FEATURED PAPER
By Brooke McMichael
SKEMA Business School
USA and Paris, France
Introduction
Corruption is perhaps the single most important threat to stable societal frameworks today, and little is being done through investment contracts to stop it. While contracts can influence behavior[1], they are not an end-all solution for illicit business dealings and transactions. The casual three-lined anti-corruption clauses that find themselves in almost all investments contracts are not effective; frameworks for open public contracting and other standards that have a wholesome approach (that is, focusing on external factors like the societies in such developing countries) are the best hope for combatting corruption[2]. The benefits of anti-corruption efforts are far-reaching and promote a level-playing field for smaller firms, higher quality products and services in affected countries, and yield higher values for money invested2. This research seeks to convey the importance of combatting corruption and its lasting effects on societies and their people around the world, and the most effective ways of altering business operations and contracts to do so. Furthermore, it will focus on contracts procured either by public or private sector entities in the aim of investing in developing countries, be it in the form of new business or public goods such as infrastructure.
Keywords: Transparency, Open Contracts, Accountability, Public Benefits, Corruption, Bribery, Open Discourse, Fair Markets, Development
Statistically, public contracting is the single largest expenditure of governments around the world; it amounts to a whopping US$9.5 trillion every year, 60% of which were won by bribes2. In even larger terms, corruption costs the world economy roughly 5% of global Gross Domestic Product (GDP), meaning corruption cost the world economy more than US$4 trillion in 2017[3]. Furthermore, more than $20-40 billion of international development aid funds sent overseas each year are laundered by high-level government personnel – this makes up nearly 40% of all international development funds3. These funds are desperately needed in developing countries where citizens rely on these funds to provide for public goods, such as schools, housing, transportation, hospitals, and so on.
Corruption is not limited to bi- or multilateral government transactions, but also includes private sector business transactions. Countless international organizations, notably the OECD, World Bank, and the International Chamber of Commerce, have consistently placed upmost importance on addressing worldwide corruption and have produced internationally recognized standards and regulations, several of which are urged for inclusion within contracts. Key takeaways from these varying standards are: (i) fostering contract transparency between direct contract stakeholders and the public-at-large; (ii) structuring open contract processes; and (iii) the exclusion of third parties in monetary transactions. While notions like third party exclusion is important for ensuring that money does not fall into the wrong hands, it focuses on a single transaction; many external factors such as the societal needs, culture, and human capital to name a few are not within the scope of this single transaction.
Perhaps the most recognized organizational body pushing for open contracting and other means of combatting corruption is the Open Government Partnership (OGP). The OGP boasts 75 member countries and partnerships with frontline organizations such as the OECD, UN, among others4. Moreover, another organization by the name of the Open Contracting Partnership (OCP) is a strong advocate for open contracting processes and their benefits. According to the OOC, open contracting is a process that accounts for all direct and indirect stakeholders, and “pushes for open and accessible and timely information on government contracting to engage citizens and businesses in identifying problems.” Open contracting also requires its standards to implemented at every level of a project; the planning stage of a project, bidding and tendering process, as well as the project implementation process.[4]
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Editor’s note: This paper was prepared for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development. http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director paul.gardiner@skema.edu.
How to cite this paper: McMichael, B. (2019). Anti-Corruption Contract Framework, PM World Journal, Vol. VIII, Issue VIII, September. Available online at https://pmworldlibrary.net/wp-content/uploads/2019/09/pmwj85-Sep2019-McMichael-anti-corruption-contract-framework.pdf
About the Author
Brooke McMichael
Paris, France
Brooke McMichael is a graduate student in the MSc Project and Programme Management & Business Development program at SKEMA Business School in Lille, France. Before her studies at SKEMA, Ms. McMichael received a bachelor’s degree in Finance with minors in Economics and Political Science at the University of Louisiana at Lafayette (USA) in 2017. While pursuing her studies, Ms. McMichael completed an internship at the U.S. Embassy to France – Mission to the Organization for Economic Cooperation and Development (OECD) in 2017, where her research focused on the future of work and economic policy. Prior to this experience, she worked on multiple international projects while interning within International Operations and Business Development at PHI, Inc. Ms. McMichael is a U.S. citizen and is currently working within Business Development and Project Management in Paris, France. She can be contacted at brooke.mcmichael@skema.edu
[1] Cotula, L. (2010). Investment Contracts and Sustainable Development. Retrieved from International Institute for Environment and Development (IIED) website: http://pubs.iied.org/pdfs/17507IIED.pdf
[2] Hayman, G. (2016). The Biggest Hope for Ending Corruption is Open Public Contracting. [blog] Open Contracting Partnership. Available at: https://www.open-contracting.org/2016/05/11/biggest-hope-ending-corruption-open-public-contracting/
[3] Yermo, J. and Schroeder, H. (2014). The Rationale for Fighting Corruption. CleanGovBiz – Integrity in Practice. [online] Paris: OECD, pp.1-4. Available at: https://www.oecd.org/cleangovbiz/49693613.pdf
4 U.S. Department of Justice (2018). [online] Foreign Corrupt Practices Act (FCPA).Available at: https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act
[4] Open Contracting Partnership (2016). The Biggest Hope for Ending Corruption is Open Public Contracting. [blog] Open Contracting Partnership. Available at: https://www.open-contracting.org/why-open-contracting/#what-is-open-contracting
