PwC and Ecorys: A lot of corruption in public procurement

26 November 2013 Consultancy.uk

Corruption in public procurement costs the European Union billions on a yearly basis. On average between 3% and 4.4% of the overall value of public procurements ends up in the wrong place. This is evident from a study by consulting firms PwC, Ecorys and the University of Utrecht, the Netherlands.

In the report ‘Identifying and Reducing Corruption in Public Procurement in the EU’, the researchers try to quantify the volume of corruption in public procurement trajectories. To come to an accurate estimate, they looked at data from 8 countries, focussing on 5 key sectors*. After this, 192 contracts were extensively examined. Of all these cases, 24 were categorised as ‘corrupt’ and another 70 fell in a so-called grey area. In other words, across the board, a minimum of 12.5% of procurements involve some degree of corruption.

Veel-corruptie-in-openbare-aanbestedingen-1-7900

The researchers also looked at the differences in corruption across sectors. The analysis showed that the construction of waste plants is most prone to theft or other forms of trickery: between 25% (Low) and 35% (High) of public procurements in this sector has to deal with corruption**. A comparison:

Lots of corruption in public procurement

By multiplying the probabilities for corruption by the size of each sector, the researchers came to an estimate of the direct costs of corruption. All in all, they concluded that in the five sectors studied between €1.4 and €2.2 billion is lost in corruption on an annual basis. Considering these 5 sectors constitute approximately one third of the total public procurement market, the numbers can easily be doubled to come to an estimate of the damage to the European economy.

Advices
Based on the massive volume of corruption, PwC and Ecorys advise government to step up their activities to fight corruption. Governments are advised to deploy independent audits and evaluations according to EU-wide standards for future projects, analyse data regarding procurement trajectories and screen contractors and beneficiaries more often. An analysis should also be done into ways how to optimize the entire process of public procurement and how to stimulate more cross-border knowledge sharing.

* The 5 sectors represent just over one third of the total money spent in public procurements.

** The intervals for corruption are higher than the minimum of 12.5% as they include the cases in the grey area that are likely to be corrupted as well.

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