Two stages of the contracting process—the decision of which company to award the contract to, and the delivery of the equipment or services by the company—can be influenced by corruption.

1. Contract Award

Even in a well-prepared and well-run process, there are still risks that the final choice of the successful bidder is not decided by the parameters of the procurement process and needs assessment, but instead by senior members of the tender board and/or the government.  In some cases, thorough analysis is carried out, but at the last minute a senior official selects a competitor based on bribery or kickbacks.

2. Contract Delivery

Once a contract has been awarded, the company must deliver the equipment or services it has agreed to. Corruption in contract delivery occurs when a company fails to deliver what they have promised. There are also subtler versions of this than complete non-delivery; for example, if a company only partially delivers the equipment or services, omitting key (and usually expensive) elements from the package delivered.

Overcoming corruption within contracts

The stronger the procurement process, however, and the more open it is to public validation, the harder it is to bypass. There should be adequate oversight of the procurement process to ensure that any irregularities are detected and investigated.

In terms of delivery, preventative measures should include extremely strong sanctions and penalties for companies that do not deliver what the contract promises. This should be included in the terms of the contract. There should be oversight of the contract by an independent body throughout the procurement process, and sanctions should be enforced upon non- or inadequate delivery.

Case Study: South Africa, BAE Systems

This occurred in a procurement of fighter aircraft for South Africa. In preparation for a procurement of fighter aircraft, South African Air Force chiefs had conducted an assessment of their needs. Based on a valuation of bidders, they selected Italian aircraft. But corruption came to light when investigators found that South African Defence Minister Joe Modise had altered the formula used to select the winning company by removing cost as a deciding factor. BAE Systems won the contract, despite the fact that their bid was double the price, and their equipment was less modern than the Italian offer. It was later discovered that BAE Systems had a close relationship with Modise, and that bribes had been paid to award the contract in their favour at the last minute.

(Information in this case study is from The Guardian, 6 January 2007)

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