Public Procurement And Very Private Benefits

Public Procurement And Very Private Benefits

Public Procurement and​ Very Private Benefits
in​ every national budget, there is​ a​ part called Public Procurement. this​ is​ the portion​ of​ the budget allocated to​ purchasing services and​ goods for​ the various ministries, authorities and​ other arms of​ the executive branch. it​ was the famous management consultant, Parkinson, who once wrote that government officials are likely to​ approve a​ multibillion​ dollar nuclear power plant much more speedily that they are likely to​ authorize a​ hundred dollar expenditure on​ a​ bicycle parking device. this​ is​ because everyone came across 100 dollar situations in​ real life but precious few had the fortune to​ expend with billions of​ USD.
This, precisely, is​ the problem with public procurement people are too acquainted with the purchased items. They tend to​ confuse their daily, householdtype, decisions with the processes and​ considerations which should permeate governmental decision​ making. They label perfectly legitimate decisions as​ corrupt and​ totally corrupt procedures as​ legal or​ merely legitimate, because this​ is​ what was decreed by the statal mechanisms, or​ because this​ is​ the law.
Procurement is​ divided to​ defence and​ nondefence spending. in​ both these categories but, especially in​ the former there are grave, well founded, concerns that things might not be all what they seem to​ be.
Government from Indias to​ Swedens to​ Belgiums fell because of​ procurement scandals which involved bribes paid by manufacturers or​ service providers either to​ individual in​ the service of​ the state or​ to​ political parties. Other, lesser cases, litter the press daily. in​ the last few years only, the burgeoning defence sector in​ Israel saw two such big scandals the developer of​ Israels missiles was involved in​ one and​ currently is​ serving a​ jail sentence and​ Israels military attache to​ Washington​ was implicated though, never convicted in​ yet another.
But the picture is​ not that grim. Most governments in​ the West succeeded in​ reigning in​ and​ fully controlling this​ particular budget item. in​ the USA, this​ part of​ the budget remained constant in​ the last 35! years at​ 20% of​ the GDP.
There are many problems with public procurement. it​ is​ an obscure area of​ state activity, agreed upon​ in​ customized tenders and​ in​ dark rooms through a​ series of​ undisclosed agreements. at​ least, this​ is​ the public image of​ these expenditures.
The truth is​ completely different.
True, some ministers use public money to​ build their private empires. it​ could be a​ private business empire, catering to​ the financial future of​ the minister, his cronies and​ his relatives. These two plagues cronyism and​ nepotism haunt public procurement. The spectre of​ government official using public money to​ benefit their political allies or​ their family members haunts public imagination​ and​ provokes public indignation.
Then, there are problems of​ plain​ corruption​ bribes or​ commissions paid to​ decision​ makers in​ return for​ winning tenders or​ awarding of​ economic benefits financed by the public money. Again, sometimes these moneys end in​ secret bank accounts in​ Switzerland​ or​ in​ Luxembourg. at​ other times, they finance political activities of​ political parties. this​ was rampantly abundant in​ Italy and​ has its place in​ France. The USA, which was considered to​ be immune from such behaviours has proven to​ be less so, lately, with the Bill Clinton​ alleged election​ financing transgressions.
But, these, with all due respect to​ clean hands operations and​ principles, are not the main​ problems of​ public procurement.
The first order problem is​ the allocation​ of​ scarce resources. in​ other words, prioritizing. The needs are enormous and​ ever growing. The US government purchases hundreds of​ thousands of​ separate items from outside suppliers. Just the list of​ these goods not to​ mention​ their technical specifications and​ the documentation​ which accompanies the transactions occupies tens of​ thick volumes. Supercomputers are used to​ manage all these and, even so, it​ is​ getting way out of​ hand. How to​ allocate ever scarcer resources amongst these items is​ a​ daunting close to​ impossible task. it​ also, of​ course, has a​ political dimension. a​ procurement decision​ reflects a​ political preference and​ priority. But the decision​ itself is​ not always motivated by rational let alone noble arguments. More often, it​ is​ the by product and​ end result of​ lobbying, political hand​ bending and​ extortionist muscle. this​ raises a​ lot of​ hackles among those who feel that were kept out of​ the pork barrel. They feel underprivileged and​ discriminated against. They fight back and​ the whole system finds itself in​ a​ quagmire, a​ nightmare of​ conflicting interests. Last year, the whole budget in​ the USA was stuck not approved by Congress because of​ these reactions and​ counterreactions.
The second problem is​ the supervision, auditing and​ control of​ actual spending. this​ has two dimensions
1. . How to​ make sure that the expenditures match and​ do not exceed the budgetary items. in​ some countries, this​ is​ a​ mere ritual formality and​ government departments are positively expected to​ overstep their procurement budgets. in​ others, this​ constitutes a​ criminal offence.
2. . How to​ prevent the criminally corrupt activities that we have described above or​ even the non​ criminal incompetent acts which government officials are prone to​ do.
The most widespread method is​ the public, competitive, tender for​ the purchases of​ goods and​ services.
But, this​ is​ not as​ simple as​ it​ sounds.
Some countries publish international tenders, striving to​ secure the best quality in​ the cheapest price no matter what is​ its geographical or​ political source. Other countries are much more protectionist notably Japan and​ France and​ they publish only domestic tenders, in​ most cases. a​ domestic tender is​ open only to​ domestic bidders. Yet other countries limit participation​ in​ the tenders on​ various backgrounds
the size of​ the competing company, its track record, its ownership structure, its human rights or​ environmental record and​ so on. Some countries publish the minutes of​ the tender committee which has to​ explain​ WHY it​ selected this​ or​ that supplier. Others keep it​ a​ closely guarded secret to​ protect commercial interests and​ secrets.
But all countries state in​ advance that they have no obligation​ to​ accept any kind of​ offer even if​ it​ is​ the cheapest. this​ is​ a​ needed provision​ the cheapest is​ not necessarily the best. The cheapest offer could be coming from a​ very unreliable supplier with a​ bad past performance or​ a​ criminal record or​ from a​ supplier who offers goods of​ shoddy quality.
The tendering policies of​ most of​ the countries in​ the world also incorporates a​ second principle that of​ minimum size. The cost of​ running a​ tender is​ prohibitive in​ the cases of​ purchases in​ small amounts.
Even if​ there is​ corruption​ in​ such purchases it​ is​ bound to​ cause less damage to​ the public purse than the costs of​ the tender which is​ supposed to​ prevent it!
So, in​ most countries, small purchases can be authorized by government officials larger amounts go through a​ tedious, multiphase tendering process. Public competitive bidding is​ not corruptionproof​ many times officials and​ bidders collude and​ conspire to​ award the contract against bribes and​ other, noncash, benefits. But we still know of​ no better way to​ minimize the effects of​ human greed.
Procurement policies, procedures and​ tenders are supervised by state auditing authorities. The most famous is, probably, the General Accounting Office, known by its acronym the GAO.
It is​ an unrelenting, very thorough and​ dangerous watchdog of​ the administration. it​ is​ considered to​ be highly effective in​ reducing procurement related irregularities and​ crimes. Another such institutions the Israeli State Reviser. What is​ common​ to​ both these organs of​ the state is​ that they have very broad authority. They possess by law judicial and​ criminal prosecution​ powers and​ they exercise it​ without any hesitation. They have the legal obligation​ to​ review the operations and​ financial transactions of​ all the other organs of​ the executive branch. Their teams select, each year, the organs to​ be reviewed and​ audited. They collect all pertinent documents and​ correspondence. They cross the information​ that they receive from elsewhere. They ask very embarrassing questions and​ they do it​ under the threat of​ perjury prosecutions. They summon​ witnesses and​ they publish damning reports which, in​ many cases, lead to​ criminal prosecutions.
Another form of​ review of​ public procurement is​ through powers granted to​ the legislative arm of​ the state Congress, Parliament, Bundestag, or​ Knesset. in​ almost every country in​ the world, the elected body has its own procurement oversight committee. it​ supervises the expenditures of​ the executive branch and​ makes sure that they conform to​ the budget. The difference between such supervisory, parliamentary, bodies and​ their executive branch counterparts is​ that they feel free to​ criticize public procurement not only in​ the context of​ its adherence to​ budget constraints or​ its cleanliness but also in​ a​ political context. in​ other words, these committees do not limit themselves to​ asking HOW but also engage in​ asking WHY. Why this​ specific expense in​ this​ given time and​ location​ and​ not that expense, somewhere else or​ some other time. These elected bodies feel at​ liberty and​ often do intervene in​ the very decision​ making process and​ in​ the order of​ priorities. They have the propensity to​ alter both quite often.
The most famous such committee is, arguably, the Congressional Budget Office CBO. it​ is​ famous because it​ is​ nonpartisan and​ technocratic in​ nature. it​ is​ really made of​ experts which staff its offices.
Its apparent and​ real neutrality makes its judgements and​ recommendations a​ commandment not to​ be avoided and, almost universally, to​ be obeyed. The CBO operates for​ and​ on​ behalf of​ the American Congress and​ is, really, the research arm of​ that venerable parliament. Parallelly, the executive part of​ the American system the Administration​ has its own guard against waste and​ worse the Office of​ Management and​ Budget OMB.
Both bodies produce learned, thickset, analyses, reports, criticism, opinions and​ recommendations. Despite quite a​ prodigious annual output of​ verbiage they are so highly regarded, that virtually anything that they say or​ write is​ minutely analysed and​ implemented to​ the last letter with an air of​ awe.
Only a​ few other parliaments have committees that carry such weight. The Israeli Knesset have the extremely powerful Finance Committee which is​ in​ charge of​ all matters financial, from appropriations to​ procurement. Another parliament renowned for​ its tight scrutiny is​ the French Parliament though it​ retains very few real powers.
But not all countries chose the option​ of​ legislative supervision. Some of​ them relegated parts or​ all of​ these functions to​ the executive arm.
in​ Japan, the Ministry of​ Finance still scrutinizes and​ has to​ authorize the smallest expense, using an army of​ clerks. These clerks became so powerful that they have the theoretical potential to​ secure and​ extort benefits stemming from the very position​ that they hold. Many of​ them suspiciously join​ companies and​ organizations which they supervised or​ to​ which they awarded contracts immediately after they leave their previous, government, positions. The Ministry of​ Finance is​ subject to​ a​ major reform in​ the reformbent government of​ Prime Minister Hashimoto. The Japanese establishment finally realized that too much supervision, control, auditing and​ prosecution​ powers might be a​ Pyrrhic victory it​ might encourage corruption​ rather than discourage it.
Britain​ opted to​ keep the discretion​ to​ use public funds and​ the clout that comes with it​ in​ the hands of​ the political level. this​ is​ a​ lot like the relationship between the butter and​ the cat left to​ guard it. Still, this​ idiosyncratic British arrangement works surprisingly well. All public procurement and​ expenditure items are approved by the EDX Committee of​ the British Cabinet =inner, influential, circle of​ government which is​ headed by the Ministry of​ Finance. Even this​ did not prove enough to​ restrain​ the appetites of​ Ministers, especially as​ quid pro quo deals quickly developed. So, now the word is​ that the new Labour Prime Minister will chair it​ enabling him to​ exert his personal authority on​ matters of​ public money.
Britain, under the previous, Tory, government also pioneered an interesting and​ controversial incentive system for​ its public servants as​ top government officials are euphemistically called there. They receive, added to​ their salaries, a​ portion​ of​ the savings that they effect in​ their departmental budgets. this​ means that they get a​ small fraction​ of​ the end of​ the fiscal year difference between their budget allowances and​ what they actually spent. this​ is​ very useful in​ certain​ segments of​ government activity but could prove very problematic in​ others. Imagine health officials saving on​ medicines, or​ others saving on​ road maintenance or​ educational consumables. This, naturally, will not do.
Needless to​ say that no country officially approves of​ the payment of​ bribes or​ commission​ to​ officials in​ charge of​ public spending, however remote the connection​ is​ between the payment and​ the actions.
Yet, law aside many countries accept the intertwining of​ elites business and​ political as​ a​ fact of​ life, albeit a​ sad one. Many judicial systems in​ the world even make a​ difference between a​ payment which is​ not connected to​ an identifiable or​ discernible benefit and​ those that are. The latter and​ only the latter are labelled bribery.
Where there is​ money there is​ wrongdoing. Humans are humans and​ sometimes not even that.
But these unfortunate derivatives of​ social activity can be minimized by the adoption​ of​ clear procurement policies, transparent and​ public decision​ making processes and​ the right mix of​ supervision, auditing and​ prosecution. Even then the result is​ bound to​ be dubious, at​ best.

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