Theme: Procurement

 20^th March 2018, London – The re-opening of corruption charges against former South African President  Jacob Zuma, relating to a 1999 arms deal, are a welcome step and should mark the beginning of justice finally being served, according to Transparency International Defence & Security.

Research from Corruption Watch UK into the scandal known as the ‘Arms Deal’ suggests billions of taxpayers money was squandered – at a time when the South African government claimed that there were insufficient funds to treat thousands of citizens for AIDS.

Andrew Watson, Head of Industry Integrity at Transparency International Defence & Security, said:

“We warmly welcome the news that Jacob Zuma may now finally face justice for his crimes. It’s a shame that these charges took him to leave office for a prosecution to take place – but it is encouraging that his crimes may now finally be catching up with him.”

“Jacob Zuma and the companies alleged to have paid bribes to him have escaped justice for many years. These charges must now finally shed some light on one of the largest defence corruption scandals ever seen and result in robust prison sentences for those found to have been involved.”

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Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
dominic.kavakeb@transparency.org.uk

19^th January 2018, London – Commenting on an announcement by the Serious Fraud Office that it is investigating Chemring Group PLC, a British Defence Company, for corruption, money laundering and bribery, Andrew Watson, Head of Industry Integrity at Transparency International Defence and Security, said:

“It is disappointing to see another British defence company facing fresh allegations of systemic and widespread corruption, highlighting the very real challenges facing this unique sector.”

“Once again, intermediaries – long established as one of the highest corruption risks in defence commerce – are at the heart of these allegations.”

“Whilst it is encouraging that the company reportedly discovered the allegations themselves during an internal audit and that it was then self-reported to the SFO, we call for the company to fully cooperate with investigators and conduct an internal review of its anti-bribery procedures to discover what went wrong and why it wasn’t discovered before now. It’s vital that this investigation is thorough and perpetrators are brought to justice, no matter how high-up in the company they may be.”

Chemring scored a C in the Transparency Internationals most recent Defence Companies Anti-Corruption Index, meaning there is “moderate evidence” that they have anti-corruption measures.

Transparency International’s 2016 report “License to Bribe” identified the significant risks in the use of third parties and agents in arms deals, one area reported to be the subject of this investigation.

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Contact:

Dominic Kavakeb
020 3096 7695
079 6456 0340
dominic.kavakeb@transparency.org.uk

Weaponising Transparency has found that unpublished defence budgets and arms procurements are still open to abuse by corrupt officials seeking to benefit from the conflict with Boko Haram and launder stolen money abroad. Many deaths in the conflict have occurred while the military lacks vital equipment, critical training, and morale.

Since 2011, 50,000 people have lost their lives in the conflict with Boko Haram, while millions have been displaced. An estimated US $15bn has been stolen from the defence sector and billions of Naira spent annually without clear rationale. While President Buhari has made significant moves to take on the secretive and powerful defence sector, the pace of reform in the MOD is too slow and lacks any strategy.

This evaluation is based on a review of 8 indicators in Transparency International’s (TI) unique dataset, the Government Defence Anti-Corruption Index, analysing procurement control mechanisms, policies and procedures from 20 European government defence ministries collected during 2014 and 2015.

The paper identifies positive and negative practices across countries, as well as the overarching trends analysed in three areas; namely, the use of the essential security interest exemption, procurement transparency and competition.

Drawing on this analysis, the paper contains a series of recommendations to European governments and the Commission concerning the factors affecting the implementation of the Directive in these areas, and the issues that continue to require action at EU level.

Agents have played a key role in defence procurement for decades and many cases of procurement corruption have involved agents. They are widely recognised as one of the highest risk factors for corruption across the sector but, despite recent changes to the regulatory environment, the risks are as difficult to manage as ever.

How can governments protect themselves from corruption in the contracting process, without becoming overburdened by long and detailed legal processes? This report offers a new option: suspension and debarment systems. Suspension and debarment systems protect governments from engaging doing business with contractors who pose a business risk by preventing them from participating in government contracts and subcontracts. It explains how they function, both in theory and practice, and it identifies certain “best practices” that characterize a well-functioning suspension and debarment system.

Full and open competition is one tool for governments to help ensure best value for money. Yet previous studies highlight that the defence sector is poor in this respect. This report explores trends in the award of non-competitive or single-source contracts in defence.

Single-source, or non-competitive, defence procurement is a widespread phenomenon that is prevalent both in devel- oping countries and in advanced arms exporting countries. The usual competitive bidding process – which assists in both value-for-money evaluation and in lowering corruption risk – is used much less often than expected in defence procurement. Whilst there can be good reasons for single sourcing, the opportunities and inducements for corruption are significantly escalated.

Corruption within defence procurement can have a detrimental impact on security, operational effectiveness, and public trust. Despite defence procurement being a key area of focus in anti-corruption measures in many countries, there remains a serious lack of transparency. In this article for Getting the Deal Through – Public Procurement 2014, Tehmina Abbas summarises Transparency International’s (TI’s) views on the areas in defence and security procurement that most vulnerable to corruption within defence companies and governments.

Reproduced with permission from Law Business Research Ltd. This article was first published in Getting the Deal Through – Public Procurement 2014, (published in May 2014; contributing editor: Hans-Joachim Prieß of Freshfields Bruckhaus Deringer) For further information please visit www.GettingTheDealThrough.com.

The purpose of this report is to shed light on the quality of due diligence in defence offset programmes, and to identify areas of good practice and areas for improvement. It consists of an analysis of one-to-one interviews between the organisations’ person responsible for, or heavily engaged in, offsets, and the TI team. The interviews were non-attributable, so as to maximise the chance of an open discussion. The report found that companies have improved their offsets due diligence practice in the last two to four years. Nevertheless, there’s also substantial variation in practice within the industry: at one end of the range, there is a block of companies with strong, well established due diligence practices; and at the other, there are many other companies who have either rudimentary processes or who have very recently established them. Some companies distinguish themselves as an example of good practice because they have a clear list of red flags that indicate potential corruption for which their staff and advisers must look out for, and have mandatory processes to be followed when a red flag is identified.

This report addresses one particular area of concern in the defence sector: offsets. Defence offsets are arrangements in which the purchasing government of the importing country obliges the supplying company of the exporting country to reinvest some proportion of the contract in the importing country. Offsets are big business, and yet they are very opaque and receive much less transparency and attention than they should, given their susceptibility to high corruption risk. Many government and defence industry professionals share our view that the integrity around offsets transactions needs to be improved significantly. The publication explores the issue in depth, looking at current industry and government practices, and exploring the nature of the corruption risks associated with offset arrangements. We also look at the economic arguments in favour of and against offsets.