Examples of procurement compliance checklists

1 Examples of procurement compliance checklists Query Would you have any idea if companies or agencies use procurement compliance checklists to report possible irregularities, suspicious cases or difficulties in the procurement process? Could you name any Examples and how such lists are designed? Summary Purpose Due to the volume, number and complexity of the transactions involved, procurement is one of the In order to improve our internal procurement system, government activities most vulnerable to corruption. we are currently considering asking our procurement procurement compliance checklists constitute an officers at HQ and in our country offices to fill out a important element of corruption risk management compliance checklist . The idea is to get feedback from strategies in procurement processes, both in terms of them on a regular basis about possible irregularities, prevention and detection of fraud and corruption.

2 They suspicious cases or difficulties in the procurement can guide procurement staff through the process of process. Next to this function as reporting tool, the transparent and effective procurement and help detect checklist should also serve as compliance tool: the and report irregularities. procurement officer declares that all cases that are not reported in the checklist are to be considered as compliance checklists reflect good practice in 'regular', for which he/she takes the responsibility. procurement processes by providing a set of indicators to assess adherence to the agency's procurement rules Content and regulations. They are often structured around the 1. Designing a procurement a compliance major phases of the procurement cycle and typically cover the various risks associated with each phase of checklist the contracting process, using red flags and blinking.

3 2. Examples of procurement compliance indicators. For successful implementation of such checklists compliance tool, checklists should be designed in a 3. References participatory manner, be user-friendly and easy to apply and supported by regular training and awareness raising activities. Author(s): Marie Ch ne , Transparency International, Reviewed by: Robin Hodess , Transparency International, Date: 11 March 2010 Number:236. U4 Expert Answers provide targeted and timely anti-corruption expert advice to U4 partner agency staff Examples of procurement compliance checklists 1 Designing a procurement a and transparency into a set of detailed steps and indicators;. compliance checklist procurement is one of the government sectors most They provide concrete guidance to procurement vulnerable to corruption, due to the important financial officers on how to design procurement tenders flows involved as well as the complexity of contracting that minimise risks of fraud, corruption and anti- processes that provide both incentives and competitive behaviours.

4 Opportunities for rent-seeking behaviors. Corruption in procurement can take many forms and can occur at all They allow the tracking of procurement decisions stages of the procurement cycle from the decision to and can help the detection of irregularities contract, the identification of needs, the specifications through a system of red flags and indicators;. of the contract, the tendering process, to the contract implementation and final evaluation. Yet, corruption They support consistent procurement processes risks are especially hard to detect because of the size, across the agency;. number and complexity of the transactions involved that often require high levels of technical expertise at all They can serve as a comprehensive tool for stages of the process. reviewing procurement processes and assess compliance with existing guidelines. In addition, corruption schemes in procurement processes are complex, technically challenging, and Such compliance checklists are usually part of a often perpetrated by individuals who know exactly how broader set of complementary measures that can be to abuse the system.

5 The lack of proactive corruption implemented, including the establishment of clear risk management processes in many organisations reporting procedures, effective complaints mechanisms, further exacerbates detection challenges. Therefore, a adequate whistleblowing protection and an effective good, transparent and accountable procurement system of internal and external controls. system needs to ensure effective control, complaints and review mechanisms to ensure that decisions are Contents and structure of conform to the procurement regulations. procurement compliance checklists procurement checklists reflect good practice in What are procurement compliance procurement processes, based on an overview of the checklists ? potential vulnerabilities associated with each phase of procurement compliance checklists are one of the the contracting process. In addition to monitoring corruption risk management tools that can be used to compliance with the agency's procurement guidelines, effectively monitor procurement processes, identify and they can guide procurement officers through the detect fraud and corruption risks at all stages of the process of managing the procurement exercise in an procurement cycle.

6 They typically consist of a effective and transparent manner. comprehensive summary of existing standards and requirements at all stages of the procurement process, According to the Business Anti-corruption Portal, with the view to ensuring adherence to an agency's transparent and effective procurement processes can procurement policies and guidelines. be characterised by three major underlying principles: Their potential benefits for managing corruption risks Fairness: all competent suppliers should have are many, both in terms of fraud prevention and equal chances to participate;. detection: Transparency: all procedural steps are based They reinforce existing guidelines and policies on open, predictable, known and written by providing detailed and clear expectations at procedures, including the process and criteria all stage of the procurement process; used for awarding the contract to ensure that all participating bidders are treated on equal terms.

7 They can help operationalise and translate the objectives of fairness, openness, competition 2. Examples of procurement compliance checklists Recourse possibilities: a transparent contract and 5) Managing and supervising contract procurement process should also allow for an implementation. They typically cover the various risks open and independent contestation mechanism. involved at each stages of the process by spelling out detailed indicators of adherence to the agency's At the operational level, cutting across all phases of the procurement regulations, and providing a series of red procurement cycle, these principles should translate flags such as suspicious pricing patterns, statements, into effective record keeping and documentation, documents and behaviour by firms, that can be used as making sure that all bidding, procedure, evaluation and a warning system to identify potential suspicious award documents are publicly and timely available, as transactions.

8 Well as public access to information through effective communication channels, including by using online systems where information can be shared with auditors, Overview of procurement corruption complainants and the general public. risks and red flags According to the U4 thematic page on procurement , Overview of corruption risks there is a broad agreement about the major features of The first step involved in developing a procurement a competitive process that should be covered to some compliance checklist consists of mapping the various extent by any compliance checklist , including: risks associated with the various stages of the procurement cycle and identifying indicators and red Public notification of bidding opportunities; flags for the detection of irregularities. Documentation of the needs for goods and Most common schemes used to manipulate corruption services, specifications, technical requirements, processes include bribery, kickbacks brokered by local etc agents, various forms of bid rigging, collusion, influence peddling, etc.

9 As the World Bank's Fraud and Documents clearly outlining the contracting Corruption Awareness Handbook states, corruption process, terms and conditions, criteria for schemes in procurement often involve more than one awarding the contract; type of misconducts, beginning by a bribe, followed by bid rigging and finally fraud to cover up the scheme Submission of secret sealed bids that are (World Bank 2009): publicly opened at a specified date, time and place;. Demand for payment. A government official Impartial evaluation and comparison of bids by demands a bribe or kickback from a firm or competent evaluators without interference by individual, or a firm or individual offers a bribe, in bidders or other parties; exchange for a contract award. In most cases, the corrupt official will permit the bribe payer to Award of the contract to the bidder complying inflate the price to cover the bribe and preserve with all requirements and offering the best value its profits.

10 For money bid, as defined by the published selection criteria; Bid rigging. To ensure that the contract will be awarded to the bribe-paying firm (whose prices Documentation of the contract award decision are now inflated to cover the cost of the bribe), and notification of the unsuccessful bidders with government officials manipulate the bidding the ground for decisions and relevant information process to exclude other (presumably cheaper). about the tender; competitors. Effective supervision of contract implementation. Fraud. To recover the cost of the bribe, and to exploit the corrupt relationship, the firm usually compliance checklists are usually structured around with the knowledge and complicity of government the key stages of the procurement cycle, including: 1) officials inflates prices, bills for work not Identifying the need; 2) Defining the contract performed, fails to meet contract specifications or specifications; 3) Tendering process; 4) Awarding the substitutes substandard products during 3.