{"id":1244,"date":"2020-10-06T16:10:49","date_gmt":"2020-10-06T15:10:49","guid":{"rendered":"https:\/\/scscsussex.wordpress.com\/?p=1244"},"modified":"2021-10-05T08:55:02","modified_gmt":"2021-10-05T07:55:02","slug":"the-uk-needs-to-get-serious-about-debarring-corrupt-companies-from-public-procurement","status":"publish","type":"post","link":"https:\/\/blogs.sussex.ac.uk\/centre-for-the-study-of-corruption\/2020\/10\/06\/the-uk-needs-to-get-serious-about-debarring-corrupt-companies-from-public-procurement\/","title":{"rendered":"The UK needs to get serious about debarring corrupt companies from public procurement"},"content":{"rendered":"\n

Currently there are few consequences for companies that subvert public procurement through corruption and fraud. And with government departments often highly dependent on a few large strategic suppliers, there are real risks of moral hazard, where suppliers behave badly because they know the government won\u2019t act. But with the UK reforming its procurement rules post-Brexit, Sue Hawley, Executive Director of Spotlight on Corruption<\/strong> argues that this presents a great opportunity to introduce an effective debarment regime.<\/em><\/p>\n\n\n\n

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Public procurement is widely recognised<\/a> everywhere in the world as high risk for corruption and fraud. The UK is no exception. The UK loses up to \u00a322.6 billion<\/a> at central government level to \u201cfraud and error\u201d annually, with procurement fraud the dominant type of fraud detected, and up to \u00a32.7 billion<\/a> at local government according to recent government estimates.<\/p>\n\n\n\n

Losses from procurement fraud are not confined to the public sector. In 2019, analytics company SAS described<\/a> the UK as a \u2018procurement fraud capital\u2019 after finding that 40% of UK businesses had lost between \u20ac150-400,000 a year to fraud compared with an average of 16% for the rest of Europe, Middle East and Africa (EMEA). Alarmingly, the same report found that only 29% of UK businesses held regular audits to detect fraud compared with an average of 46% across EMEA.<\/p>\n\n\n\n

Why does it matter?<\/em><\/p>\n\n\n\n

Corruption and fraud in public procurement not only increase costs for government which are ultimately born by the taxpayer, they also undermine confidence in, and pose real reputational risks for government. Unregulated conflicts of interest in procurement likewise increase perceptions of corruption and destroy trust in decision-making around public expenditure.<\/p>\n\n\n\n

One of the problems with tackling corruption and fraud in public procurement is the dangerous lack of consequences for those, particularly companies, that engage in it. This problem can be exacerbated where the government departments are highly dependent upon a few large strategic suppliers \u2013 a phenomenon that the current UK Prime Minister\u2019s chief advisor has characterised as corporate looting<\/a>. In this context, these suppliers become too big to fail<\/a> or to hold to account. This creates real risks of moral hazard, where suppliers behave badly because they know there is nothing the government can do about it.<\/p>\n\n\n\n

Having a regime to incentivise and reward ethical behaviour in public contracting, and to penalise those who undermine fair procurement processes, is essential to protect the public purse, create a level playing field and build confidence in the public procurement system. This is where debarment (also known as exclusion) from public procurement comes in.<\/p>\n\n\n\n

Debarment is increasingly recognised globally as an effective tool to protect the integrity of public contracting and prevent corruption and fraud.<\/p>\n\n\n\n

New rules post Brexit<\/em><\/p>\n\n\n\n

Up to now the UK\u2019s procurement regime has been based on EU rules which have allowed for companies to be excluded from procurement where they\u2019ve faced a conviction for corruption, fraud and money laundering. These rules have rarely been used in the EU, and to our knowledge, never in the UK (though lack of procurement data on this make it almost impossible to find out).<\/p>\n\n\n\n

This is in part because of serious limitations<\/a> with the EU rules themselves, and recent EU case law interpreting them which makes them hard for public authorities to use.<\/p>\n\n\n\n

As the UK leaves the EU and reformulates its procurement rules, it has a real opportunity to revisit these rules and introduce an effective debarment regime. We\u2019ve identified seven key components to an effective debarment regime in our new paper<\/a> for the Centre for the Study of Corruption, which we believe the UK government should consider in rewriting its procurement rules.<\/p>\n\n\n\n

These include:<\/p>\n\n\n\n