22 - Ensuring integrity and competition in public procurement markets: a dual challenge for good governance

Summary

Introduction

Ensuring the effective functioning of public procurement markets necessitates addressing two distinct but interrelated challenges: (i) ensuring integrity in the procurement process (i.e. preventing corruption on the part of public officials); and (ii) promoting effective competition among suppliers, including by preventing collusion among potential bidders. These two challenges sometimes merge, for example where public officials are paid to turn a blind eye to collusive tendering schemes or to release information that facilitates collusion (e.g. the universe of potential bidders or the bids themselves). However, analytically, preventing corruption on the part of public officials and promoting effective competition between potential suppliers are separable challenges: the former (corruption) is first and foremost a principal–agent problem in which the official (i.e. the ‘agent’) enriches himself at the expense of the government or the public (i.e. the ‘principal’); while the latter (promoting competition) involves preventing collusive practices among potential suppliers and removing barriers that unnecessarily impede healthy competition.

The issue of ensuring integrity in public procurement processes has rightly received a good deal of attention at the international level in recent years. It is addressed by various international instruments, including: (i) the UN Convention Against Bribery and Corruption; (ii) the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; and (iii) the OECD Revised Recommendation on Combating Bribery in International Business Transactions.