A Fighting Chance Against Corruption in Public Procurement?

Corruption Manual for Beginners: 'Corruption Techniques' in Public Procurement with Examples from Hungary

“…Hence, tailoring eligibility criteria to exclude most or all non-wanted bidders even though they could bid given the actual object of procurement can effectively inhibit fair competition. This is by far the most widely quoted corruption technique in the Hungarian (Báger 2011;Major Dezsériné 2003;Pálinkó, Szántó, and Tóth 2008;Papanek 2009) and international literature (Goldman, So, and Rocholl 2012;Grodeland 2005Grodeland , 2010Heggstad and Froystad 2011;Piga 2011;Soreide 2006) which was confirmed by our interviewees. Tailoring can be done by 1. defining a combination of hard criteria such as prior works or annual turnover clearly excluding some companies, or 2. setting vague and subjective criteria allowing issuers to exercise discretion in a partial manner.…”

“…Getting more, better quality, or more timely information on tenders can put some bidders in an unbeatable position. This is exactly what corrupt informal networks use to win public contracts in seemingly fair competition in Hungary, but in other countries too (Goldman, So, and Rocholl 2012;Grodeland 2010;Papanek 2009;Piga 2011). It is enough to give informally crucial information on specific aspects of the tender to one bidder while issuing a vague or erroneous tender specification.…”

“…However, in practice, detection is difficult as the contracts are moved out of the more transparent domain and determining the actual joined-up nature of two or more contracts requires intimate knowledge of the contracts as well as the issuer (Piga 2011). As with many other techniques, external control is exercised by the SAO and supporting institutions especially the National Development Agency managing most of the EU funding coming into Hungary.…”

“…The academic and policy literature identifies four major phases of the public procurement process spanning from the identification of organisational need up until the implementation and conclusion of the contract (Byatt 2001;Piga 2011;Thai 2009;Transparency International 2006;Várday 2005 The needs assessment phase involves determining the object and quantity of the procurement task in line with the organisation's needs. The process design and document preparation phase translates the decisions of the previous phase into the specific context of public procurement according to national laws and the organisation's own regulations (e.g.…”

“…However, this logic is crucially dependent on the quality, price, and flexibility of centrally procured provision. In an environment ridden with systemic corruption, centralised purchasing simply centralises corruption and state capture leading to low quality and/or high price provision (Piga 2011).…”