Anti-corruption Provisions for Procurement in TTIP

The TTIP Procurement Chapter should incorporate strong anti-corruption provisions.

A new European Commission report, which examined corruption in the European Union (EU), concluded that public procurement in the Member States is particularly prone to corruption.  According to the EU report, a 2013 survey on corruption relevant to business found that more than three out of ten (32%) European companies participating in public procurement cited corruption as the reason they were unable to win a contract.  Indeed, more than one-half of all companies viewed corruption as widespread – 56% in procurement managed by national authorities and 60% in regional or local procurement.  To address the corruption issue, the United States and the EU should include strong and effective anti-corruption provisions in the Transatlantic Trade and Investment Partnership (TTIP).

The EU Anti-Corruption Report, which was sent to the EU Council and Parliament on February 3, 2014, pointed to four main types of corrupt practices based on a 2013 study:

  • bid rigging (in the form of bid suppression, complementary offers, bid rotation and sub-contracting) when the contract is “promised” to one supplier with or without the consent of public officials;
  • kickbacks (bribes);
  • conflicts of interest; and
  • other irregularities, such as the failure of public officials to follow the required procedures.

The EU Report described some of the most frequently occurring problems resulting from corruption as including:  drafting of tailor-made specifications to favor certain bidders, splitting of public tenders in smaller bids to avoid competitive procedures, disproportionate and unjustified selection criteria, unjustified exclusion of bidders, unjustified use of emergency procedures and unjustified exceptions from publication of bids.

These types of practices should be addressed in the TTIP since it is intended to be a comprehensive agreement and both the United States and the EU have identified expansion of procurement opportunities as objectives in the TTIP negotiations.  The value of new procurement opportunities could be diminished significantly by the prevalence of corruption.

The TTIP measures should go beyond those in the recently revised WTO Government Procurement Agreement (GPA).  The revised GPA recognizes in its preamble the importance of avoiding conflicts of interest and corrupt practices, in accordance with applicable international instruments, such as the United Nations Convention Against Corruption.  However, the text of the GPA only includes a general admonition to procuring entities to conduct their procurement in a transparent and impartial manner so as to avoid conflicts of interest and prevent corrupt practices.

The TTIP measures should also go beyond the provisions that are typically found in U.S. free trade agreements (FTAs).  Those FTAs generally include a provision on Ensuring Integrity in Government Procurement Practices that requires the parties to ensure that criminal or administrative penalties are available to sanction the giving or taking of bribes in procurement.  The TTIP parties should develop more extensive measures tailored to the types of corrupt practices identified in the EU report.

In the TTIP negotiations, the United States and the European Union should set new standards for addressing corruption in government procurement.  Since corruption in procurement is a problem throughout the world, effective TTIP standards could provide a model for other agreements and other countries.

Jean Heilman Grier

February 5, 2014

Related Posts

US and EU’s Procurement Objectives in TTIP Negotiations

WTO Government Procurement Agreement: Background