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Civil Society Engagement: myths and realities. A case from the Integrity Pact experience.

Eduardo Bohórquez and Juanita OlayaTransparencia Mexicana Transparency International –

Secretariat

Transparency International

November 2003

Overview

• The case for Civil Society involvement in preventing corruption in public contracting

• Civil Society’s involvement: myths and limits

• Practical Implications for policy makers and CSOs

The impact of corruption in Governance

• Could the government be trusted for the decisions they are making?

• Was the final outcome of these decisions altered by the procurement or contracting process?

• Were fiscal resources spent wisely?

• Is the Government trusted to do anything about (against) corruption at all? And then on, on other issues?

The case for CSOs involvement in preventing corruption in public contracting:

The cost of corruption from the citizen’s and firms’ perspective:

On average, households paid USD $9.50 for each bribe

On aggregated figures, this accounts for USD $2.3 billions (23,400 millions of pesos) in petty corruption

Households in Mexico use 6.9% of their income just for bribes

Households in Mexico under one minimum wage use 13.9%

Firms worldwide: percentage of the contract value typically offered in unofficial payments when firms (in your industry) do business with the government: between 5% and 10% (WBES2000 Survey).

Firms worldwide: more than 80% of the firms pay up to 25% of their revenue per annum as unofficial payments to government officials. (WBES2000 Survey).

How harmful is corruption

in Public Contracting?

• It has been estimated that about 68% of government expenditure (world average) turns one way or another into contracts (e.g. on a yearly basis, the Federal Mexican government participates in more than 15,000 – 20,000 public procurement processes).

• Experts estimate that corruption can add up to 25% to the costs of contracting.

• Low levels of trust in government: procurement and contracting are important sources of social distrust.

• Citizen’s needs: unattended.

Is there a rolefor Civil Society in Procurement?

• An opportunity to attend unforeseen consequences of the law and to act accordingly

• An independent facilitator to the contracting process or procurement law enforcement

• A final chance to directly address the loopholes of the contracting or procurement laws

• A source of support and sustainability for public policy

• A tool for conflict management and good policy implementation

• CSOs can contribute in bringing balance vs. powerful stakeholders.

Civil Society‘s involvement

The benefits

• Safeguarding integrity, but much more relevant, trying to restore trust in public institutions

• Allows civil society and public opinion to understand the rationale behind a public decision

• Provides an open discussion about the quality of the public decision

• A third party is conscious about the output of a procurement process but also about the final outcome

• Preventive role

• Helps important initiatives to survive government change

IP: the model and some results

• The model:

– Collaborative: public sector, private sector and Civil Society

– Based on political will

– Explicit agreement: levels the playing field, facilitates law enforcement, facilitates acces to information

– Creates monitoring role

• Current application– Different versions retaining essential elements worldwide

(aprox 12 different countries) on more than 100 contracting processes.

– Assesment on its way

IP: the model and some results

Reported impact, some examples.

• Savings. For example:

– Colombia technological turnaround of the -Banco Agrario- ( 2002), finished with an

awarding price 30% below the budgeted price

– Pakistan: K-II Greater Karachi Water Supply Scheme (2001-2002) the Karachi Water

and Sewerage Board (KW&SB) included the application of the IP concept in the

contracting process for consultants.

• Trust. When losing bidders say: “we are unhappy that they lost, but know we lost fairly”

• Sanctions. In some countries, companies have been blacklisted for violating the Pact.

( i.a. Italy, Korea)

The Myths

• Civil Society engagement is

1. The panacea

2. An Unncessary hassle: pandora box for intruders

3. Another word for lobbying

4. Is Not-Civil or Not-Society

• We all know what Civil Society is

• Civil Society is the same everywhere

The Limits

• Unbalanced interests, the direct output (a winner) vs. the final purpose and outcomes.

• An “early warning system”, like civil society monitoring in public procurement, is not a permanent solution for a problem: room for future legal reform.

• The importance of keeping a comprehensive approach to government’s overall operation.

• When engagement backfires: misunderstanding civil society, enforcing prejudice and exaggerating limitations.

• Daily life is difficult enough: understanding priorities and transaction costs.

The Limits

• What do we MEAN by Civil Society? Definitions and approaches vary from country to country.For example

– Arab world: limitations to freedom of speech and association, local-type organizations, non/representativeness, no tax payers. Is there a Civil Society?

– Eastern Europe: government was too big? Distrust in law, government and institutions..who trusts who?

– Asia: role of ethnicity and religion.

• The test: what stakeholders are not having a voice in the process but do have a say in it?

Practical Implications

• The role of political will and firms‘ social responsibility: without it, it does not happen.

• The difference between power and authority: losing power may give authority and thus give more power afterwards.

• Technical capacity on all sides is crucial at making participation productive and constructive.

• No news is good news: success is not appealing to the Media.

• Local dynamics are wiser.

• International civil society also exists.

• A different sense of government: balanced involvement, cannot serve as an excuse to postpone Govmt. Reform.

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