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ETHICS IN PUBLIC PROCUREMENT
Ajay Adhikari
Email: ajay3adhikari@gmail.com
Abstract
Ethics has always been a major subject of discussion in public procurement. This study intends to
briefly review different kinds of risks and international initiatives to address them. It further
highlights some of the public procurement activities and measures in place in Nepal. The case
studies presented in this article reveal that the procurement proceedings are not going the desired
way and it also involves some risks. Some ways forward to improve the procurement proceedings
have been proposed so that ethics could be maintained. The article concludes that effective
implementation of legal provisions along with the increased roles of civil society especially during
procurement proceedings, appropriate motivation measures to boosting up morale of the public
personnel and implementation of technological tools could improve the quality of procurement
proceedings in Nepal.
1. Introduction
Public procurement means acquisition of goods, consultancy services or other services or
carrying out or causing to be carried out any construction works, by a public entity (PPA,
2007). It is a process of obtaining office equipment and consumables, services of
intellectual experts and hiring of other requirements. Furthermore, development activities
comprise construction of infrastructure either by public entity itself or by being engaged
through contract agreement with construction firms. According to Wikipedia, government
procurement, also called public tendering or public procurement, is the procurement of
goods and services on behalf of the public authority, such as government agency
(Wikipedia, 2012). Public procurement is an activity carried out by the government agency
to do day to day works for fulfilling its objectives of delivering services to people in a
sincere manner.
Ethics is the set of moral principles that governs and/ or influences the conduct of any
individual or group of individuals. Mariam-Webster online dictionary defines ethics as a
discipline dealing with evil and with moral duty and as moral principles or practice. Public
procurement has to be done in an ethical manner so that value for money, quality and time
could be achieved.
Public procurement is an extension of the personal procurement by two key words i.e.
transparency and fairness. Some other ethical concepts in public procurement are
confidentiality, accountability, objectivity, openness, non-discrimination, compliance with
the rules and regulations, integrity, due diligence, etc. Ethical procurement prohibits breach
of the publicโ€™s trust by discouraging a public employee from attempting to realize personal
gains through conduct inconsistent with the proper discharge of the employeeโ€™s duties
(NIGP, 2011). The above mentioned concept of ethics has major significance especially of
recent daysโ€™ public procurements in Nepal. This paper tries to explore globally identified
risks associated with public procurement. Further, it introduces the recommendations
made by international initiatives and obligations to be fulfilled by the actors involved in
public procurement. The subsequent sections present a brief overview of the status of
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public procurement in Nepal, legal framework to address issues of illicit activities, the way
forward for fair procurement practices and the conclusion thereof.
2. Risks in Public Procurement
Non-ethical practices in public procurement reduce participation of contractors/
consultants thereby reducing competition. More competent firms that refuse to make illicit
payments have no chance to win contracts, leaving less capable companies to win
contracts at higher prices and deliver lower quality. To know about such non-ethical
practices, the following common ethical risks in the public procurement are discussed
herewith:
๏‚ท Fraudulent practice
๏‚ท Collusive Practice
๏‚ท Corrupt practice
๏‚ท Coercive practice
๏‚ท Obstructive practice
๏‚ท Conflict of interest
Fraudulent practice is any act or omission, including misrepresentation that knowingly or
recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or
to avoid an obligation (WB, 2009). It is a misrepresentation of facts in order to influence a
procurement process of the execution of a contract to the detriment of the GON, and
includes collusive practices among bidders (prior to or after bid submission) designed to
establish bid prices at artificial, noncompetitive levels and to deprive the GON of the
benefits of free and open competition (PPMO, 2009).
Collusion can be defined as โ€œan arrangement between two or more parties designated to
achieve an improper purpose, including influencing improperly the actions of another
partyโ€ (PPMO, 2009). This definition refers to collusion between two or more bidders
manage to manipulate bidding process. Bidders artificially inflate bid price thereby
undermining competitive bidding, a cornerstone of public procurement (IBRD, 2013). Price
fixing and bid rigging are common form of collusive practices in public procurement.
A corrupt practice is the offering, giving, receiving, or soliciting, directly or indirectly,
anything of value to influence improperly the actions of another party (WB, 2009).
Corrupt practice influence the personnel involved in the procurement process as well as in
contact execution.
Coercive practice means impairing or harming, or threatening to impair or harm, directly
or indirectly, any party or the property of the party to influence improperly the actions of
a party (ADB, 2013).
Obstructive practice means deliberately destroying, falsifying, altering or concealing of
evidence material to the investigation or making false statements to investigators in order
to materially impede an investigation into allegations of a corrupt, fraudulent, coercive or
collusive practice; and/or threatening, harassing or intimidating any party to prevent it from
disclosing its knowledge of matters relevant to the investigation or from pursuing the
investigation; or acts intended to materially impede the exercise of inspection and audit
rights of investigator (PPMO, 2012).
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Conflict of interest is defined either for bidder/ consultants or for personnel involved in
public procurement. In case of bidders/ consultants, it refers to one of the eligibility
criterion to take part in bidding process. According to (PPMO, 2012) and (PPR, 2007),
bidders/ consultants may be in conflict of interest if they have one or more of the following
kind of engagements:
๏‚ท They have controlling partners in common;
๏‚ท They receive or have received any direct or indirect subsidy from any of them;
๏‚ท They have the same legal representative for purposes of this bid;
๏‚ท They have a relationship with each other, directly or through common third
parties, that puts them in a position to have access to information about or
influence on the bid of another bidder, or influence the decisions of the employer
regarding this bidding process;
๏‚ท They participate in more than one bid in this bidding process;
๏‚ท They or any of its affiliates participated as a consultant in the preparation of the
design or technical specifications of the contract that is the subject of the bid;
๏‚ท A bidder or any of its affiliates has been hired (or is proposed to be hired) by the
employer as engineer (or construction supervision consultant) for the contract;
๏‚ท A consultant appointed to prepare engineering design of any project shall not be
appointed as a consultant to prepare environmental assessment of the same
project;
๏‚ท A consultant on the privatization of any enterprise owned by the government shall
not be appointed as a consultant of the buyer of such assets nor shall such
consultant be allowed to purchase such assets in the name of his or her close
relative or a partner in his or her firm (provided that, this provision shall not apply
to a turnkey contract or design and build contract);
๏‚ท A firm and other organization or person affiliated with that firm engaged to provide
goods or construction works for any project shall be disqualified to provide
consultancy services for the same project; and a consultancy firm or other
organization or person affiliated with that firm appointed for the preparation or
implementation of any plan shall be disqualified from supplying goods for such
project.
In case of personnel involved in public procurement, conflict of interest refers to the
direct or mutually exclusive conflict between the interest of the public entity and personal
interest of public procurement personnel.
The public entity should neither select the bidder/ consultant nor accept his/ her bid/
proposal if it determines that the bidder/ consultant is engaged in any kind of illicit acts
mentioned above.
3. International Initiatives
Under some international initiatives, risks of public procurement are implicitly and/ or
explicitly addressed as a means of fulfilling the objectives of public procurement. Following
are some widely accepted and ratified initiatives for fighting against fraud and corruption in
public procurement:
๏‚ท UN Convention against Corruption, 2003 (UNCAC, 2003)
๏‚ท Open Governmental Partnership, 2011 (OGP, 2011)
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๏‚ท OECD Anti-Bribery Convention, 1999 (OECD, 1999)
๏‚ท AU Convention on Corruption, 2006 (AU, 2006)
๏‚ท Inter-American Convention against Corruption, 1997 (IACAC, 1997)
๏‚ท ADB and OECD Anti-Corruption Initiative, 2001 (ADB and OECD, 2001)
๏‚ท Council of Europe Convention on Corruption, 2002 (CECC, 2002)
Recommendations made by above conventions and initiatives are mainly focused towards
the development and enactment of legal instruments, strengthening of institutional
capacity, supporting access to information, involvement of civil society, strengthening
judicial integrity, and promoting private sector integrity, which are summarized here.
Development and enactment of legal instruments: This involves the development of
legal instruments and measures with regard to the public procurement. Legal instruments
and measures should involve, but not be limited to, sanctioning and preventing of any kind
of bribery and money laundering, criminalizing improper use of classified and confidential
information and property of the state, protection of whistleblowers, criminalizing
obstruction of justice and investigation. State should declare, based on the legal
instruments, โ€œillicit enrichmentโ€ as an offense. A code of conduct for all officials of the
public entity is needed to be promulgated to require officials to disclose all outside
activities which does or may relate to the conflict of interest. Legal documents should have
explicit provisions to penalize every kind of criminal activity. Care must be exercised while
developing the legal instruments so that regulatory provisions are made as simlpe as
possible to avoid any kind of ambiguity and vagueness during their interpretation and
implementation.
Strengthen institutional capacity: Development and effective implementation of legal
instruments for the public procurement depends largely upon efficiency of the institution.
It is the duty of the state to authorize a body or bodies for the development of policy, act
and regulations for public procurement. The state should establish a monitoring body to
ensure that public procurement is carried out complying with the developed rules and in a
good faith. For this, capacity of the personnel of such body and of institutions involved in
the public procurement should also be built up. A kind of mechanism to report the acts of
corruption in the performance of public function should be established. Rotation of job
among the personnel of similar ranking reduces the insularity, which may foster
corruption.
Promote private sector integrity: Private sector is one of major parties in public
procurement. So, it is indispensable to adopt some mechanisms and implement some
measures to prevent corruption involving the private sector. There should be legislative
provisions to prohibit the establishment of off-the-book account and transactions, the
recording of the non-existent expenditures, the use of false documents to win tenders, to
prevent private sector from paying bribes, etc. Private sector involved in such illicit
activities should be penalized strongly. Besides, private sector should be encouraged to
participate in the fight against unfair competition in public procurement.
Access to information: Transparency is one of the major pillars of ethical public
procurement, which could be enhanced by publicly publishing information of the
procurement activities. Legal recourse and remedies for violation and assurance/ guarantee
for public access to procurement information should be ensured.
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Involvement of civil society: With the objective of transparency and openness, the state
must make necessary provisions of citizen participation and engagement in monitoring of
the implementation of procurement law as well as in policymaking and governance. This
eventually enables civil society to hold public entity accountable. Furthermore, good
mechanisms that encourage participation of civil society help the government to fight
against corruption.
Strengthen judicial integrity: Independent judicial system is one of the prerequisites of
the fare public procurement. There should be measures to maintain such judiciary as well
as to strengthen the integrity. However, there must be some mechanism to prevent
opportunities for corruption among members of the judiciary.
4. Obligations of Actors
In every procurement process, there are two kinds of actors involved, i.e. main and
secondary. Functions of secondary actors involve roles of the state, civil society as well as
the judiciary. Main actors involve personnel of the public entity involved in procurement
and the contractor/ consultant. Selection of qualified bidder/ consultant and effective
implementation of the project mainly depends upon the activities performed by the main
actors. Here, we are discussing about the roles that the main actors should play in the
public procurement. There are some obligations, which both the actors have to follow
collectively. However, there are also other rules which each of them have to follow
individually.
Obligation of public procurement personnel: Under the Section 61 of the (PPA, 2007),
personnel of the public entity shall have to follow the following conducts:
๏‚ท Discharging one's duty impartially so that bidders fairly compete in the
procurement proceedings;
๏‚ท Operating procurement proceedings in public interest;
๏‚ท Not committing an act conflicting interest with the procurement from his/her work
or conduct or behavior;
๏‚ท If s/he knows that his/her nearest relatives have participated as a bidder or
proponent in the procurement proceedings of his/her involvement, not taking part
in such procurement proceedings by giving immediate notification to one level
higher authority;
๏‚ท Not working with a person, firm, organization, company and any other institution
of private nature with which s/he had had dealings of procurement at the time of
holding post for two years after retirement;
๏‚ท Keeping confidential all proprietary information of the bidder known by him /her in
the course of the procurement proceedings;
๏‚ท Not committing an act in contravention of prevailing law, while carrying out
procurement proceedings;
๏‚ท Not committing corrupt or fraudulent practice nor involving in such act;
๏‚ท Not colluding or involving in a group prior to or after submitting bid or proposal
with the objective of forbidding or causing to be forbidden the benefit of
competition.
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Above listed conducts try to address probable risks in the public procurement. First two
points point towards the general conduct that the public personnel should follow. Third,
fourth and fifth points avoid the conflict of interest and fraudulent practice, which could
take place for personal benefit, ignoring the prevailing legal provisions. Sixth point
addresses the risk of corrupt practice, where there is a chance of money laundering to
alter the result, if any kind of information is leaked during the evaluation. Remaining points
remind the acts and rules to be followed during the public procurement.
Obligation of bidder/ consultant: Bidders/ consultants have some obligations to follow
prior to and during the procurement proceedings. Pursuant to the Section 62 of the (PPA,
2007), bidders/ consultants should not be involved in conducts as listed below:
๏‚ท Engaging in corrupt or fraudulent practice or involving in such act;
๏‚ท Giving or offering directly or indirectly improper inducement;
๏‚ท Submitting a fact by distortion or misrepresentation;
๏‚ท Contacting the Public Entity from the time of the opening of bid or proposal until
the notice of acceptance of bid or proposal is given with the objective of causing
interference upon bid or proposal or committing an act of interference in the
examination or evaluation of bid or in the evaluation of proposal.
๏‚ท Intervening in the participation of other competing bidder or proponent to be
involved in any way in the proceedings relating to bid or proposal;
๏‚ท Commit an act of threatening directly or indirectly to cause harm to the body,
person or property of any person to be involved in the procurement proceedings
or coercive act;
๏‚ท Making collusion or involving in groupism prior to or after submission of bid or
proposal with the objective of allocating procurement contract among the bidders
or proponents or fixing the price of bid or proposal artificially or noncompetitively
or otherwise forbidding the Public Entity of the benefit of open and free
competition.
Submission of distorted facts and offering any kind of personal benefit to the personnel
involved in the public procurement hinder the public entity to select qualified and capable
bidder as well as to get benefit from open and free competition. First four points above
address the issue of fraudulent and corrupt practices. Similarly, fifth and sixth points tell
about the coercive practices that intervene the interested bidders to participate in the
public procurement on one hand and threaten the personnel of the public entity on the
other. Collusive practice is the main cause for undermining the competitive bidding
processes addressed in the last point.
5. Public Procurement in Nepal
Public procurement in Nepal has been taking place amidst violations of rules. Despite the
enactment of several acts and regulations explicitly motivated towards the eradication of
illicit activities in public procurement, their enforcement has yet to be effective. In a study,
68% respondents involving beneficiary stakeholders and representatives from different
sectors of society say that tender approval process for construction work is not fair in
Nepal (NVC, 2007). Almost all sectors i.e. the cabinet, judiciary, civil service, politicians,
police, army, non-governmental organizations, and the private sector etc. are seriously
affected (Poudel, 2014) by non-ethical practices in public procurement.
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The year 2014 Transparency International (TI) report ranks Nepal as 126th
among 175
countries across the world in terms of the Corruption Perception Index (CPI) with 29
points on a scale of 0-100 (0 denoting the most corrupt and 100 very clean)
(http://www.tinepal.org/?p=161966), following the CPI as 31 in 2013 and 27 In 2012
(Rayznews, 2013). The TI has been publishing these reports every year on the CPI and
ranking countries "by their perceived levels of corruptionโ€, as determined by expert
assessments and opinion surveys. The CPI generally defines corruption as "the misuse of
public power for private benefit (Wiki, 2014). Public power involves power delegated for
public procurement as well, among others. Hence, there is a long way to go for ethical
public procurement, though Nepal seems to improving CPI in TI report.
Preliminary investigation being carried out by Commission for the Investigation of Abuse of
Authority (CIAA) indicates that there could be numerous illicit practices behind public
procurement in the country. Some of the major charge sheets filed in special court by
CIAA include the case of Nepal Telecom (NT), Nepal Electricity Authority (NEA), etc.
Personnel of NT for producing fake report of purchase and the supplier for supplying
against the specification in the bidding documents while procuring air conditioning
equipment of value NRs. 51,188,670.90 have been accused for committing crime against
Section 19 (2) of the Prevention of Corruption Act, 2002 (TKP, 2013). In two different
procurement proceedings of NEA, i.e. 1,995 electric transformers of value NRs.
411,840,571.73 and 6,000 electric transformers of value NRs. 467,663,263.97, personnel
are charged with accepting sub-standard equipment and suppliers are accused of supplying
the same (KNED, 2013).
All three cases mentioned above seem to include fraudulent practice along with implicitly
associated corruptive practice according to the definitions. However, these allegations are
yet to be decided by the Special Court.
Preliminary investigation of CIAA reports that personnel from public entity as well as
private sector are involved in illicit activity. This shows a gap between prevailing provisions
in acts and regulations and procedure followed in public procurement. Major reason for
this, among others, is that capacity of personnel for public procurement is not sufficient.
Private sector, on the other hand, is motivated towards making money either by hook or
crook. Most of the contractors/ consultants try to influence the public procurement
proceedings.
Annual report published by the PPMO office shows that 71 firms and companies have been
blacklisted till the end of Fiscal Year 2012/2013 (PPMO, 2014). There are some firms
blacklisted due to illicit activities during procurement proceedings. Some of such activities
include collusive practice before submitting bids, submission of fake bid bond along with
the bid, fake tax clearance certificate, and fake experience certificate, fake joint venture
agreement, fake power of attorney, etc. Verification of these kinds of documents
sometimes becomes very difficult. Coercive risks in the public procurement significantly
justify the high demand and recent implementation of electronic system for e-submission
of bids.
It is shown in almost all projects in Nepal that participation of stakeholders is envisaged
only during planning, implementation and post-implementation activities of the project but
not in procurement activities. Special involvement of civil society in procurement has never
been seen. Such kind of avoidance and lack of access to information has been two of the
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reasons that help promote illicit activities in public procurement. However, PPMO has
recently established Government Electronic Procurement System of Nepal (GEPSON) to
carry out all public procurement activities through one window, which has been expected
to work as a means of information dissemination.
Under the Article 101 (2) of Interim Constitution of Nepal, 2007 and Section 3 of Special
Court Act, 2002, Special Court has been established, which promotes judicial integrity. It is
an independent judicial system, whose main function, among others, is to make decisions
on the cases filed by the CIAA and cases filed under the Money Laundering Prevention
Act, 2008 (SCN, 2014).
6. Legal Framework in Nepalese Context
Nepal has introduced preventive and promotional legal frameworks along with
punitive/correctional measures with respect to corruption control (Poudel, 2014). There
are two types of legal frameworks to regulate the non-ethical practices in public
procurement. One type explicitly describes the provisions and other implicitly outlines the
provisions for carrying out public procurement and punitive measures for illicit acts.
Interim Constitution of Nepal, 2007 is the main document governing the public
procurement in Nepal. Article 35 (19) of the Interim Constitution of Nepal states that โ€œthe
State shall pursue a special policy of regulating the operation and management of public and non-
governmental organizations established in the countryโ€. Further, Article 43 (2) of the
Constitution states that โ€œthe allocation and transaction of the business of the Government of
Nepal shall be carried out as set forth in the rules approved by the Government of Nepalโ€.
Under the provision of the Interim Constitution 2007, the House of Representatives have
enacted Public Procurement Act 2007 (PPA, 2007) on 14 January 2007. Furthermore, in
exercise of the powers conferred by Section 74 of the PPA, 2007, the Government of
Nepal has framed Public Procurement Regulation 2007 (PPR, 2007). The PPA, 2007 and
the PPR, 2007 are two main legal documents which explicitly guide the public procurement
in Nepal. Government of Nepal has established a Public Procurement Monitoring Office
(PPMO) under the Prime Minister Office and Council of Ministers. Functions of the PPMO
could also be grouped into six frameworks of international initiatives.
The functions of the PPMO are listed under the Section 65 of the PPA, 2007. The PPMO
recommends to the GON for reform in the procurement policy or laws in force and to
issue technical guidelines and manuals required for implementing the PPA, 2007 and
standard documents for the procurement to be used by the public entity. It provides
opinions to the public entity on the provisions of legal documents of public procurements,
technical guidelines and manuals. Regular trainings for the bidder and the employee of the
public entity are conducted for their capacity building. The PPMO is working to establish a
procurement website so that all public procurement activities are carried out through it.
This in turn facilitates access to information regarding the public procurement for all
people including civil society. Furthermore, as per the Section 70 of PPA, 2007, the act,
regulation and procurement manuals made thereunder are kept in the website of the
PPMO for information and convenience of general public. This ultimately promotes access
to information and involvement of civil society with regard to the public procurement.
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Prevention of Corruption Act, 2002 has explicitly made provisions of punishment to the
personnel involved in corruption. Here, corruption with regard to the public procurement
refers to the activities including misrepresentation, falsifying and destroying facts and
documents, promoting collusive practice among bidders/ consultants, receiving or giving
money and other things, harming or threatening any concerned bidder/ consultant
encouraging any official to carry out illicit activity, etc. Under this act, the GON has
established the National Vigilance Centre whose main objectives are to effectively control
corruption-oriented acts and to promote peoplesโ€™ awareness against corruption. This
ultimately encourages the enactment of prevailing laws, access to information and
participation of civil society in the public procurement.
Commission for the Investigation of Abuse of Authority Act, 1991 has set the Commission
for the Investigation of Abuse of Authority (CIAA) with the semi-judicial power. This act
has attributed CIAA the power to issue an order to submit materials for the investigation,
to make inquiries to the concerned or relevant persons, to write to the GON to suspend
the personnel against whom the investigation has been initiated and to order police to
arrest the person who does not appear before the CIAA within the prescribed period
even receiving the notice so issued by it.
Civil Service Act, 1993 necessitates the civil personnel to get government approval before
accepting a gift, donation, present or gratification of any kind or asking for donation or
borrow any loan from any person concerned with any government business, in such a
manner as to affect the government business in any manner. This also forbids corruptive
practice in the public procurement proceedings. This act has also delegated judicial power
(punitive) to some extent to the concerned department, in case any of its personnel is
involved in illicit activity.
Construction Business Act, 1998 has the provision of annulment of license in case the
entrepreneur submits false statement and related documents with intent to carry out, or
cause to be carried out, public construction works. This provision encourages private
sector integrity in the public procurement.
7. The Way Forward
Despite the presence of preventive and punitive measures in the legal frameworks, the
current status reveals that Nepal is still facing corruption in public procurement.
Identification of potential causes of such illicit activities is the foremost step to be taken
towards the eradication of corruption. Some of the possible steps that could improve
ethical practices in public procurement are discussed here.
More emphasis should be given to legal measures of discouraging illicit activities in public
procurement. Along with it, the PPA and PPR needs to be periodically revised as per the
needs and requirements on the ground of experiences of its implementation. Capacity
building of personnel through training packages and workshops on public procurement
should be conducted at least two times a year for inter departmental information sharing.
Information dissemination to all stakeholders and input from procurement experts of civil
society could be some helpful means of enhancing ethical public procurement. To
encourage the involvement of civil society, Parliamentary Public Account Committee
constituted under the Rule 176 of (HORR, 2007) should be provided with all procurement
documents for review before entering into an agreement in case of major public projects.
10 of 11
However, care should be taken that such measures does not hinder timely decision
making.
Punitive measures for private sector should be explicitly written in procurement acts and
regulations along with the effective implementation of preventive measures. To avoid
submission of fake documents by private firms, companies, Internal Land Revenue Office, a
government agency responsible for monitoring financial activities of private sectors, should
make annual audit report and tax clearance status of every private company public. Every
public agency should inform public about the completed projects including nature,
complexity and value of task and contractor/ consultant who completed the task. Above
endeavors of agencies reduce, if not eliminate, the submission of fake documents by the
contractor/ consultant.
Prevailing measures in the legal document for personnel of public entity must be
implemented effectively. In this regard, recent expedition against corruption being carried
out by the CIAA is very much appreciative. Furthermore, it should always be realized that
it is simply not possible to exist without exacting private payments. A case of the defense
counsel for Korean corruption argues that in practice, corruption functioned as an income
support program to supplement civil servantsโ€™ notoriously low salaries and compensate for
the absence of a large welfare state (Beattie, 2010). This argument is applicable in the case
of Nepal as well where salary of public official is said to be very low. In any system, where
public office is routinely used to extract illicit bribes, the official remuneration for that
office is frequently low, which has to be addressed by paying honest public personnel well.
Therefore, illicit activities should ever be discouraged along with the increment in salary of
personnel of public entity based on market economy, which eventually motivates them to
work out of duty with high morale.
8. Conclusion
Ethics is one of the prerequisites for maintaining transparency and competition in the
public procurement. For this, risks have been addressed by the international conventions
and initiatives. Existence of legal provisions along with their implementation through
capable institution, access to information thereby promoting participation of civil society
for monitoring of law, role of judicial system and active involvement of private sector along
with the sincerity are main focus of these initiatives. Legal documents of the public
procurement have also included the focal areas as identified by the international initiatives.
However, status of public procurement in Nepal shows that there should be some more
interventions for discouraging illicit practices. Effective implementation of law, increased
roles of civil society during procurement, motivation measures to public personnel and
implementation of technological tools are some ways to be effectively implemented to
improving public procurement procedure in Nepal. All in all, legal provisions could only be
effective when the state, personnel from public entity, private sector, judicial system and
civil society work sincerely.
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References
ADB, 2013. Procurement Guidelines, Manila: Asian Development Bank.
Beattie, A., 2010. False Economy. 2nd ed. London: Penguin Books.
CIAA, 2014. Chart Sheet Filed in Special Court (Major Cases), Kathmandu: Commission for
the Investigation of Abuse of Authority.
HORR, 2007. House of Representatives Regulation, Kathmandu: Government of Nepal.
IBRD, 2013. Fraud and Corruption Awareness Handbook, Washington: International Bank for
Reconstruction and Development.
KNED, 2013. CIAA arrests 21 Government Officials including MD of NEA. Karobar
National Economic Daily, 20 August.
NIGP, 2011. Public Procurement Dictionary of Terms, Herndon: National Institute of
Governmental Purchasing Inc..
NVC, 2007. Nihit Swarthako Dwanda Sambandhi Adhyayan (Study on Conflict of Interest),
Kathmandu: National Vigilance Centre.
Poudel, M., 2014. A Summary of Anti-Corruption Measures in Nepal. [Online] Available at:
www.unafei.or.jp/english/pdf/RS_No86/No86_21PA_Poudel.pdf [Accessed 22
August 2014].
PPA, 2007. Public Procurement Act, Kathmandu: Government of Nepal.
PPMO, 2009. Standard Prequalification Document, Kathmandu: Public Procurement
Monitoing Office.
PPMO, 2012. Standard Bidding Document, Procurement of Works, International Competitive
Bidding (ICB) (Single Stage Post Qualification Procedure), Kathmandu: Public
Procurement Monitoring Office.
PPMO, 2014. Annual Report, Kathmandu: Public Procurement Monotoring Office .
PPR, 2007. Public Procurement Regulation. Kathmandu: Government of Nepal.
Rayznews, 2013. Transparency Internationalโ€™s Corruption Perceptions Index 2013 out. [Online]
Available at: http://www.rayznews.com/transparency-internationals-corruption-
perceptions-index-2013-out/ [Accessed 31 August 2014].
SCN, 2014. Special Court of Nepal. [Online] Available at: http://specialcourt.gov.np/
[Accessed 4 September 2014].
TKP, 2013. CIAA drags five NT officials to court. The Kathmandu Post, 12 August.
WB, 2009. Guidelines on Preventing and Combating Corruption in Projects financed by IBRD
Loans and IDA Credits and Grants, Washington: World Bank.
Wiki, 2014. Corruption Perception Index. [Online] Available at:
http://en.wikipedia.org/wiki/Corruption_Perceptions_Index [Accessed 31 August
2014].
Wikipedia, 2012. [Online] Available at: wikipedia.org/wiki/Public_procurement [Accessed
August 2014].

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Ethics in public procurement

  • 1. 1 of 11 ETHICS IN PUBLIC PROCUREMENT Ajay Adhikari Email: ajay3adhikari@gmail.com Abstract Ethics has always been a major subject of discussion in public procurement. This study intends to briefly review different kinds of risks and international initiatives to address them. It further highlights some of the public procurement activities and measures in place in Nepal. The case studies presented in this article reveal that the procurement proceedings are not going the desired way and it also involves some risks. Some ways forward to improve the procurement proceedings have been proposed so that ethics could be maintained. The article concludes that effective implementation of legal provisions along with the increased roles of civil society especially during procurement proceedings, appropriate motivation measures to boosting up morale of the public personnel and implementation of technological tools could improve the quality of procurement proceedings in Nepal. 1. Introduction Public procurement means acquisition of goods, consultancy services or other services or carrying out or causing to be carried out any construction works, by a public entity (PPA, 2007). It is a process of obtaining office equipment and consumables, services of intellectual experts and hiring of other requirements. Furthermore, development activities comprise construction of infrastructure either by public entity itself or by being engaged through contract agreement with construction firms. According to Wikipedia, government procurement, also called public tendering or public procurement, is the procurement of goods and services on behalf of the public authority, such as government agency (Wikipedia, 2012). Public procurement is an activity carried out by the government agency to do day to day works for fulfilling its objectives of delivering services to people in a sincere manner. Ethics is the set of moral principles that governs and/ or influences the conduct of any individual or group of individuals. Mariam-Webster online dictionary defines ethics as a discipline dealing with evil and with moral duty and as moral principles or practice. Public procurement has to be done in an ethical manner so that value for money, quality and time could be achieved. Public procurement is an extension of the personal procurement by two key words i.e. transparency and fairness. Some other ethical concepts in public procurement are confidentiality, accountability, objectivity, openness, non-discrimination, compliance with the rules and regulations, integrity, due diligence, etc. Ethical procurement prohibits breach of the publicโ€™s trust by discouraging a public employee from attempting to realize personal gains through conduct inconsistent with the proper discharge of the employeeโ€™s duties (NIGP, 2011). The above mentioned concept of ethics has major significance especially of recent daysโ€™ public procurements in Nepal. This paper tries to explore globally identified risks associated with public procurement. Further, it introduces the recommendations made by international initiatives and obligations to be fulfilled by the actors involved in public procurement. The subsequent sections present a brief overview of the status of
  • 2. 2 of 11 public procurement in Nepal, legal framework to address issues of illicit activities, the way forward for fair procurement practices and the conclusion thereof. 2. Risks in Public Procurement Non-ethical practices in public procurement reduce participation of contractors/ consultants thereby reducing competition. More competent firms that refuse to make illicit payments have no chance to win contracts, leaving less capable companies to win contracts at higher prices and deliver lower quality. To know about such non-ethical practices, the following common ethical risks in the public procurement are discussed herewith: ๏‚ท Fraudulent practice ๏‚ท Collusive Practice ๏‚ท Corrupt practice ๏‚ท Coercive practice ๏‚ท Obstructive practice ๏‚ท Conflict of interest Fraudulent practice is any act or omission, including misrepresentation that knowingly or recklessly misleads, or attempts to mislead, a party to obtain a financial or other benefit or to avoid an obligation (WB, 2009). It is a misrepresentation of facts in order to influence a procurement process of the execution of a contract to the detriment of the GON, and includes collusive practices among bidders (prior to or after bid submission) designed to establish bid prices at artificial, noncompetitive levels and to deprive the GON of the benefits of free and open competition (PPMO, 2009). Collusion can be defined as โ€œan arrangement between two or more parties designated to achieve an improper purpose, including influencing improperly the actions of another partyโ€ (PPMO, 2009). This definition refers to collusion between two or more bidders manage to manipulate bidding process. Bidders artificially inflate bid price thereby undermining competitive bidding, a cornerstone of public procurement (IBRD, 2013). Price fixing and bid rigging are common form of collusive practices in public procurement. A corrupt practice is the offering, giving, receiving, or soliciting, directly or indirectly, anything of value to influence improperly the actions of another party (WB, 2009). Corrupt practice influence the personnel involved in the procurement process as well as in contact execution. Coercive practice means impairing or harming, or threatening to impair or harm, directly or indirectly, any party or the property of the party to influence improperly the actions of a party (ADB, 2013). Obstructive practice means deliberately destroying, falsifying, altering or concealing of evidence material to the investigation or making false statements to investigators in order to materially impede an investigation into allegations of a corrupt, fraudulent, coercive or collusive practice; and/or threatening, harassing or intimidating any party to prevent it from disclosing its knowledge of matters relevant to the investigation or from pursuing the investigation; or acts intended to materially impede the exercise of inspection and audit rights of investigator (PPMO, 2012).
  • 3. 3 of 11 Conflict of interest is defined either for bidder/ consultants or for personnel involved in public procurement. In case of bidders/ consultants, it refers to one of the eligibility criterion to take part in bidding process. According to (PPMO, 2012) and (PPR, 2007), bidders/ consultants may be in conflict of interest if they have one or more of the following kind of engagements: ๏‚ท They have controlling partners in common; ๏‚ท They receive or have received any direct or indirect subsidy from any of them; ๏‚ท They have the same legal representative for purposes of this bid; ๏‚ท They have a relationship with each other, directly or through common third parties, that puts them in a position to have access to information about or influence on the bid of another bidder, or influence the decisions of the employer regarding this bidding process; ๏‚ท They participate in more than one bid in this bidding process; ๏‚ท They or any of its affiliates participated as a consultant in the preparation of the design or technical specifications of the contract that is the subject of the bid; ๏‚ท A bidder or any of its affiliates has been hired (or is proposed to be hired) by the employer as engineer (or construction supervision consultant) for the contract; ๏‚ท A consultant appointed to prepare engineering design of any project shall not be appointed as a consultant to prepare environmental assessment of the same project; ๏‚ท A consultant on the privatization of any enterprise owned by the government shall not be appointed as a consultant of the buyer of such assets nor shall such consultant be allowed to purchase such assets in the name of his or her close relative or a partner in his or her firm (provided that, this provision shall not apply to a turnkey contract or design and build contract); ๏‚ท A firm and other organization or person affiliated with that firm engaged to provide goods or construction works for any project shall be disqualified to provide consultancy services for the same project; and a consultancy firm or other organization or person affiliated with that firm appointed for the preparation or implementation of any plan shall be disqualified from supplying goods for such project. In case of personnel involved in public procurement, conflict of interest refers to the direct or mutually exclusive conflict between the interest of the public entity and personal interest of public procurement personnel. The public entity should neither select the bidder/ consultant nor accept his/ her bid/ proposal if it determines that the bidder/ consultant is engaged in any kind of illicit acts mentioned above. 3. International Initiatives Under some international initiatives, risks of public procurement are implicitly and/ or explicitly addressed as a means of fulfilling the objectives of public procurement. Following are some widely accepted and ratified initiatives for fighting against fraud and corruption in public procurement: ๏‚ท UN Convention against Corruption, 2003 (UNCAC, 2003) ๏‚ท Open Governmental Partnership, 2011 (OGP, 2011)
  • 4. 4 of 11 ๏‚ท OECD Anti-Bribery Convention, 1999 (OECD, 1999) ๏‚ท AU Convention on Corruption, 2006 (AU, 2006) ๏‚ท Inter-American Convention against Corruption, 1997 (IACAC, 1997) ๏‚ท ADB and OECD Anti-Corruption Initiative, 2001 (ADB and OECD, 2001) ๏‚ท Council of Europe Convention on Corruption, 2002 (CECC, 2002) Recommendations made by above conventions and initiatives are mainly focused towards the development and enactment of legal instruments, strengthening of institutional capacity, supporting access to information, involvement of civil society, strengthening judicial integrity, and promoting private sector integrity, which are summarized here. Development and enactment of legal instruments: This involves the development of legal instruments and measures with regard to the public procurement. Legal instruments and measures should involve, but not be limited to, sanctioning and preventing of any kind of bribery and money laundering, criminalizing improper use of classified and confidential information and property of the state, protection of whistleblowers, criminalizing obstruction of justice and investigation. State should declare, based on the legal instruments, โ€œillicit enrichmentโ€ as an offense. A code of conduct for all officials of the public entity is needed to be promulgated to require officials to disclose all outside activities which does or may relate to the conflict of interest. Legal documents should have explicit provisions to penalize every kind of criminal activity. Care must be exercised while developing the legal instruments so that regulatory provisions are made as simlpe as possible to avoid any kind of ambiguity and vagueness during their interpretation and implementation. Strengthen institutional capacity: Development and effective implementation of legal instruments for the public procurement depends largely upon efficiency of the institution. It is the duty of the state to authorize a body or bodies for the development of policy, act and regulations for public procurement. The state should establish a monitoring body to ensure that public procurement is carried out complying with the developed rules and in a good faith. For this, capacity of the personnel of such body and of institutions involved in the public procurement should also be built up. A kind of mechanism to report the acts of corruption in the performance of public function should be established. Rotation of job among the personnel of similar ranking reduces the insularity, which may foster corruption. Promote private sector integrity: Private sector is one of major parties in public procurement. So, it is indispensable to adopt some mechanisms and implement some measures to prevent corruption involving the private sector. There should be legislative provisions to prohibit the establishment of off-the-book account and transactions, the recording of the non-existent expenditures, the use of false documents to win tenders, to prevent private sector from paying bribes, etc. Private sector involved in such illicit activities should be penalized strongly. Besides, private sector should be encouraged to participate in the fight against unfair competition in public procurement. Access to information: Transparency is one of the major pillars of ethical public procurement, which could be enhanced by publicly publishing information of the procurement activities. Legal recourse and remedies for violation and assurance/ guarantee for public access to procurement information should be ensured.
  • 5. 5 of 11 Involvement of civil society: With the objective of transparency and openness, the state must make necessary provisions of citizen participation and engagement in monitoring of the implementation of procurement law as well as in policymaking and governance. This eventually enables civil society to hold public entity accountable. Furthermore, good mechanisms that encourage participation of civil society help the government to fight against corruption. Strengthen judicial integrity: Independent judicial system is one of the prerequisites of the fare public procurement. There should be measures to maintain such judiciary as well as to strengthen the integrity. However, there must be some mechanism to prevent opportunities for corruption among members of the judiciary. 4. Obligations of Actors In every procurement process, there are two kinds of actors involved, i.e. main and secondary. Functions of secondary actors involve roles of the state, civil society as well as the judiciary. Main actors involve personnel of the public entity involved in procurement and the contractor/ consultant. Selection of qualified bidder/ consultant and effective implementation of the project mainly depends upon the activities performed by the main actors. Here, we are discussing about the roles that the main actors should play in the public procurement. There are some obligations, which both the actors have to follow collectively. However, there are also other rules which each of them have to follow individually. Obligation of public procurement personnel: Under the Section 61 of the (PPA, 2007), personnel of the public entity shall have to follow the following conducts: ๏‚ท Discharging one's duty impartially so that bidders fairly compete in the procurement proceedings; ๏‚ท Operating procurement proceedings in public interest; ๏‚ท Not committing an act conflicting interest with the procurement from his/her work or conduct or behavior; ๏‚ท If s/he knows that his/her nearest relatives have participated as a bidder or proponent in the procurement proceedings of his/her involvement, not taking part in such procurement proceedings by giving immediate notification to one level higher authority; ๏‚ท Not working with a person, firm, organization, company and any other institution of private nature with which s/he had had dealings of procurement at the time of holding post for two years after retirement; ๏‚ท Keeping confidential all proprietary information of the bidder known by him /her in the course of the procurement proceedings; ๏‚ท Not committing an act in contravention of prevailing law, while carrying out procurement proceedings; ๏‚ท Not committing corrupt or fraudulent practice nor involving in such act; ๏‚ท Not colluding or involving in a group prior to or after submitting bid or proposal with the objective of forbidding or causing to be forbidden the benefit of competition.
  • 6. 6 of 11 Above listed conducts try to address probable risks in the public procurement. First two points point towards the general conduct that the public personnel should follow. Third, fourth and fifth points avoid the conflict of interest and fraudulent practice, which could take place for personal benefit, ignoring the prevailing legal provisions. Sixth point addresses the risk of corrupt practice, where there is a chance of money laundering to alter the result, if any kind of information is leaked during the evaluation. Remaining points remind the acts and rules to be followed during the public procurement. Obligation of bidder/ consultant: Bidders/ consultants have some obligations to follow prior to and during the procurement proceedings. Pursuant to the Section 62 of the (PPA, 2007), bidders/ consultants should not be involved in conducts as listed below: ๏‚ท Engaging in corrupt or fraudulent practice or involving in such act; ๏‚ท Giving or offering directly or indirectly improper inducement; ๏‚ท Submitting a fact by distortion or misrepresentation; ๏‚ท Contacting the Public Entity from the time of the opening of bid or proposal until the notice of acceptance of bid or proposal is given with the objective of causing interference upon bid or proposal or committing an act of interference in the examination or evaluation of bid or in the evaluation of proposal. ๏‚ท Intervening in the participation of other competing bidder or proponent to be involved in any way in the proceedings relating to bid or proposal; ๏‚ท Commit an act of threatening directly or indirectly to cause harm to the body, person or property of any person to be involved in the procurement proceedings or coercive act; ๏‚ท Making collusion or involving in groupism prior to or after submission of bid or proposal with the objective of allocating procurement contract among the bidders or proponents or fixing the price of bid or proposal artificially or noncompetitively or otherwise forbidding the Public Entity of the benefit of open and free competition. Submission of distorted facts and offering any kind of personal benefit to the personnel involved in the public procurement hinder the public entity to select qualified and capable bidder as well as to get benefit from open and free competition. First four points above address the issue of fraudulent and corrupt practices. Similarly, fifth and sixth points tell about the coercive practices that intervene the interested bidders to participate in the public procurement on one hand and threaten the personnel of the public entity on the other. Collusive practice is the main cause for undermining the competitive bidding processes addressed in the last point. 5. Public Procurement in Nepal Public procurement in Nepal has been taking place amidst violations of rules. Despite the enactment of several acts and regulations explicitly motivated towards the eradication of illicit activities in public procurement, their enforcement has yet to be effective. In a study, 68% respondents involving beneficiary stakeholders and representatives from different sectors of society say that tender approval process for construction work is not fair in Nepal (NVC, 2007). Almost all sectors i.e. the cabinet, judiciary, civil service, politicians, police, army, non-governmental organizations, and the private sector etc. are seriously affected (Poudel, 2014) by non-ethical practices in public procurement.
  • 7. 7 of 11 The year 2014 Transparency International (TI) report ranks Nepal as 126th among 175 countries across the world in terms of the Corruption Perception Index (CPI) with 29 points on a scale of 0-100 (0 denoting the most corrupt and 100 very clean) (http://www.tinepal.org/?p=161966), following the CPI as 31 in 2013 and 27 In 2012 (Rayznews, 2013). The TI has been publishing these reports every year on the CPI and ranking countries "by their perceived levels of corruptionโ€, as determined by expert assessments and opinion surveys. The CPI generally defines corruption as "the misuse of public power for private benefit (Wiki, 2014). Public power involves power delegated for public procurement as well, among others. Hence, there is a long way to go for ethical public procurement, though Nepal seems to improving CPI in TI report. Preliminary investigation being carried out by Commission for the Investigation of Abuse of Authority (CIAA) indicates that there could be numerous illicit practices behind public procurement in the country. Some of the major charge sheets filed in special court by CIAA include the case of Nepal Telecom (NT), Nepal Electricity Authority (NEA), etc. Personnel of NT for producing fake report of purchase and the supplier for supplying against the specification in the bidding documents while procuring air conditioning equipment of value NRs. 51,188,670.90 have been accused for committing crime against Section 19 (2) of the Prevention of Corruption Act, 2002 (TKP, 2013). In two different procurement proceedings of NEA, i.e. 1,995 electric transformers of value NRs. 411,840,571.73 and 6,000 electric transformers of value NRs. 467,663,263.97, personnel are charged with accepting sub-standard equipment and suppliers are accused of supplying the same (KNED, 2013). All three cases mentioned above seem to include fraudulent practice along with implicitly associated corruptive practice according to the definitions. However, these allegations are yet to be decided by the Special Court. Preliminary investigation of CIAA reports that personnel from public entity as well as private sector are involved in illicit activity. This shows a gap between prevailing provisions in acts and regulations and procedure followed in public procurement. Major reason for this, among others, is that capacity of personnel for public procurement is not sufficient. Private sector, on the other hand, is motivated towards making money either by hook or crook. Most of the contractors/ consultants try to influence the public procurement proceedings. Annual report published by the PPMO office shows that 71 firms and companies have been blacklisted till the end of Fiscal Year 2012/2013 (PPMO, 2014). There are some firms blacklisted due to illicit activities during procurement proceedings. Some of such activities include collusive practice before submitting bids, submission of fake bid bond along with the bid, fake tax clearance certificate, and fake experience certificate, fake joint venture agreement, fake power of attorney, etc. Verification of these kinds of documents sometimes becomes very difficult. Coercive risks in the public procurement significantly justify the high demand and recent implementation of electronic system for e-submission of bids. It is shown in almost all projects in Nepal that participation of stakeholders is envisaged only during planning, implementation and post-implementation activities of the project but not in procurement activities. Special involvement of civil society in procurement has never been seen. Such kind of avoidance and lack of access to information has been two of the
  • 8. 8 of 11 reasons that help promote illicit activities in public procurement. However, PPMO has recently established Government Electronic Procurement System of Nepal (GEPSON) to carry out all public procurement activities through one window, which has been expected to work as a means of information dissemination. Under the Article 101 (2) of Interim Constitution of Nepal, 2007 and Section 3 of Special Court Act, 2002, Special Court has been established, which promotes judicial integrity. It is an independent judicial system, whose main function, among others, is to make decisions on the cases filed by the CIAA and cases filed under the Money Laundering Prevention Act, 2008 (SCN, 2014). 6. Legal Framework in Nepalese Context Nepal has introduced preventive and promotional legal frameworks along with punitive/correctional measures with respect to corruption control (Poudel, 2014). There are two types of legal frameworks to regulate the non-ethical practices in public procurement. One type explicitly describes the provisions and other implicitly outlines the provisions for carrying out public procurement and punitive measures for illicit acts. Interim Constitution of Nepal, 2007 is the main document governing the public procurement in Nepal. Article 35 (19) of the Interim Constitution of Nepal states that โ€œthe State shall pursue a special policy of regulating the operation and management of public and non- governmental organizations established in the countryโ€. Further, Article 43 (2) of the Constitution states that โ€œthe allocation and transaction of the business of the Government of Nepal shall be carried out as set forth in the rules approved by the Government of Nepalโ€. Under the provision of the Interim Constitution 2007, the House of Representatives have enacted Public Procurement Act 2007 (PPA, 2007) on 14 January 2007. Furthermore, in exercise of the powers conferred by Section 74 of the PPA, 2007, the Government of Nepal has framed Public Procurement Regulation 2007 (PPR, 2007). The PPA, 2007 and the PPR, 2007 are two main legal documents which explicitly guide the public procurement in Nepal. Government of Nepal has established a Public Procurement Monitoring Office (PPMO) under the Prime Minister Office and Council of Ministers. Functions of the PPMO could also be grouped into six frameworks of international initiatives. The functions of the PPMO are listed under the Section 65 of the PPA, 2007. The PPMO recommends to the GON for reform in the procurement policy or laws in force and to issue technical guidelines and manuals required for implementing the PPA, 2007 and standard documents for the procurement to be used by the public entity. It provides opinions to the public entity on the provisions of legal documents of public procurements, technical guidelines and manuals. Regular trainings for the bidder and the employee of the public entity are conducted for their capacity building. The PPMO is working to establish a procurement website so that all public procurement activities are carried out through it. This in turn facilitates access to information regarding the public procurement for all people including civil society. Furthermore, as per the Section 70 of PPA, 2007, the act, regulation and procurement manuals made thereunder are kept in the website of the PPMO for information and convenience of general public. This ultimately promotes access to information and involvement of civil society with regard to the public procurement.
  • 9. 9 of 11 Prevention of Corruption Act, 2002 has explicitly made provisions of punishment to the personnel involved in corruption. Here, corruption with regard to the public procurement refers to the activities including misrepresentation, falsifying and destroying facts and documents, promoting collusive practice among bidders/ consultants, receiving or giving money and other things, harming or threatening any concerned bidder/ consultant encouraging any official to carry out illicit activity, etc. Under this act, the GON has established the National Vigilance Centre whose main objectives are to effectively control corruption-oriented acts and to promote peoplesโ€™ awareness against corruption. This ultimately encourages the enactment of prevailing laws, access to information and participation of civil society in the public procurement. Commission for the Investigation of Abuse of Authority Act, 1991 has set the Commission for the Investigation of Abuse of Authority (CIAA) with the semi-judicial power. This act has attributed CIAA the power to issue an order to submit materials for the investigation, to make inquiries to the concerned or relevant persons, to write to the GON to suspend the personnel against whom the investigation has been initiated and to order police to arrest the person who does not appear before the CIAA within the prescribed period even receiving the notice so issued by it. Civil Service Act, 1993 necessitates the civil personnel to get government approval before accepting a gift, donation, present or gratification of any kind or asking for donation or borrow any loan from any person concerned with any government business, in such a manner as to affect the government business in any manner. This also forbids corruptive practice in the public procurement proceedings. This act has also delegated judicial power (punitive) to some extent to the concerned department, in case any of its personnel is involved in illicit activity. Construction Business Act, 1998 has the provision of annulment of license in case the entrepreneur submits false statement and related documents with intent to carry out, or cause to be carried out, public construction works. This provision encourages private sector integrity in the public procurement. 7. The Way Forward Despite the presence of preventive and punitive measures in the legal frameworks, the current status reveals that Nepal is still facing corruption in public procurement. Identification of potential causes of such illicit activities is the foremost step to be taken towards the eradication of corruption. Some of the possible steps that could improve ethical practices in public procurement are discussed here. More emphasis should be given to legal measures of discouraging illicit activities in public procurement. Along with it, the PPA and PPR needs to be periodically revised as per the needs and requirements on the ground of experiences of its implementation. Capacity building of personnel through training packages and workshops on public procurement should be conducted at least two times a year for inter departmental information sharing. Information dissemination to all stakeholders and input from procurement experts of civil society could be some helpful means of enhancing ethical public procurement. To encourage the involvement of civil society, Parliamentary Public Account Committee constituted under the Rule 176 of (HORR, 2007) should be provided with all procurement documents for review before entering into an agreement in case of major public projects.
  • 10. 10 of 11 However, care should be taken that such measures does not hinder timely decision making. Punitive measures for private sector should be explicitly written in procurement acts and regulations along with the effective implementation of preventive measures. To avoid submission of fake documents by private firms, companies, Internal Land Revenue Office, a government agency responsible for monitoring financial activities of private sectors, should make annual audit report and tax clearance status of every private company public. Every public agency should inform public about the completed projects including nature, complexity and value of task and contractor/ consultant who completed the task. Above endeavors of agencies reduce, if not eliminate, the submission of fake documents by the contractor/ consultant. Prevailing measures in the legal document for personnel of public entity must be implemented effectively. In this regard, recent expedition against corruption being carried out by the CIAA is very much appreciative. Furthermore, it should always be realized that it is simply not possible to exist without exacting private payments. A case of the defense counsel for Korean corruption argues that in practice, corruption functioned as an income support program to supplement civil servantsโ€™ notoriously low salaries and compensate for the absence of a large welfare state (Beattie, 2010). This argument is applicable in the case of Nepal as well where salary of public official is said to be very low. In any system, where public office is routinely used to extract illicit bribes, the official remuneration for that office is frequently low, which has to be addressed by paying honest public personnel well. Therefore, illicit activities should ever be discouraged along with the increment in salary of personnel of public entity based on market economy, which eventually motivates them to work out of duty with high morale. 8. Conclusion Ethics is one of the prerequisites for maintaining transparency and competition in the public procurement. For this, risks have been addressed by the international conventions and initiatives. Existence of legal provisions along with their implementation through capable institution, access to information thereby promoting participation of civil society for monitoring of law, role of judicial system and active involvement of private sector along with the sincerity are main focus of these initiatives. Legal documents of the public procurement have also included the focal areas as identified by the international initiatives. However, status of public procurement in Nepal shows that there should be some more interventions for discouraging illicit practices. Effective implementation of law, increased roles of civil society during procurement, motivation measures to public personnel and implementation of technological tools are some ways to be effectively implemented to improving public procurement procedure in Nepal. All in all, legal provisions could only be effective when the state, personnel from public entity, private sector, judicial system and civil society work sincerely.
  • 11. 11 of 11 References ADB, 2013. Procurement Guidelines, Manila: Asian Development Bank. Beattie, A., 2010. False Economy. 2nd ed. London: Penguin Books. CIAA, 2014. Chart Sheet Filed in Special Court (Major Cases), Kathmandu: Commission for the Investigation of Abuse of Authority. HORR, 2007. House of Representatives Regulation, Kathmandu: Government of Nepal. IBRD, 2013. Fraud and Corruption Awareness Handbook, Washington: International Bank for Reconstruction and Development. KNED, 2013. CIAA arrests 21 Government Officials including MD of NEA. Karobar National Economic Daily, 20 August. NIGP, 2011. Public Procurement Dictionary of Terms, Herndon: National Institute of Governmental Purchasing Inc.. NVC, 2007. Nihit Swarthako Dwanda Sambandhi Adhyayan (Study on Conflict of Interest), Kathmandu: National Vigilance Centre. Poudel, M., 2014. A Summary of Anti-Corruption Measures in Nepal. [Online] Available at: www.unafei.or.jp/english/pdf/RS_No86/No86_21PA_Poudel.pdf [Accessed 22 August 2014]. PPA, 2007. Public Procurement Act, Kathmandu: Government of Nepal. PPMO, 2009. Standard Prequalification Document, Kathmandu: Public Procurement Monitoing Office. PPMO, 2012. Standard Bidding Document, Procurement of Works, International Competitive Bidding (ICB) (Single Stage Post Qualification Procedure), Kathmandu: Public Procurement Monitoring Office. PPMO, 2014. Annual Report, Kathmandu: Public Procurement Monotoring Office . PPR, 2007. Public Procurement Regulation. Kathmandu: Government of Nepal. Rayznews, 2013. Transparency Internationalโ€™s Corruption Perceptions Index 2013 out. [Online] Available at: http://www.rayznews.com/transparency-internationals-corruption- perceptions-index-2013-out/ [Accessed 31 August 2014]. SCN, 2014. Special Court of Nepal. [Online] Available at: http://specialcourt.gov.np/ [Accessed 4 September 2014]. TKP, 2013. CIAA drags five NT officials to court. The Kathmandu Post, 12 August. WB, 2009. Guidelines on Preventing and Combating Corruption in Projects financed by IBRD Loans and IDA Credits and Grants, Washington: World Bank. Wiki, 2014. Corruption Perception Index. [Online] Available at: http://en.wikipedia.org/wiki/Corruption_Perceptions_Index [Accessed 31 August 2014]. Wikipedia, 2012. [Online] Available at: wikipedia.org/wiki/Public_procurement [Accessed August 2014].