Preventing corruption - new public procurement rules as of April 2016

Preventing corruption and creating a culture of integrity are a priority for the new EU Public Procurement Directives that enter into force on 18 April 2016.

These directives have set the proper framework for prior publication of tenders, clear and unbiased technical specifications, equal treatment of bidders in all stages of the process, and objective evaluation of tenders.

According to the European Commission’s Anti-Fraud Report 2015, corruption costs society in the EU around €120 billion per year and erodes citizens' trust in their leaders and institutions. With public procurement accounting for 14% of EU GDP or more than €2 trillion annually, it is frequently perceived as a corruption hotspot from which no EU country is immune. According to a 2013 study, the overall direct costs of corruption in public procurement in only five sectors (road and rail, water and waste, urban/utility construction, training, and research and development) and in only eight EU countries ranged from €1.4billion to €2.2 billion.

The new Public Procurement Directives contain measures directly enhancing transparency and tackling corruption. For instance: 

1. Fraud andconflict of interest occur when public procurement practitioners can be influenced by a private or personal interest that could lead them to attempt to gain a personal advantage. In response, the notion of "conflicts of interest" is defined at EU level for the first time in the new Directives. The new definition will make it easier to identify and manage fraud and conflict of interest cases. EU countries and contracting authorities are asked to take appropriate measures to effectively prevent, identify and remedy such cases.
2. The widespread practice that public purchasers undertake preliminary market consultations for the preparation of calls for tenders can lead to situations that favour the companies involved. In the future however, public purchasers must ensure that the participation of a previously consulted company does not affect competition within the tender procedure and that any information shared with a company as a result of its prior involvement must be sent to the other participating companies as well.
3. Currently, companies convicted for fraud and corruption can be excluded from public procurement procedures. Under the new directives though, a company can also be excluded if it unduly influenced the decision-making process or made false statements. .
4. Since the post-award period is particularly vulnerable to corruption, the rules for modifying contracts during their term have been clarified and simplified to remove any doubts.  In particular, a new call for tenders will not be required for any modifications where the modifications have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses and the changes are not substantive, i.e. do not change the nature or the economic balance of the contract.
5. With transparency being one of the most effective ways of fighting corruption and malpractice in public procurement, EU countries are required to report violations of rules to national authorities, make the results of their monitoring activities public and submit a report to the Commission every 3 years on the most common sources of misapplication or legal uncertainty. Public purchasers must also keep copies of contracts of higher value for their entire duration and make them available to the public. Moreover, any public procurement award procedure must be covered by a specific report by the public purchaser explaining the main decisions relating to the procedure concerned, reporting any conflict of interests detected and steps taken in this regard, and be forwarded to the Commission/national authorities upon request.
6. The simplification of procedures and the greater use of electronic tools in public procurement are also important instruments in the fight against fraud and corruption.  In particular:.

• e-procurement will be generalised and become mandatory by 2018.
• the setting of a dedicated legal framework for concession contracts enhances transparency.
• a standard form for the self-declaration for bidders, the "European Single Procurement Document" will be introduced, which makes it more difficult to exclude tenders in the selection phase.

What can the EU countries do to prevent corruption? 

The transposition deadline for the new directives (18 April 2016 and 2018 for e-procurement) gives EU countries the opportunity: 

• to raise awareness of the rules among all public procurement actors (including the judiciary), to overhaul the organisation of its public sector with the aim that all public procurement officials share a common sense of public utility and public service, to strive to deliver optimal results for society, and to reconsider in depth the efficiency of its current public procurement and anti-corruption policy.
• to promote a culture of integrity in the public service and among businesses (compliance programmes, use of integrity pacts, strengthen the protection of whistle-blowers, improve standing of citizens and NGOs in corruption cases, strengthen anti-corruption measures).
• ensure better collection and analysis of data to improve public procurement governance such as ensuring better collection of data on procurement above and especially below EU thresholds, establishing contract registries for public procurement contracts, establishing public procurement irregularities databases based on remedies and audits, developing anomalies detection tools, ensuring interconnectedness between public procurement data and public and business registries and EU funds databases. .

The public procurement legislation aims to ensure that procurement markets are kept open EU-wide to contribute to the most efficient use of public funds, promoting a fair, uniform and transparent platform for public spending. This can also positively influence overall EU anti-corruption policies where transparency and fair competition play an important role in preventing corrupt practices. Tackling corruption in public procurement can foster growth, enhance competition and investment, and have a positive effect on the internal market.