Countering corruption in procurement
Public procurement is both a very resource-intensive and very corrupt system. Scandalous cases in this area appear on the pages of the press almost every day, and the main laws governing it have already gone through several dozen changes. In these conditions, combating corruption in the field of procurement becomes a common concern of the state, society and business.
Putting things in order in this area means restoring citizens' confidence in government agencies and saving budget funds. According to researchers, about a trillion rubles, or fourteenth of the country's total consolidated budget, are stolen annually in this area.
World practice and regulatory framework of Russia
The Russian experience in fighting corruption in the field of public procurement cannot be considered in isolation from world practice. For Russia, the CIS, the rest of the world, the basis for building an optimally working system is its transparency, understanding of the principles of forming orders and prices, criteria for evaluating proposals. Only the most stringent system of evaluating each lot by objective parameters will help to avoid the choice of a seller who, in addition to goods and services, also offered corruption remuneration. The practice looks depressing today. Recently, the head of IDGC North-West and his deputy were detained for kickbacks during purchases, who in their private conversations called kickbacks “homework”.
Within the framework of the action of only federal laws regulating the sphere of public procurement, it is impossible to deal with long-term manifestations of the system, organized groups that thoroughly know all the shortcomings of these laws and are constantly developing new ways to bypass all new regulatory norms. Despite the fact that the Russian legislation on procurement for the needs of state or municipal bodies is based on the Model Law of the United Nations Commission on International Trade Law (UNCITRAL), it cannot fully regulate all the specifics of corrupt legal relations.
Therefore, in addition to the law "On Combating Corruption", the main regulatory act regulating this area is the Criminal Code, which contains a wide range of criminal acts related to corruption in the field of procurement. Despite the fact that legislation in this area should be based on certain principles, responsibility for its violation should be tough and inevitable.
Among the necessary principles:
- transparency, transparency of all information on procurement, publishing it in such a way that it can be accessible to all potential bidders;
- accountability of all bidders (both suppliers and buyers) to the public and strict adherence to all procedures under the strict control of law enforcement and public councils;
- open competition, impossibility of discrimination against any of the market participants;
- fairness for all participants.
All these principles are fixed in numerous agreements operating at the level of the WTO, the EAEU and other interstate associations.
Types of corruption offenses in procurement
The most frequent criminal offense in the field of procurement was article 214, part 4 of the Criminal Code of the Russian Federation "Commercial bribery committed as part of a group of persons, on an especially large scale." In practice, the mechanisms for implementing corruption schemes are:
- conclusion of contracts at deliberately inflated prices. The average level of overestimation was estimated by the auditors of the Accounts Chamber at 6.3%; nevertheless, the measures taken by the state lead to positive dynamics. So, in 2010, the level of overestimation exceeded 10%. For the regions of municipalities, this level is significantly lower, it fluctuates in the range of 4-5%, which is due to the widespread use of the electronic trading system in the field of public procurement;
- the use of so-called "gaskets" - tech companies winning the auction. In this case, another person becomes the actual executor of the order, often a state research institute, which may not receive funds for the actually completed order for years;
- overestimation of not only the cost, but also the volume of work performed;
- placement of fictitious orders, in which payment is made, but services or works are actually not provided.
In order to bypass the mandatory tender procedures, the organizers of the tenders artificially split large contracts into a number of private tenders, and already at the stage of order fulfillment revise its terms or conditions. Often, acceptance of works or services is carried out on the basis of fictitious documents, without due verification of their quality. Often, in the field of public procurement, warranty obligations are not observed or they are simply not provided for in contracts. Violations in the placement of information on the organization of orders are becoming the most frequent in the field of public procurement.
It is obvious that the subject of the crime - corruption in the field of public procurement - in most cases becomes a representative of a government customer or a company with state participation, acting in collusion with representatives of suppliers.
Legal regulation of ensuring anti-corruption
The introduction in 2005 of Federal Law No. 94-FZ "On Placing Orders", according to the Federal Antimonopoly Service, has shown good results in the first 5 years of its operation. The total savings amounted to about 1.4 billion rubles, while almost the same amount is stolen from this area every year. Competition remains at a low level, despite the fact that, on average, only 1.8 bids are submitted for one lot in the competition, and 2.5 bids in the electronic auction. This cannot but speak about the predictable results of tenders in the field of public procurement and the exclusion of the majority of potential suppliers from tenders.
A serious disadvantage of the law was the provision of priority in choosing a winner to the person who offered the minimum cost of the application to the detriment of the potential qualification requirements presented to him. Thus, the tender is won by unknown "pocket" companies that do not have actual resources to fulfill the order. Dumping brings its own inconvenience to the state customer himself, he is often forced to purchase a product of poor quality, but offered on the most favorable price terms. At the same time, it does not become an effective anti-corruption mechanism. Dumping results in unfinished roads and healthcare facilities, disgusting baby food in schools, and far from the best medicines in hospitals. The low price priority also has a corrosive effect on the procurement sector, discouraging them from improving the quality of services.
Despite the fact that procurement planning is introduced for the year ahead, in practice, a significant part of them turns out to be spontaneous, due to the requirements of the moment. It is in them that the greatest number of corruption violations lies, since they are committed outside the plan and often only with the aim of using the budget that has not been selected for any item. Lack of preliminary planning in full makes it impossible to assess the feasibility of a particular purchase and the price level.
On the other hand, such ad hoc purchases, not included in the plans, provide ample scope for prior notification of affiliated companies. The rest of the potential bidders learn about them only at the time of the announcement and often do not have the opportunity to timely prepare for participation. According to 2015 data, almost 39% of purchases were made from one supplier, which indicates an extremely low level of competition. Interestingly, most of the purchases from a single supplier are carried out under those contracts, the amount of which exceeds 1 billion rubles. This also has objective reasons: the number of market participants with such production volumes is limited, and they are often monopolists in their industry, for example, the state defense order.
The contract system as a way to limit corruption
The Law on the Contract System, adopted in 2013, also reduced the possibility of manipulation and corruption in public procurement. Based on this law, a schedule-based contracting mechanism was implemented. The plan drawn up by each buyer must indicate:
- purpose of purchase;
- assortment and name;
- the amount of funding allocated for procurement;
- timing or frequency of their implementation;
- justification of expediency.
Planning as one of the elements of combating corruption is carried out for the period of validity of each next law on the state budget, the budget of a federal subject or municipal body. But every year an additional procurement schedule is developed for each state body or company with state participation. The customer received the right to use one of 5 methods of forming the contract price. It:
- regulatory (standards can be set quite arbitrarily);
- design and estimate;
- method of comparable market prices.
Unsurprisingly, almost every one of these pricing methods carries potential corruption risks of overpricing. Anti-corruption can be carried out at the level of auditors of the Accounts Chamber, who identify mechanisms for overpricing. The purchase of goods, works, services can be carried out on a competitive basis: at a competition, auction, by requesting quotations. If possible, a single source procurement method is used. The law requires making at least 15 of the total volume of purchases from small businesses or socially oriented NGOs, associations of people with disabilities and similar organizations. More often, small businesses find themselves affiliated with the buyer's representatives, and the rule of law seemingly aimed at restoring social justice turns out to be another loophole for corruption. It is extremely rare to reveal a conflict of interest, since it is not possible to trace a direct connection and the presence of corruption in the public procurement system.
The Federal Antimonopoly Service becomes the main body in whose sphere of authority is control over the detection of corruption in the public procurement system. It is according to her ideas that numerous criminal cases are initiated.
The main task of combating corruption is to identify violations in information support and find cases of conflict of interest and direct communication between an official and an employee of an entrepreneur. But examples of such direct communication are limited. It:
- the presence of a marriage between the head of the procurement commission or its member with the head of suppliers;
- close family ties between the same persons;
- having a direct personal interest in concluding a contract.
But these facts can become only one of the possible reasons for the invalidation of the contract. If direct bribery is not established, then a criminal case will not be initiated.
Only the work of the FAS cannot control the entire volume of corruption and ensure the fight against corruption. Public control becomes necessary. Citizens should be able to conduct independent monitoring, identify all doubtful situations in the field of public procurement, and on the basis of their work, a law enforcement system should begin to operate. It is within the powers of the Government of Russia to directly determine the cases when the need for a particular procurement is identified on the basis of public discussion of its expediency. The procurement may be canceled following public comment. This right is granted to the Government of the Russian Federation only in relation to contracts with an initial price of 1 billion rubles, not included in the list of exceptions, which includes contracts of the defense department, some particularly significant projects.
Public discussion, in accordance with the norms of the Government Decree No. 835 of August 22, 2016, is carried out in two stages:
- first on the dedicated ENI website;
- then, on the basis of the discussion data, a protocol is formed, which is sent to the FAS for making an informed decision. This decision is made based on the results of interviews with customers and all interested parties. The interview is carried out in the form of in-person public hearings with obligatory audio recording. It may also result in changes to the tender documentation.
As a precedent, we can give an example of changing the design documentation for the construction of highways in Ugra. If the procedure is not carried out, the Code of Administrative Offenses in Article 7.29.3 establishes responsibility for this in the form of a fine of 30,000 rubles, which does not look like a convincing measure. While such activity of citizens in holding discussions is not great, significant construction projects in the regions attract attention. The National Association of Procurement Institutions has established: so far, more than half of contracts worth over 1 billion rubles in the field of public procurement are carried out without due observance of competitive procedures. This is facilitated by the condition that it is necessary to fulfill the public procurement order only on its own, without involving a subcontractor.
The mechanism of hiding information about the purchase by the method of replacement in the announcements of tenders from Russian letters to Latin is widely used. Such trades in 2012 alone were identified for 9 billion rubles. From the point of view of information support, the Ministry of Economic Development suggests finding a way to fight by installing filters. In addition, he plans to create a system for comparing purchase prices to identify unjustified overpricing.
It is impossible to eradicate corruption without strengthening government coercive responses. A bill was introduced to the State Duma proposing to increase the punishment for violations in the field of public procurement to 15 years in prison with additional opportunities for law enforcement officials to control large acquisitions of officials, if they are made after the initiation of a criminal case, and even confiscate them. The project has not yet been adopted. At the same time, within the framework of the National Anti-Corruption Plan, the authorities have been assigned the following tasks:
- to develop bills aimed at combating corruption at the regional level, since a significant part of violations occurs precisely at the level of regional elites, which are not always fully controlled by the federal center;
- to create a draft regulation on the commissions for combating corruption in the regions and to introduce these commissions in the future.
In addition, preventive measures should work at the personnel and organizational level. Decisions were made on:
- developing a list of positions and organizations in whose work heightened corruption risks arise;
- the introduction of special screening and appointment procedures for filling posts from this list;
- development of a mechanism for the unimpeded movement of employees who fill positions with an increased level of corruption to other places or their dismissal on the basis of loss of confidence;
- development, taking into account the limitation of a number of personal and property rights for employees from this list, a mechanism for providing them with additional social guarantees;
- tightening all types of control over the daily life of employees from this list, up to the use of secret methods;
- the development of strictly regulated decision-making methods in each controversial case in the field of public procurement, which has signs of corruption.
Despite the fact that a number of these steps may partially violate the constitutional and labor rights of citizens, the very development and implementation of such a mechanism already speaks of the seriousness of the problem. The Concept also proposes, in addition to the existing options for antimonopoly and public control over procurement, to introduce a special method that allows state and municipal financial control bodies to issue orders to prohibit any procurement that arouses suspicion, until violations are eliminated. From the point of view of detecting violations or the possibility of their occurrence, it is supposed not to wait, but to oblige auditors who carry out inspections of state-owned companies to inform law enforcement officers about any possible risks.
The shortcomings of the Law "On Combating Corruption" do not make it possible to fully identify and promptly eliminate all corruption manifestations in the field of public procurement. The lack of disclosure of the concept of "personal interest", which excludes the criminal law qualification of all types of corruption, in which personal interest is expressed in a non-financial form, not in the form of direct bribery, makes it impossible to bring persons motivated not by money, but by personal or career benefits, to account. The law makes it possible to prosecute an accountant of a regional municipal unitary enterprise for overstating the estimate, but does not give the right to suppress the action of groups working at the highest level and using, among other things, international channels to finance bribery. No mechanism has been envisaged that could, even at the stage of formation of procurement commissions, prevent persons with a possible conflict of interest or corruption plans from entering them. It is practically impossible to prosecute specific performers who publish incorrect information, compose tender documentation, and justify the overstatement of prices.
All this, including numerous contradictions and flaws in the legislation, leads to the fact that law enforcement agencies are practically powerless in identifying systemic violations. The need to create a separate structure with powers similar to the Soviet OBKhSS is recognized by many researchers. Public control must be accompanied by a direct interest of public controllers in identifying unlawful behavior. All these measures together will help to more effectively counter corruption in the field of public procurement.