Public procurement corruption costs €2.2 billion

2 October 2013

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3 October 2013 | Gurjit Degun

Up to €2.2 billion (£1.84 billion) was lost through corruption in public procurement in eight EU countries in 2010.

That’s the finding from research commissioned by the European Anti-Fraud Office (OLAF). According to Identifying and reducing corruption in public procurement in the EU analyses corruption in public procurement and what the direct costs – the immediate monetary impact on national budgets – are to taxpayers.

The study identified four main types of procurement corruption; bid rigging; kickbacks; conflicts of interest; and other, which could include deliberate mismanagement or ignorance.

It examined procurement projects in five areas; road and rail; training; water and waste; urban/utility construction; and R&D. It found in relative terms, the highest losses are encountered in corrupt training projects with 44 per cent of the budget lost.

In total losses amounted to 18 per cent of the overall project budget, of which 13 per cent was attributed to corruption. The survey noted such losses are typically a result of cost overruns, delays of implementation and/or loss of effectiveness. The overall share of budgets lost to corruption tended to be higher in smaller projects than in larger projects.

European commissioner for anti-fraud Algirdas Semeta, said: “Up to now, a problem we have had is in quantifying corruption. Like with any of these shadow crimes, we are short of tools to measure it concretely and properly assess the harm done.

“The study now puts concrete figures to what we have long recognised as a threat to public finances. And it confirms that once a procurement project is affected by corruption, the public losses increase substantially.”

OLAF made the following recommendations to mitigate against corruption in procurement:

Increase the transparency of public procurement through public availability of documents and data on public procurement.

Contracting authorities should make all necessary efforts to ensure that public procurement is market-based, generating a sufficient (but not necessarily maximum) amount of tenders.

Invest in professional and centralised procurement organisations. Ensure procurement officers are well-trained, experienced and adequately paid, including regular screening and job-rotation of this staff.

The research was carried out by PwC and Ecorys, with the support of the University of Utrecht. The research was based eight randomly selected EU nations - France, Hungary, Italy, Lithuania, the Netherlands, Poland, Romania and Spain.

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