Carry on Disclosing – Concluding an investigation into EU OJEU Contract Award Transparency against Perceived Corruption

Christopher H. Bovis’s says in his book EU Public Procurement Law‡ ’One of the most important principles of the Public Procurement Directives is the principle of transparency…it services two main objectives:

1. Introducing a system of openness into public purchasing in the member states, so a greater degree of accountability should be established and potential direct discrimination on grounds of nationality should be eliminated.
2. Ensuring that transparency in public procurement represents a substantial basis for a system of best practice for both parts of the equation, but is of particular relevance to the supply side, to the extent that the latter has a more proactive role in determining the needs of the demand side.’

Quite, but I would add a third ensuring that transparency extends to an obligation/social contract on buyers fully disclosing in the public domain how our money is spent.
Somewhat belatedly following up on the last blog (remember?) I picked up on the zeitgeist of transparency and disclosure currently abroad throughout the EU and wider world. One of the reasons for the delay was a wish to extend the examination to the whole of 2013 (with the archives only becoming available in January) and to all member states.

Previously I said I’d examine in more detail the issue of publication of the Referenced Document number or to give it its more prosaic description, ‘Part IV.3.2 of the award: Previous publication(s) concerning the same contract’. These should appear in each OJEU disclosed Contract Award. I realise this all sounds highly esoteric and the procurement geek’s equivalent to angels dancing on pinheads, but is in fact, along with the disclosure of the contract award itself, a bellwether on not only openness in who won a publicly funded contract and at what price but also how it can be linked back to the original offer through a simple audit trail. When framed within the context of all OJEU transactions equating to roughly 22% of 20% of the EU’s economic output/GDP equivalent to something like €570bn* of European taxpayers’ money, there’s nothing esoteric about it at all.
In initial investigations for the first part of the blog, I was prompted by a PwC/Ecorys report commissioned by OLAF (the EU’s Anti-Fraud Office) examining losses incurred on public budgets in eight member states with €1.4-2.2bn/£1.2-1.9bn being lost based on TED data for 2010. In these initial investigations, whilst it was encouraging to see that overall, disclosure rates had considerably improved since the mid 1990s, it became apparent that the newer member states appeared to be the most compliant. Great you might think and given that with a neophytes’ enthusiasm comes a wish to make a positive impression, there’s nothing necessarily out of context. However, it has to be seen against the wider backdrop of transparency and corruption and this is where something of a paradox is created. The greater the level of perceived corruption in a member state, the greater the levels of contract award disclosure. Are you keeping up at the back there?

Claudius’s Conundrum

To explain this conundrum let’s start with how all the EU member states have performed, including the EU institutions, e.g. the Commission, Parliament Courts of Justice, European Investment Bank etc. in disclosing the number of contract awards to the number of contract notices. A rolling average has been calculated over the previous three year period 2011-2013, examining over 930K records. This generated unusual results on two levels.

1. With the exception of the Netherlands, Spain and the EU Institutions, all the other countries with award disclosure rates above the EU average are those only joining within the previous 10 years and in the case of Bulgaria & Romania, seven. Moreover, it wasn’t much more than a decade before that, that any emerged, blinking from centrally planned totalitarianism with scant regard for the rule of law or the disclosure of anything bar propaganda. In contrast, all those languishing below the European average, with the exception of Slovakia are all 20th century western market economies, never under the COMECON† yoke.
2. With one marginal exception Slovenia, they all manage to report higher levels of awards than tenders i.e. +100% over a three year average. That equates within that group of countries in the period examined, an additional 15K contract awards, equivalent to 16% of all the tenders published for which there appear to be no original invitations to tender. So why is this? The initial suppositions aren’t very encouraging. Are awards published for Tenders that were never advertised or is there a culture of publishing multiple awards against one contract notice? There is no practical way of proving either without either the tireless examination of each contract or a statistically significant sample. For the latter, there’s a legal vehicle for this where results are published without the contracting entity ever needing to advertise the original tender and that’s the Voluntary ex Ante Transparency Notice (see Part 1), but these aren’t being accounted for in this study, since there’s nothing to trace it back to so that’s a red herring.

Fig. 1 Average Disclosure Rates of Contract Awards 2011-2013

The second puzzle examines the disclosure of the link back to the original contract, i.e. a nice clear transparent audit trail. Over the examined period 2011-2013, 31% of contract awards failed to disclose details of the original contract notice, accounting for a staggering 141K contracts. Any guesses what the value of all this would be? The EU average is dragged down by France publishing 26% of all awards in this period with its poor disclosure rate of only 62%. Again, with the exception of the EU Institutions, 8 of the 18 states with above average Previous Publication disclosure rates are the former COMECON countries. The UK surprisingly languishes third from bottom but then seen within the prism of the rest of this study perhaps not so.

All this could be put down to buyers’ collective administrative laziness without easy access to the original tender or simply a failure to record or know what the OJEU reference was. This sounds more likely than any malign hidden agenda concealing and obfuscating possible potential attempts to link the award with the original contract. It may also be that despite the perceived corruption in many of the countries reporting high levels of disclosure that they also display correspondingly higher levels of enthusiasm for being in the EU, manifesting itself in more positive engagement in its byzantine administrative complexities although this doesn’t hold true for Slovenia, the Czech Republic or Cyprus.

Fig. 2 Average Disclosure rates of Previous Publications concerning the same contract 2011-2013

Despite the Commission’s recent self-damning report on the endemic levels of corruption permeating at various degrees through all levels of EU public life, seen from the perceptions of each member states’ citizens EU Anti-Corruption Report they couldn’t quite bring themselves to rank each member state, conveniently avoiding any discomfiting political issues and upsetting anyone.

Each member state has therefore been ranked according to their average corruption perception index score over the same period 2011-13, based on Transparency International’s figures, since they’re beholden to no one. This is an index in which they have ‘ranked 177 countries and territories around the world on their perceived levels of public sector corruption’. The scores rank from 0 Highly Corrupt through to 100 Very Clean. For details on this visit their excellent site cpi.transparency.org

Figure 3 transposes the average 2011-13 CPI rankings for each member state against the disclosure rates in Figures 1 & 2. The Scandinavians are ranked in the top 10 in what Transparency International calls ‘Very Clean’. In contrast the ‘less clean’ Balkan member states are ranked at the bottom. Any countries in the bottom 10 (thankfully not represented in the EU) are referred to as ‘Highly Corrupt’. Set against the back drop of this ranking the other graphs reveal something unusual, in that the lower a countries’ perceived corruption index, the higher generally the award disclosure rate. There is also a slight upward trend in the disclosure of a previous publication, i.e. the original tender. This is counterintuitive since the trend should show them all going roughly in the same direction.

Fig. 3 Comparison of 2011-2013 Average Corruption Index Rankings of EU states against Average RN & Award disclosure rates 2011-2013

Known Unknowns or No Honestly?

In an attempt to try to present this more simply and effectively, Fig. 4 aggregates the figures for each member state according to their CPI grouping by Transparency International. There is now clearly a discernible downward trend in the disclosure rates of countries’ contract award data against their decreasing levels of perceived corruption. There is also a marginal upward trend in the disclosure rate of countries’ previous documents as the levels of transparency increase as perhaps one might expect.

Fig. 4 Average Disclosure Rates against Corruption Perception Groupings for 2013

The below table aggregates the CPI averages for the period 2011-2013 collected from Transparency International with an attempted emulation of the same shading used by TI in their excellent infographic cpi.transparency.org/cpi2013/infographic/ for ease of visual representation. Apologies to TI if it isn’t exactly right.

To put some perspective on this, two further rungs down the league table and you hit rock bottom with the lowest Score group 0-9 or ‘Highly Corrupt’ occupied by Afghanistan, North Korea & Somalia.

So having dragged you through this minefield you might expect me to cut to the chase revealing some insightful conclusion. Is it a sort of zero sum game whereby the trade-off for less corruption is less transparency or are the figures skewed by the simple fact that the overly high (+100%) disclosure rates from the more corrupt countries (as perceived by Transparency International) in themselves reveal something not quite right?

Or, should we be guided by Prof. Nick Black who recently dismissed the most established method of measuring NHS hospital mortality as having no value and simply ignore these figures?

I don’t know, but it is something the Commission should commission (no pun intended) someone to look at more closely. Step forward Transparency International?

I’ll leave the last words to the peerless and existential Donald Rumsfeld, ex. US Secretary of State for Defense [sic]

Claudius
‡ Edward Elgar Publishing ISBN 978-1-84720-947-4

* Based on 22% of 20% of the aggregated averages for the EU for 2011-2013 from Statista: www.statista.com/statistics/279447/gross-domestic-product-gdp-in-the-european-union-eu/. According to a 2011 OECD report ‘On average, 22% of the total value of public procurement in OECD countries that are also members of the EU are published in the OJEU’

† COMECON or Council for Mutual Economic Assistance was the Soviet Union’s response to the OECD and consisted of the former communist Central and Eastern European states.