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Developed by Transparency International (TI) during the 1990s, the integrity pact is a tool aimed at preventing corruption in public contracting. The pact is essentially an agreement between a government or government department (at the national, sub-national or local level) and all bidders for a public contract. It stipulates rights and obligations to the effect that neither side will: pay, offer, demand or accept bribes; collude with competitors to obtain the contract; or engage in such abuses while executing the contract.

TI has seen the pact tried and tested over ten years in hundreds of contracts in over 15 countries. What makes it a unique tool is the introduction of an independent monitoring system under the leadership of civil society, which ensures increased accountability of public resources.

What is an integrity pact
How do integrity pacts work
What wider benefit does an integrity pact bring
What challenges does an integrity pact face
Resources

What is an integrity pact?

A written agreement between the government/government department and all bidders to refrain from bribery and collusion

Bidders are required to disclose all commissions and similar expenses paid by them to anyone in connection with the contract. If the written agreement is violated then the pact describes the sanctions that shall apply. These may include:

  • Loss or denial of contract;
  • Forfeiture of the bid or performance bond and liability for damages;
  • Exclusion from bidding on future contracts (debarment); and
  • Criminal or disciplinary action against employees of the government.

A monitoring system that provides for independent oversight and increased government accountability of the public contracting process

In most cases, monitors are members of civil society or experts appointed by (and reporting to) the TI Chapter and its civil society partners. The independent monitoring system aims to ensure that the pact is implemented and the obligations of the parties are fulfilled. The monitor performs functions such as:

  • Overseeing corruption risks in the contracting process and the execution of work;
  • Offering guidance on possible preventive measures;
  • Responding to the concerns and/or complaints of bidders or interested external stakeholders;
  • Informing the public about the contracting process’s transparency and integrity (or lack thereof).

Why use an integrity pact?

  • Companies can abstain from bribing safe in the knowledge that
    • A) their competitors have provided assurances to do the same, and
    • B) government procurement, privatisation or licensing agencies will follow transparent procedures and undertake to prevent corruption, including extortion, by their officials
  • Governments can reduce the high cost and distorting impact of corruption on public procurement, privatisation or licensing in their programmes, which will have a more hospitable investment climate and public support.
  • Citizens can more easily monitor public decision-making and their government’s activities.

Who can use it?

The integrity pact can be used by government officials and agencies, private companies (the bidders) and civil society. The initiative to include pacts in a public contracting process can come from any of these actors.

So far, integrity pacts have been led by civil society -mainly through the TI chapters, sometimes with other civil society partners- which allows them to share the experience of past projects.

When can an integrity pact be used?

Integrity pacts are adaptable to many settings. They are flexible tools that can be applied to:

  • Construction contracts;
  • Goods and services supply contracts;
  • State asset privatisation programmes (the buyer/recipient of state property);
  • Consultants (engineering, financial, architectural, for example);
  • State licences or concessions and extraction rights (oil or gas exploration and production, mining, fishing, logging, for example);
  • Government-regulated services such as telecommunications, water supply and waste collection services.

Whenever possible, an integrity pact should cover the entire project from start to finish; needs assessment and justification, bidder pre-selection, bidding, awarding the contract and implementation.

How do integrity pacts work?

  1. The starting point is an agreement for the implementation of the pact between the government procuring agency and the civil society organisation leading the monitoring. This agreement confirms the political will to implement the pact, defines the contracting processes and describe the activities, roles and responsibilities of each of the parties involved.
  2. Maximum transparency at every phase of the contracting process leading to the award of the contract and the project’s implementation. Public hearings and the internet help provide public access to all the relevant information including: needs assessment, design, bidding documents, pre-qualification of contractors, bidding procedures, bid evaluation reports, contract terms and conditions, contract implementation and supervision reports.
  3. The content of the integrity pact should be agreed upon by the civil society organisations and the government. As a contract between the government office inviting the public tender and the bidders, it should be one of the bidding documents.
  4. The main elements of the pact are:
    • An undertaking by the government that its officials will not demand or accept any bribes, gifts etc., with appropriate disciplinary or criminal sanctions in the case of any violation;
    • A statement by each bidder that it has not paid, and will not pay, any bribes in order to obtain or retain the contract;
    • An undertaking by each bidder to disclose all payments made to anyone in connection with the contract in question (including agents and other middlemen as well as family members etc.);
    • The explicit acceptance by each bidder that the no-bribery commitment and the disclosure obligation, as well as the corresponding sanctions, remain in force for the winning bidder until the contract has been fully executed;
    • Bidders are advised to have a company Code of Conduct (clearly rejecting the use of bribes and other unethical behaviour) and a compliance programme for the implementation of a Code of Conduct throughout the company;
    • The use of arbitration as a conflict resolution mechanism, and acceptance that the arbitration panel can decide and impose sanctions;
    • A pre-agreed set of sanctions for any violation by a bidder of any part of its commitments or undertakings within the pact, including (some or all):
      • Denial or loss of contract,
      • Forfeiture of the bid security and/or performance bond,
      • Liability for damages to the principal and the competing bidders, and
      • Debarment of the violator by the principal for an appropriate period of time.
  5. The civil society organisations must select the independent monitor(s): The monitor should be highly respected people of unquestionable integrity, who possess professional expertise in the area of the contract. The monitor should not have any links to the procuring agency or bidding companies. The monitor preferably reports directly to the civil society organisations.
  • Monitors should have free access to all relevant government documents, meetings and officials, and to all documents submitted by the bidders. They should review the tender documents, the evaluation reports, the award selection decision and the implementation supervision reports (technical as well as financial).
  • Monitors regularly inform the leadership of the government office of any corruption risks or possible irregularities detected. The monitors should suggest preventive/corrective measures to all parties.
  • Where any corruption risks or possible irregularities are reported by the monitor to the government office and no steps have been taken (or such steps are inadequate) within a reasonable period of time, then the Monitor is entitled to inform the public and/or the public prosecutor’s office about this situation. In addition, the civil society organisations must be entitled to withdraw from the pact process and explain in a public statement the reasons for the withdrawal.

What wider benefits does an integrity pact bring?

  • Enhanced access to information, which increases the level of transparency and integrity in public contracting.
  • Greater confidence and trust in public decision-making – foster changes in the perception of citizens & bidders about the presence of corruption in public procurement.
  • Less litigation on procurement processes.
  • Contract values that match or are below original budget estimates reducing the cost of public contracting
  • More bidders compete for public contracts
  • Induce greater media coverage of anti-corruption activities resulting in increased public awareness.
  • Encouragement of institutional changes such as the introduction of e-procurement systems, simplification of administrative procedures, use of bidders’ rosters, effective regulatory action, and new practices by public officials such as using codes of conduct or ethics agreements.

See the ’resources’ section for links to national chapters with experience of integrity pacts and feedback on their design, implementation and benefits.

What challenges does an integrity pact face?

Lack of real political will:

  • Governments should make clear commitments to demonstrate that a pact is not just a show of transparency. Civil society must follow-up closely to ensure government compliance.

Political changes:

  • Building relationships and securing commitment at several levels of government ensures changes in positions do not undermine a pact.

Limited technical expertise within TI Chapter or civil society group on the sector covered by the contracting process:

  • External experts can support the technical review of the procurement process. Local independent experts are important, but international experts should fill in if none are available.

Insufficient access to timely and reliable information on the contracting process:

  • There should be clear provisions on how and when information should be disclosed, and specify that non-compliance will be a cause for civil society’s withdrawal from the monitoring.

Insufficient interest of the media to report on the results:

  • The media typically likes stories about scandals more than stories on anti-corruption efforts. Efforts can be made to build an alliance with a strong actor within the media who understands the concept of the pact, will champion its work and report on the results of pacts. Training of journalists is another option.

Resources

Transparency International has available a wide range of material on integrity pacts, compiled by both TI Chapters and the TI Secretariat. Some highlights include:

Integrity Pacts in the Water Sector: An Implementation Guide for Government Officials (2010)
This collaborative effort between the Water Integrity Network (WIN) and TI seeks to help determined leaders and champions to overcome corruption in public contracting within their own governments.

Government officials and other interested parties can use the manual to familiarise themselves with the integrity pact and apply it to their situation. Although the manual places particular focus on the water sector, the information provided can serve as a more general set of guidelines and thus be applied to other sectors also. To read more and download the Manual, please click here.

Curbing Corruption in Public Procurement (2006)
This Handbook is designed to provide a basic introduction to the challenge of overcoming corruption in the field of public procurement. Its intention is to provide the readers with examples of counter corruption efforts including the use of integrity pacts. The publication was issued as a result of a project carried out with the national chapters from, Indonesia, Malaysia and Pakistan. To read more and download the publication, please click here.

The integrity pact: A Powerful Tool for Clean Bidding
A brochure providing a brief description of the integrity pact in English, French and Spanish.

The integrity pact: The Concept, the Model and the Present Applications: A Status Report (2002)
This report provides a description of the initial design of the integrity pact, including its application and status in 2002. To download and read the report, please click here.

Integrity pacts in practice in TI chapters

Argentina:
Public hearings are a key element of pacts in Argentina.

Poder Cuidadano, along with several municipal authorities, organises public hearings to increase credibility and prevent corruption in public procurement. They provide a platform for the responsible authority to convene with citizens, businesses, experts and representatives of the opposition and present the details of the particular project and the procurement provisions.

At the hearings, participants can make objections and suggestions which are taken into account and incorporated into the process where appropriate.

More information on Argentina’s experience in fighting corruption can be found on the chapter’s website. To access the website please click here [Spanish].

Colombia:
The chapter and Authority discuss the corruption risks that may arise during a contract process with bidders beforehand. This technique is suggested to secure the cooperation of all participants from an ethical point of view. Measures to prevent the identified risks are agreed upon between all parties and incorporated into the pact document, to be signed between the bidders and the authority, as well as in an ‘Ethics Declaration’ adopted by the relevant public officials involved.

Transparencia por Colombia introduced pacts in over 60 major procurement processes, in different sectors. More detailed information on the Colombian experience can be found in the paper, “The Experience of the Systematic Implementation of integrity pacts for Public Contracting in Colombia” available here.

Colombia built on their experience with pacts and evolved to a new tool -Anti-Corruption Agreements- for specific industry sectors. More information on the latter form can be found here. More general information is available on Transparencia por Colombia’s website. To access the website, please click here [Spanish].

Germany:
Schönefeld International Airport, a project worth €2.4 billion, provides a very high profile use of a pact.

In an effort to reduce the risk of corruption, TI Germany was approached by the company in charge of the project (Flughafen Berlin-Schönefeld GmbH) and together they established a pact which suited the German legal context. The adapted pact model was applied to all project contracts, starting at the early stages of project design and implementation. The selection of a suitable monitor was crucial. The monitoring has included contract execution and will be in place until the airport is officially opened.

A case study of the application of the pact in the Schönefeld project can be found as an annex within the integrity pacts in the Water Sector Manual or here. Additionally, more general information on Germany’s experience with the pact can be found on the chapter’s website. To access the website, please click here [German].

India:
TI India’s advocacy efforts resulted in the Central Vigilance Commission (CVC) issuing Directive 008/CRD/013, which refers to the implementation of integrity pacts as ‘standard operating procedure’ in procurement contracts of any major government department. To date, over 39 Public Sector Undertakings (PSU), or state-owned companies, have signed a Memorandum of Understanding (MoU) with TI India and apply the integrity pact accordingly. More detailed information regarding the use of pacts in India can be found on the chapter’s website. To access the website, please click here.

Indonesia:
In Indonesia, the pact has been adapted and applied to local government contracts in up to 20 districts. As the main beneficiaries, the general public holds the lead role in monitoring the implementation of integrity pacts to ensure the quality of the output.

For more information on the Indonesian experience, please refer to the Curbing Corruption in Public Procurement Handbook, or click here. TI Indonesia’s website also provides more general information on anti-corruption efforts in procurement. To access the website, please click here [Bahasa].

Italy:
In Italy, the pact has been introduced mainly at municipal level. Milan City Council was the first authority to adopt the integrity pact in 2002. In 2009 the Italian Association of Municipalities, the Minister of Public Administration and TI Italy have signed a protocol promoting the use of pacts by municipal administrations.

In Italy the introduction of the pacts is preceded by a training to all managers and employees engaged in their application on best public procurement practices to prevent corruption risks and the role the integrity pact. The Italian pact model does not provide for Independent External Monitoring, instead it relies on the control mechanisms of the Court of Auditors.

More general information on TI Italy’s work on procurement and the use of integrity pacts can be found on the chapter’s website. To access the website, please click - here [Italian].

Latvia:
In 2005, TI Latvia and the Latvian Ministry of Culture agreed to apply an integrity pact to the contracts of three major construction projects of a national library, a concert hall, and a contemporary art museum. TI Latvia was appointed as an independent external monitor to guarantee transparency and provides public reports on the process.

A summary of the integrity pact’s implementation process can be found here. More general information on the chapter’s related work can be found on their website. To access the website, please click here.

Mexico:
Transparencia Mexicana has implemented pacts in over 100 contracts, worth approximately US $30 billion in total. The chapter’s has emphasised the use of independent monitors, known as a “social witness”. In 2004, the Public Administration Authority issued a decree whereby the role of social witnesses has become mandatory for national level contracts above a certain threshold.

A case study on the implementation of pacts in Mexico is included as an annex in the integrity pacts in the Water Sector Manual, or can be downloaded here. More general information on Transparencia Mexicana’s efforts to fight corruption can be found on the chapter’s website. To access the website, please click here [Spanish].

South Korea:
The Korean pact model emphases the protection of whistleblowers and the creation of an ombudsman system to carry out independent external monitoring. The chapter conducted a survey on integrity pacts in the Public Sector in 2003.

The findings to this survey and the Korean experience can be accessed in English here. Additionally, more information on South Korea’s experience in pact implementation can be found here.

Pakistan:
TI Pakistan introduced integrity pacts in 2000, in the Greater Karachi Water Supply project (K-III) implemented under the responsibility of the Karachi Water and Sewerage Board (KWSB). TI Pakistan monitored the bidding process for the design and supervision of the project and recommended a series of procedures that were maintained for the remaining contracts of the project, which was completed ahead of schedule at a total cost US$10 million less than initially estimated.

In 2004, the Government of Pakistan enacted the Public Procurement Rules; it is now mandatory for bidders to sign a pact for any contracting process with a value above a given threshold. The new legislation does not provide for the participation of an independent monitor.

For more information on Pakistan’s experience with pact implementation in the Greater Karachi K-III project, please click here. An additional example of pacts in the Steel industry can also be accessed here. More general information of Pakistan’s fight against corruption on public procurement can be found on the chapter’s website. To access the website, please click here.

United Kingdom:
Integrity pacts have also been adapted and implemented with particular focus on the defence sector. TI UK offers stakeholders of the sector an introduction to integrity pacts; templates and guidance, documents for practical implementation of the tool, the role of the Independent Monitor and an overview of experience to date with defence integrity pacts as well as an assessment of how the tool assists in the fight against corruption. More detailed information on the use of defence integrity pacts can be found on the chapter’s website. To access the website, please click here.

Additional Information:

References by other organisations to the integrity pact include:

Fighting Corruption Through Collective Action: A Guide for Business. World Bank Institute (2008)
A significant number of tools for Collective Action are available, and continue to evolve, though many companies that want to be more proactive in fighting corruption do not know about their existence or have insufficient practical information to consider their use. Accordingly, this guide seeks to explain the benefits and use of Collective Action as a means to fight corruption and demonstrate the role of the private sector in forming a solution to prevent instances of corruption. The integrity pact features as one of the main Collective Action tools. To read more, the report can be downloaded here.

Participatory Governance Toolkit. CIVICUS: World Alliance for Citizen Participation (2009)
This on-line toolkit provides information on nine different categories of participation governance practices and includes over 20 individual approaches/tools. It presents a collective and interactive toolkit, containing the contributions of a number of expert organisations and individuals. The toolkit includes a particular section on the integrity pact and provides information on the use of the tool, its benefits, challenges and lessons learnt through previous implementation. The Toolkit can be accessed here.

Combating Corruption: A Private Sector Approach. Centre for International Private Enterprise Reform Toolkit. Washington (2008)
This publication introduces a number of important concepts, seeks to explain and address the underlying causes of corruption, and recommends a number of concrete areas in which the private sector may lead governance reform. The toolkit focuses on the costs and causes of corruption; stages in the fight against corruption; and the demand-side and supply-side ways of fighting corruption. The integrity pact is noted as one way in which corruption in public procurement can be addressed and reduced. Particular case studies of anti-corruption programmes in Bulgaria, Colombia, and Serbia are also included. To read more, the paper can be downloaded here.


Handbook: Curbing Corruption in Public Procurement

Working Paper No 05/2010:
Corruption and Public Procurement