Vendors
• Feedback from IEM
• Quality of Good monitor

Thank You