Transparency International

This is a guide for impact investors on how corruption can undermine environmental and social outcomes, and about how coordinating due diligence across business integrity and environmental and social workstreams can help identify these links. This guidance puts business integrity at the heart of impact investing.

The Integrity Pact was first introduced in the 1990s and since then has been applied across the world. A revival in 2015, including the implementation of a pilot project across 11 countries in the European Union, enabled a further update of the approach and for further lessons to emerge. These lessons include a better understanding of where the Pact might be applied to best effect as well as lessons on the internal workings of the Integrity Pact. It was on this basis that this guide was developed.

This guide is for civil society organisations (CSOs) interested in monitoring infrastructure projects. It describes how they can create an effective process to monitor publicly-financed infrastructure projects of public interest by adapting a Model Monitoring Agreement and Model Integrity Pact for Infrastructure (together known as “Model Agreements”).

Healthcare and public procurement both suffer from high levels of corruption and the point at which they converge, procurement within healthcare, is an acute vulnerability that is routinely exploited. But governments and civil society organisations are now taking action to protect the lives of citizens by implementing open contracting.

The proposition behind open contracting is that procurement reform requires a broad base of participation from outside government. Businesses must be able to compete for contracts and make sense of the market. The communities directly affected by procurement, and the groups and people that represent those communities, are often better placed than government to independently monitor the procurement process.

To facilitate this participation, governments must publish useful, timely and accessible information about the procurement process. Healthcare and anti-corruption efforts share a common principle: prevention is better than cure. In the long term, open contracting offers a route for governments to move from the procurement status quo of corruption, waste and inefficiency, to clean contracting, in which fairness, integrity and efficiency are the norms.

This report first outlines some of the major challenges in healthcare procurement before explaining how open contracting works and how it can support reform. Section two introduces different approaches to open contracting that have been used around the world. Finally, section three presents case studies of successful implementation from Honduras, Nigeria and Ukraine.

This publication covers the basics of Integrity Pacts and can be used as a tool for advocacy and awareness-raising.

Why do companies need Integrity Pacts?

It’s all too common for companies to encounter corruption during public procurement processes. The Organisation for Economic Co-operation and Development (OECD) Foreign Bribery Report states that 57 per cent of foreign bribery cases which it assessed related to public procurement.In the EU alone, corrupt bidding processes have increased annual contract costs by US$5 billion. The effects can be disastrous, including exposing companies to serious risks, such as:

• missed business opportunities, as businesses are competing in a field that is distorted by bribery;
• reputational damage, through association with corruption
• potentially heavy fines, under laws which have a global impact, such as the US Foreign Corrupt Practices Act or the UK Anti-Bribery Act;
• blacklisting and debarment from future bids (depending on jurisdiction).

A solution? Integrity Pacts.

Integrity Pacts bring a wealth of benefits to business including confidence in fair competition, protecting a company’s reputation, excluding corrupt competitors and acting as an important public signal of a company’s commitment to transparency and integrity.

Integrity Pacts have been used in more than 18 countries worldwide, among others in Argentina, Bulgaria, China, Colombia, Ecuador, Germany, Hungary, India, Indonesia, Italy, Latvia, Mexico, Pakistan, Panama, Paraguay, Peru, Rwanda, South Korea and Zambia. They have been implemented at various levels and across numerous sectors.

This paper includes an overview of how an Integrity Pact can be initiated and their benefits.

The Global Corruption Report (GCR) on sport is the most comprehensive analysis of sports corruption to date. It consists of more than 60 contributions from leading experts in the fields of corruption and sport, from sports organisations, governments, multilateral institutions, sponsors, athletes, supporters, academia and the wider anti-corruption movement.

The purpose of this publication – which was written collaboratively in only four days – is to contribute to the already existing literature on Integrity Pacts, but from a civil society perspective. This document is based on the experience of the Transparency International global network.

Representatives from 10 Transparency International chapters were brought together to review the challenges that are faced in the different stages of Integrity Pacts, and to document the alternatives they have found to overcome these challenges. These include challenges from the moment Integrity Pact implementation is being considered, until the time when the final results are evaluated.

This guide does not intend to convince anyone of the usefulness of Integrity Pacts: rather, it is designed for those who are considering implementing, or have already decided to implement, an Integrity Pact. It is for those who are new to Integrity Pacts – who have questions about where, when and how to start implementing them.

This handbook seeks to provide hands-on guidance to those contracting authorities and bidders who are willing to act for a more transparent public procurement market by pursuing an integrity pact. Moreover, it is aimed at providing additional information to all those who wish to know more about this anti-corruption tool.

The handbook builds upon discussions at a February 2014 conference in Budapest, in the context of EU examination of the possibility of using integrity pacts to help safeguard EU funds. The conference aimed to provide EU and national institutions, as well as civil society, a deeper understanding of the IP as a tool for promoting integrity. The handbook thus thus builds upon the know-how gathered at the conference and presents the use of integrity pacts in practical ways.

This guide by Transparency International provides government officials, businesses and civil society with a practical introduction to the risks of corruption in public procurement. It outlines key principles and minimum standards which, when respected, can protect public contracting from corruption.