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Preventing Corruption in Construction Projects: The experience of the Integrity Pact

Preventing Corruption in Construction Projects: The experience of the Integrity Pact Michael H. Wiehen 1 November 2008. The TI Integrity Pact (IP) Mutual commitment/pledge by principal and bidders to refrain from all acts of bribery (and by winning bidder, "throughout execution phase")

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Preventing Corruption in Construction Projects: The experience of the Integrity Pact

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  1. Preventing Corruption in Construction Projects: The experience of the Integrity Pact Michael H. Wiehen 1 November 2008

  2. The TI Integrity Pact (IP) • Mutual commitment/pledge by principal and bidders to refrain from all acts of bribery (and by winning bidder, "throughout execution phase") • Commitment by bidders to disclose all payments to third parties • Sanctions for violators (bidders and staff of principal) • Loss of Contract • Loss of bid or performance bond • Liability for Damages (to principal and competitors) • Debarment • Civil, criminal, administrative sanctions for staff • Arbitration • Monitoring by Civil Society (external expert monitor)

  3. Through Monitoring, Civil Society plays a key role in holding government and bidders to task • Monitor must have full access to all documents and parties • Advantage of IP: • Bidders can refrain from paying bribes in the knowledge that their competitors are covered by the same pledge – a controlled environment • Demand: • Normally government departments impose the IP; • but companies, about to bid for a major government contract, can also approach the principal and demand the use of an Integrity Pact

  4. Track Record of the IP: • Several hundred IPs in place, globally • Feedback generally very positive • Compliance rate high • Significant savings in numerous cases (10-60%) • Sanctions applied (debarment – Italy) • Bidders usually quickly convinced of benefits • Critical importance of Monitor (prevention and repression aspects)

  5. Selected Examples of Integrity Pacts: • Germany - Berlin International Airport - All contracts • Initiative: Airport Company (history of corruption) • IP mandatory • IP covers Bidding and Execution phases • Monitor: independent external expert, selected and supervised by TI-G • M has access to all documents (of Principal and bidders) and all meetings, can meet bidders • M monitors content and process • In case of suspicion: M seeks correction from (i) Management (ii) Board Chair (iii) Publ.Prosecutor • To date, 37 major contracts awarded, no problems • Bidders raised no complaints • No evidence of cost savings yet

  6. Mexico - El Cajon Hydroelectric Dam (largest ever in M.) • Unilateral Integrity Declarations by Principal and Bidders, submitted to TI-Mex • Monitoring of bidding/contracting process only • by Social Witness (independent and technically competent expert) - appointed by TI-Mex and representing TI-Mex • TI-Mex itself maintained contact with bidders and monitored bid evaluation (bidders: “highest risk“) • Social Witness published final assessment report • Result: Winning bid 8% below estimate • Result: Government decided to apply IP, appoint Social Witnesses for additional projects (La Yesca) • PowerCy modified its procurement processes and experiences more competition and lower prices

  7. Proven Impact of Integrity Pact- reduced investment costs- better quality construction- longer lasting infrastructure- encouraging competitive bids- increased confidence of bidders- increased trust of citizens in public administration and in NGOs

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