This is a longer version of a blog that originally appeared on the Global Anticorruption Blog on 11 May 2017
Exactly a year ago, last May, the UK government under David Cameron gathered 43 nations around the world together at the UK Anti-Corruption Summit to show their commitment to fighting corruption. The resulting declaration made a bold announcement: corrupt bidders should not be allowed to bid for government contracts. The signatories committed to ensuring information about final convictions would be made available to procurement bodies and that it would be shared across borders.
Although this wasn’t one of the headline outcomes from the Summit, it was an important one. 17 of the countries made specific country level commitments with regard to excluding corrupt bidders. 6 countries committed to establishing a central database of convicted companies as a way of ensuring procurement bodies could access relevant information, while 3 committed to exploring doing so.
International declarations on fighting corruption rarely make such an explicit commitment to excluding corrupt bidders from procurement. This is despite the fact that the OECD 2009 Recommendation on Further Combating Bribery of Foreign Officials specifically calls for signatories to deny ‘advantages’ such as public procurement contracts to companies convicted of bribery. The UK Anti-Corruption Summit was right to be ambitious about including exclusion of corrupt bidders in its declaration. Research on what incentivises companies to take combating corruption seriously shows that the risk of losing business opportunities such as through debarment from public contracts ranks equally to individual executives facing imprisonment. One off penalties such as fines rank a poor sixth in the list of those incentives.
No one should underestimate, however, the scale of the challenge. The OECD Foreign Bribery report found that while 57% of the 427 foreign bribery cases it looked at spanning 15 years involved bribes to obtain government procurement contracts, only 2 had resulted in debarment from public contracting. Examples of companies excluded for corruption from public procurement outside of the Multilateral Development Banks are few and far between. Even the US which has a relatively advanced debarment regime and which debars or suspends around 5000 entities a year from public procurement, appears to debar very few for foreign bribery and corruption.
The UK is no exception. Despite laws in place since 2006 based on EU Directives, which require companies convicted of corruption and other serious crimes to be excluded from public contracts, the UK does not appear to have ever excluded a company from public procurement. Last autumn the Department for International Development (DFID) confirmed that no companies either convicted of or suspected of corruption had been excluded from its procurement processes since new Procurement Regulations kicked in from early 2015. This is despite the fact that between 2015 and 2016, there were 28 cases of proven fraud across 11 central departments and 60 cases of proven fraud across 20 country offices in DFID only 5 of which appear to have been referred to law enforcement bodies. It is worth remembering that first UK company to enter a guilty plea for foreign bribery back in 2009, Mabey and Johnson, won a single-sourced contract with the Department for International Development within 8 months of its conviction. In 2012, meanwhile, DFID entered an MOU with the World Bank on fighting corruption in which it agreed to share information and undertake parallel and joint investigations. The absence of any exclusions seems somewhat surprising.
Likewise, the UK’s Ministry of Defence (MOD) confirmed that it had not excluded any companies for convictions or suspicions of corruption since 2011 when Defence procurement regulations allowing exclusion were introduced. Yet in the same time period, the MOD had referred 44 allegations of corruption to UK law enforcement agencies, 34 of them involving companies.
The lack of exclusion from public procurement in practice appears to cut across all government bodies. Sweett, which was the first UK company to plead guilty to a Section 7 (failure to prevent) offence under the Bribery Act in December 2015, has subsequently won no fewer than 30 contracts with local authorities all over the UK.
So having persuaded 43 countries to sign up to the commitment to exclude corrupt bidders, did the UK have its own bold new vision to implement that commitment domestically? The answer is unfortunately not. At the Summit, the UK declared that it would establish a new ‘conviction check’ on bidders for public procurement contracts. The OECD Working Group on Bribery reported in its March UK review that the UK was preparing a pilot project to cross-check self-certifications by winning bidders as to whether they had convictions against the Police National Computer. This was, it should be noted, instead of implementing the OECD’s recommendations made back in 2012 that the UK should establish a national register of convicted companies for contracting authorities to consult, and provide training to procurement officials.
The new conviction check proposal, however, appears to be an attempt by the UK’s under-performing central procurement agency, the Crown Commercial Service, to get away with doing as little as possible while appearing to do something. The proposal is laughable for a number of reasons. Procurement officials are already obliged legally to check the winning bidder’s self-certification, so there is nothing new to the proposal. The UK’s Police National Computer meanwhile does not currently contain convictions by the Serious Fraud Office – the prosecutor of the most serious and complex corporate fraud and corruption – making any conviction check incomplete. And finally, there is no requirement under the UK’s standard bidding questionnaires to self-declare convictions under Section 7 of the Bribery Act – the UK’s main corporate bribery offence – despite the fact that the government has said that it should be a discretionary grounds for exclusion from public contracts.
So what could the UK be doing if it was serious about taking steps towards excluding corrupt bidders? There are some immediate measures the UK could take, including setting up a national register of convicted companies for procurement officials to check (something that will be quicker and cheaper than any conviction check), much like the system the US already operates and countries like Germany are looking to introduce. It should ensure that companies are required to declare all convictions for Section 7 style offences on bidding forms. And it should provide centralised training and advice to procurement officials so that excluding corrupt bidders is a consistently applied policy. Individual departments which face high corruption risks such as the Department for International Development and the Ministry of Defence should be looking seriously at operating their own sectoral exclusion lists (for DFID this should include those companies debarred by the Multilateral Development Banks) and developing more administrative measures for suspending and excluding companies.
Ultimately, if the UK wants to show that it is leading the way in implementing the commitments made at its own Summit a year ago, it needs to end its current exercise in under-achievement and take some bold steps towards ensuring corrupt bidders will in practice be excluded from government contracts.