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Think Piece

Promoting Competition and Deterring Corruption in Public Procurement Markets: Synergies with Trade Liberalisation

By Robert Anderson, William Kovacic, Anna Caroline Müller, 
February 2016
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Efficient and effective government procurement markets are critical to economic growth, development, and the welfare of citizens. Yet, two very serious challenges bear on the performance of these markets: (i) ensuring integrity in the procurement process (preventing corruption on the part of public officials); and (ii) promoting effective competition among suppliers. Typically, these challenges are viewed as separate and distinct: the former (corruption) is treated primarily as a principal-agent problem in which the official (the “agent”) enriches himself/herself at the expense of the government or the public (the “principal”); while the latter (promoting competition) involves preventing collusive practices among potential suppliers and removing barriers that impede participation in relevant markets. This think-piece demonstrates that these two problems often overlap, for example where public officials are paid to turn a blind eye to collusive tendering schemes or to release information that facilitates collusion. As well, while transparency requirements are often central to efforts to eradicate corruption, such measures can, if not properly tailored, facilitate collusion and thereby undermine efforts to strengthen competition. Thus, careful coordination of measures to deter corruption and to foster competition is needed. Further, the think-piece argues that participation in the WTO Agreement on Government Procurement (GPA), or in similar regional arrangements, can play an important role both in promoting competition and in deterring corruption. The GPA enhances possibilities for healthy competition in relevant markets through participation by foreign-based or affiliated contractors. It helps to prevent corruption by requiring adherence to appropriate (tailored) transparency measures, and by exposing procurement activities to checks and balances including domestic review (“bid protest” or “remedy”) systems and international scrutiny.

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