Integrity Pact : an anti
corruption tool
Anupama Jha
Executive Director: Transparency International India
Agenda
•
•
•
•
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Corruption Perception Index
Bribe Payers’ Index
Perception of Fraud in India
What is Integrity Pact
Why companies should sign?
Corruption Perception Index
India Corruption Perception Index
90
85
84
2008
2009
80
70
72
70
60
50
40
30
20
10
0
2006
2007
Source:
Perception of fraud in India
75% : Felt the overall
incidence of fraud was
rising.
45% : Fraud (Suspected
& Actual) has increased
within their organization.
* Source: India Fraud Survey Report 2010’ by KPMG.
Perception of fraud in India
•
81%
:
Financial
statement fraud is a
major issue in India.
63%: Pursuit of meeting
market expectations
61%: Performance based
remuneration
* Source: India Fraud Survey Report 2010’ by KPMG.
“Enemy within” poses the highest risk
* Source: India Fraud Survey Report 2010’ by KPMG.
What is Integrity Pact?
• Formal Agreement between government authority
and bidders for public contracts
– Establishes rights and obligations between parties
– Provides enforceable sanctions in case of violation
• Process occurring during all stages of procurement
– Increased Transparency
– Independent External monitoring
– Detection of risks/red flags, facilitating corrective
measures
• Applicable to all sectors & types of contracts
What is Integrity Pact for?
Objectives:
•
enables companies to abstain from bribing and malpractices
– level playing field: discourages others from
corruption/malpractices
– authority curbs corruption/extortion
•
enables governments to reduce high costs and distorting impact
of corruption, to achieve social, economic and development
goals
•
builds up public confidence on the procurement system and the
government/authority and improves reputation and image
•
improves investment climate
Integrity Pact in India
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Ministry of Defence : In its 2008 Procurement Policy, it has proposed to adopt
IP in defense deals of Rs 100 crores and above, and Rs 20 crores in its
Enterprises
So far, 39 CPSUs are committed to adopt IP both in letter and sprit – Oil &
Natural Gas Corp.- being the first (April 17, 2006). List includes IOCL, CIL and
its subsidiaries , BPCL, HPCL, SAIL, NTPC, BHEL etc.
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Advantages of Integrity Pact
• Feasible - IPs can often be implemented without
legislative reforms
• Collaborative - Built on trust and support among
parties
• Preventive - Tackles corruption risks from the outset
• Inclusive - Involves Civil Society as active contributor
and as channel to increase legitimacy and public trust
in authority/government
• Saves costs
• Saves time – Faster processing of bid and contract,
reduces frivolous interventions and false complaints
Violations and Consequences
• If a Counterparty commits any violation of the Integrity
Pact, it may loose Bid Security and Performance
Bond. In addition, the Principal will terminate any
current contract and business relationship with such
Counterparties and their associates.
• The Principal would black list and exclude the
Counterparty from future dealings until the IEM is
satisfied that the Counterparty will not commit any
violation in future.
• The Counterparty will be liable to damages as
determined by the IEM.
• The Principal may initiate criminal proceedings
against violating Counterparties
Why implement IP?
• As Public Official
– Saves public money/Increases value for money and
quality
– Helps increase credibility and legitimacy of the process
– Reduces unnecessary complaints/problems.
• As Private Bidder
– Levels the playing field
– Obligations and responsibilities are upfront and
transparent
– Protection against corrupt, illegal and improper
demands
– Trusted channel for complaints
Why implement IP?
• As NGO (Civil Society)
– Opportunity to participate in short and long term changes
by contributing to integrity in public procurement
– Support increased trust & credibility on public procurement
- defend public interest
• As anyone interested in better government performance (eg
Donors)
– A way to start from facts and not theory or law: “roll up
sleeves” to change actual behavior
– A way to improve aid effectiveness and contribute to deliver
better services to the needy and deserving
Experience of various PSU’s
• Processing of contracts is faster
• Improvement in the image and general
perception about the company
• Reduced lawsuits and arbitrations .
• All frivolous interventions and false complaints
cease.
• Competitive rates – no delay in payments, no
bribing etc from vendors, improved vendor
satisfaction ensuring overall efficiency and low
cost of production
Thanks!
Questions?
Anupama Jha
Executive Director: Transparency International India