Corruption: A social disease – What’s in it for me? Fraud and corruption in public procurement (Part 3)

Johan Coetzee



For purposes of this discussion it is appropriate to focus on Namibian public contracting in general.

The procuring of and tendering for, among others, radar equipment require extreme accuracy in technical specifications. Clear and transparent contract specifications must be available to all bidders.

These include the evaluation criteria as well as the weightings of such criteria and the ratios attached to such weightings (Kruger). Kruger however indicated that there is often inconsistency in the evaluation of tenders by the Procurement Board, which is the centralised authority for evaluating and approving public tenders of Offices/Ministries/Agencies and SOEs. Any small inconsistency often creates a loophole for manipulation.

EXAMPLES FROM THE CONSTRUCTION INDUSTRY

In an online survey initiated on behalf of the author, members of the Construction Industry Federation (CIF) of Namibia were asked the following questions by the Managing Director of the CIF, Bärbel Kirchner: ‘Are you aware of any bribery taking place?’ and ‘Can you give examples of bribery that has taken place?’

They responded that tender officials award tenders to companies for a bribe of 2-3% of the contract value.

During 2014, a contractor received a tender for executing work for a Regional Council despite the tender being N$1,2 million more expensive than the closest bid. The owner of the successful company contacted a member of the CIF and asked his company to execute the tender on his behalf for N$500 000 more than the amount the unsuccessful company had tendered for. This enabled the successful tenderer to make a profit of half a million dollars for himself, with N$200 000 going to corrupt official(s).

One CIF member commented that he knew of an official in the Ministry of Finance who requests payment to process documents. Without bribes, documents are not processed.

Another member’s tender was rejected and the feedback received was that the bid price was too high. A signed copy of the same tender was found, revealing that the tenderer had exceeded the going rate by approximately 65%.

Some companies pay municipal officials to execute ‘favourable’ inspections and ‘fast approvals’.

One member was approached by officials of the Ministry of Works and Transport to provide them with ‘cooldrink money’. In return they would channel ‘work’ his way. The member did not comply with the request and he did not receive any work.

It was further alleged that officials of the Roads Authority (RA) approached consulting engineering companies and offered them assurances that certain contracts will be awarded to them if the companies offer kickbacks (Coetzee).

Consultants informed a CIF member about many projects awarded by decision-makers in government which did not comply with technical tender specifications. Front companies pay bribes to public officials.

A Chinese company offered a CIF member money for a prospective tender/project. It was clear to the said member that political connections were influential in awarding this tender and future tenders/projects.

Some consulting companies are awarded large contracts without these contracts being advertised or treated as open or public tenders.

Another CIF member said his company does not perform work for government. The company had applied some time previously to be approved as a contractor. The company was informed that the application was successful. After approval, they received phone calls at least once a month from public officials who wanted to conclude deals if the company would execute work for government. The company refused to conclude such deals, informing public officials that they were not interested if no official documents are available when tenders are invited.

Yet another member stated that he thought that companies receiving tenders often offer kickbacks to public officials. For example, the contractor was approached with the bribe: ‘To ensure you get a contract, you must give us 5% of the tender value’. This happened a day before the tender was adjudicated by the Tender Board (Coetzee).

THE BIGGER, THE BETTER

Corruption occurs if projects are large and numerous, as revenues for bribes increase in proportion to the total amount of money allocated.

If projects are technically complex, corrupt payments are easier to hide in one-of-a-kind projects compared to less technical and standardised projects. Illegal payments “can increase the cost and lower the quality of public works projects by as much as 30 to 50%” (Rose-Ackerman).

Corrupt bidders persuade public officials to manage an SOE badly to lower its value, and then when such an SOE is privatised due to mismanagement and causing a drain of scarce public resources, they emerge as the successful bidder.

According to Rose-Ackerman payoffs are not limited to a few thousand dollars but to billions that in turn impact on other processes.

Also: Winning public contracts and concessions are generally a sphere that is only accessible to large businesses and high-level public officials. The process of concluding and awarding winning contracts creates numerous opportunities for corruption in dealings with politicians and officials.

References:

Construction Industry Federation of Namibia, Online survey conducted: The Role of the CIF and the private sector in tackling corruption, 21-23 August 2017.

Johan Coetzee, The Role of the Private Sector in Fighting Corruption, Briefing Paper, Institute of Public Policy Research, April 2018.

Susan Rose-Ackerman, The Political Economy of Corruption – Causes and Consequences, Public Policy for the Private Sector, The World Bank, (74), 1996.

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