The city of Zadar in Croatia. © 123RF
The city of Zadar in Croatia. © 123RF

EU public procurement corruption costs €5bn

Corruption risk in public procurement in Europe costs around €5bn (£3.95bn) every year, according to new research.

A study by RAND Europe said the annual total cost of corruption in Europe is as much as €990bn (£780bn). The figure is much higher than previous estimates of €120bn (£95bn).

Croatia, pictured, has the most risk of public procurement corruption, according to the report.

RAND Europe estimated that an initial €71bn (£56bn) could be saved if the EU adopted three policy measures.

The Cost of Non-Europe in the Area of Corruption study, commissioned by the European Parliament, investigated corruption, including paying bribes or exercising power to give privileged access to public services, goods or contracts.

Corruption could include having only one organisation in a procurement process, or giving organisations little time to respond to tenders.

According to the report, the World Bank definition of corruption in public procurement includes acts such as unjustified sole sourcing or direct contracting of awards, tailoring specifications to a favoured bidder and sharing inside information.

The study said corruption risk in public procurement varied significantly across EU member states, with Luxemburg having the lowest risk and Croatia having the highest for corruption among public procurement contracts.

Poland, Romania, Lithuania, Cyprus and Croatia had above EU member state average of corruption risk in public procurement, the study said.

However, the costs of corruption risk are highest in Poland and the United Kingdom (both above €1bn), and while in a country like Croatia there is a relatively high corruption risk across its public procurement contracts, the overall value of contracts is low, the report said.

The new overall figures are higher than initial estimates by the European Commission (EC) because RAND Europe used a measuring methodology that took into account the indirect effects of corruption, such as disincentives of companies to invest, and direct effects, such as money lost on tax revenues and public procurement.

RAND Europe has recommended three policy measures to address corruption in Europe which could stop billions being lost every year.

These include applying the updated Cooperation and Verification Mechanism, which was used in Bulgaria and Romania before they joined the EU and involves the EC monitoring countries’ progress in tackling corruption, to other member states.

Establishing a European Public Prosecutors’ Office, to help the EC Anti-Fraud Office investigate corruption, and implementing a full EU-wide procurement system are also recommended.

Marco Hafner, a research leader at RAND Europe and the report's main author, said corruption imposed significant social, political and economic costs.

“Not only does it result in huge amounts of money being lost annually, but corruption leads to more unequal societies, higher levels of organised crime, weaker rule of law and lower trust in public institutions,” he said.

“Measuring corruption is challenging, but our study provides one of the most realistic and current estimations of its true cost to Europe as a whole. Our recommendations highlight achievable targets for the EU and member states to help stop corruption from taking place and limit the amount of money lost each year.”

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