How did the winners (TOP 30) in public procurement adhere to anti-corruption compliance in 2019?

Background

Article 62 of the Law of Ukraine "On Prevention of Corruption"  requires participants in procurement deals worth more than UAH 20 million to have: 

  • anti-corruption program
  • anti-corruption commissioner.

A typical anti-corruption program, in turn, assumes a confidential message tool.

In other words, if you know about corruption in public procurement, you should have the opportunity to complain not only to law enforcement agencies but actually to the participant himself. Such a requirement is an integral part of world practices, but how does it work in Ukraine?

We made the first approach in 2019, exploring the TOP 100 state-owned enterprises. This time we are looking at a legal entity of any form of ownership. Our selection criterion is the sum of tenders won in 2019. We are talking about billions of hryvnia, so we expected full anti-corruption compliance.

In addition, in accordance with the Law of Ukraine on public procurement, "the customer is obliged to reject the tender proposal" when "the legal entity that is a participant in the procurement procedure (except for non-residents) does not have an anti-corruption program if the cost of purchasing goods, services or works is equal to or exceeds 20 million hryvnias (including by lot). " Therefore, the responsibility of customers in case of non-compliance is also obvious.

Research

We've selected the TOP 30 companies by the volume of won positions in 2019, the list of which was formed using the BI Prozorro system.

The total amount of won propositions for the companies covered amounted to UAH 105, 35 billion. — that is 26.8% of the total.

In addition to anti-corruption programs, we also looked for orders assigning commissioners, contacts of anti-corruption hotlines, and simply the availability of a functioning website.

Results

Of the companies reviewed, four do not have an official website (the sum of the won positions for these four companies is UAH 20.48 billion).

12 out of 30 companies have no Anti-corruption program, and only two companies have it published on the official website, the remaining 16 posted it only as a part of the tender documents.

Companies that do not have an anti-corruption program won tenders in 2019 in the amount of UAH 27.6 billion.

A hotline for reporting corruption offences, including the ones occurring during a tender, is available in only 14 out of 30 enterprises, while six of them have only mentioned about a hotline, and its contacts are not publicly available.
Only 4 companies participating in public procurement have a full-fledged hotline, which is shown on their websites.

Companies that have, or are claimed to have an anti-corruption hotline, implemented the following communication channels:

  • Phone - 10 companies;
  • Е-mail - у 6 companies;

  • Personal reception to anti-corruption commissioner - 1 company;

  • Web form - 3 companies.

In general, the requirement of the availability of the Anti-corruption program and the hotline with at least three communication channels implemented is met only by 4 out of 30 companies studied.

12 companies fell into the "red zone" for the lack of anti-corruption programs and the opportunity to complain about violations of the law.

The remaining 14 companies formally meet the requirements of the law, as they provided the Anti-corruption program in the set of tender documents, but do not have fully implemented mechanisms for its enforcement.

We presented the results of the research on June 4, 2020, during the online conference of the Corporate Governance Professional Association: “What's new in anti-corruption compliance?”.

We also share the presentation of the speech:

Also, in the course of the research, we revealed several inconveniences or "bugs" in the work of the Prozorro system, which, we think, deserve to be mentioned.

Firstly, there are errors in the registries and proper names. Due to an error in the amounts of the contracts we had to exclude two participants from our research.

Secondly, the Prozorro platform does not have requirements for procurement participants regarding the volume and quality of downloaded documents. We found out that

The participant’s anti-corruption program is published on the platform only at the request of the customer, and this fact introduces a considerable error into the research.

Given the indicated, as well as the unsatisfactory level of compliance with the requirements of the law, we decided to deepen our study...

So stay tuned, the research will be continued!

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