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