Malpractices in public procurement
The total volume of public procurement, which is the government activity of purchasing goods, services and works, is substantial. In OECD countries it amounts to 12 per cent of GDP.
Public procurement is also one of the government activities most vulnerable to corruption. The direct cost of malpractices in this area of government is paid for by taxpayers. The indirect cost of malpractices is the distortion of competition, limited market access and reduced business appetite from foreign investors.
Many suspect that a culture of corruption, cronyism and nepotism is growing with impunity in public procurement, which contributes to substantial syphoning of public funds, wastage and leakages that in the present positive economic cycle attracts little public attention.
In the past few months, three important public procurement contracts were shrouded with allegations of malpractice, confirming that good governance principles are being breached by this administration. The Malta-Gozo ferry call for tenders has been dragging on, with the latest development being the Public Contracts Review Board’s declaration that the current tender issued by Transport Malta may be incongruent with EU procurement rules.
The 500-bed extension at St Vincent de Paul Hospital started as a public tender for the provision of catering facilities but evolved into a multi-million-euro direct order. The government argued that the contract for this concession did not fall within the parameters of the Freedom of Information Act, and is so far refusing to publish the contract document.
The latest indication of public procurement malpractice is the decision of Arts Council chairman Albert Marshall to overrule the international jury panel tasked with picking Malta’s curators for the prestigious Venice Biennale.
The government argues that it follows EU regulations on public procurement and that there were no breach of rules in any of these contracts. The most significant problem is not the design of the procurement system, even if this can be improved substantially, but the implementation of policies by public officials.
Companies with strong invisible connections to powerful politicians will manipulate the system knowing that the government will turn a blind eye, pretending all was well when it wasn’t.
A myriad of integrity risks lie along the public procurement cycle. These include poor procurement planning, technical specifications tailored for a specific company, lack of proper justification for the use of non-competitive procedures, and conflict of interest and corruption in the approval process as a result of the ineffective separation of financial, contractual and project authorities. When tender board meetings are used to rubber-stamp decisions taken in the corridors of power, good governance principles are rendered ineffective.
Although Malta is not an OECD member, the government would do well to undertake some of the significant reforms of the public procurement process recommended by the OECD.
The first and most important principle that needs to be hardwired in the public procurement process is integrity. This refers to upholding ethical standards and moral values of honesty, professionalism and righteousness. It needs to be embedded in the process to ensure fairness, non-discrimination and compliance.
Full transparency is also often absent in the way the current public procurement process is conducted. Transparency promotes accountability and ensures access to information. It serves a vital role of levelling the playing field for businesses and allowing small enterprises to participate on an equal footing. Being transparent implies that government actively ensures full access to information and open data along with timely responses to requests for information.
Another principle that should become more prominent in the public procurement process is that of stakeholder participation. To promote government accountability, it is essential that a broad range of stakeholders, including anti-corruption offices, private sector organisations, end-users, civil society, the media and the public are involved in the process. Open dialogue with suppliers and business associations can reinforce mutual understanding of factors shaping the public markets.
Oversight and control is another essential principle for good governance in the public procurement function. In Canada, for instance, the government has appointed a Procurement Ombudsman to increase the effectiveness and transparency of business practices in procurement.
Rather than justifying what at best are dubious practices in the public procurement process, the government should undertake a meaningful dialogue with all stakeholders with the ultimate objective of cleansing the present system from abuse while strengthening the principles of good governance.
This is a Times of Malta print editorial