The 2010 “agreement on mutual enforcement of debarment decisions” and its impact for the fight against fraud and corruption in public procurement
| Published date | 01 March 2014 |
| Pages | 62-95 |
| Date | 01 March 2014 |
| DOI | https://doi.org/10.1108/JOPP-14-01-2014-B003 |
| Author | Lorenzo Nesti |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 14, ISSUE 1, 62-95 SPRING 2014
THE 2010 “AGREEMENT ON MUTUAL ENFORCEMENT OF
DEBARMENT DECISIONS” AND ITS IMPACT FOR THE FIGHT AGAINST
FRAUD AND CORRUPTION IN PUBLIC PROCUREMENT
Lorenzo Nesti*
ABSTRACT. A remarkable example of coordination between IGOs to deal with
corruption and fraud in public procurement is the “Agreement for the Mutual
Enforcement of Debarment Decisions” signed by the World Bank and the
main regional Multilateral Development Banks (MDBs) in 2010. This article
will try to examine the characteristics of the MDBs’ cross debarment
agreement and its significance for the MDBs that adhered to it in terms of
the process of harmonization that resulted from it. Secondly, the article
discusses the potential benefits and challenges connected to the extension
of this agreement to other MDBs or to other initiatives that have been
initiated in parallel to, or in imitation of, the MDBs’ cross debarment
agreement.
INTRODUCTION
Public procurement is extremely vulnerable to instances of fraud,
corruption or waste due to the amount of money circulating between
the public and the private sector. The procurement activities
undertaken by International Governmental Organizations (IGOs) are
generally related both to their internal needs (we will refer to it here
as “corporate procurement” for ease of reference) and to their
projects or operations (we will refer to it here as “operational
procurement” for ease of reference). Operational procurement usually
represents the large majority of the procurement activities of IGOs.
In recent years, many IGOs have become increasingly concerned
with the risks of corruption in their procurement activities.1 Different
IGOs have developed specific strategies for countering fraud
----------------------
* Lorenzo Nesti, MSc., is a Certified Fraud Examiner. His research interest is
in the area of internal investigations and corporate ethics.
Copyright © 2014 by PrAcademics Press
THE 2010 “AGREEMENT ON MUTUAL ENFORCEMENT OF DEBARMENT DECISIONS” AND ITS IMPACT 63
corruption in public procurement in different ways. Some IGOs,
particularly the main MDBs, have also increased the complexity and
predictability of their sanctioning procedures in order to provide a
stronger justification for their remedial measures against vendors or
consultants who were found to have incurred in any corrupt or other
irregular practice. This action, has, in some cases, shifted the
assessment of the eligibility of an entity to do business with an IGO
from a typical private business decision to a quasi-judicial process
based on predictability, transparency, due process and, in certain
cases, publicity (Williams, 2007).
Remedial actions against sanctioned vendors or consultants have
been often summarised under the term “debarment”, also defined as
“the exclusion of a contractor who is or has been involved in
corruption from competition for contracts” (Dervieux, 2005, p. 207).
Debarment has been analysed in different studies (Schooner, 2004).
and it is considered more and more as an effective dissuasive tool by
different IGOs.
Another aspect that saw concrete progress in the actions
undertaken by IGOs is connected to the mutual recognition of the
debarment decisions or sanctions applied to fraudulent or corrupt
vendors. The most important example in this respect is the
Agreement for the Mutual Enforcement of Debarment Decisions
signed by the main MDBs in 2010.
2 This article will analyse the
achievements and challenges that resulted from the implementation
of the 2010 Agreement and the potential developments that the
agreement will have for the participating MDBs or other IGOs.3
THE 2010 AGREEMENT: MUTUAL RECOGNITION AND PUSH FOR
HARMONIZATION
The “Agreement for the mutual enforcement of debarment
decisions”, was signed in 2010 by five MDBs: the World Bank Group
(WBG),4 the African Development Bank Group (AfDB);5 the Asian
Development Bank (ADB); the European Bank for Reconstruction and
Development (EBRD); and, the Inter-American Development Bank
Group (IaDB).6
Since 1996, the WBG has been at the forefront of anticorruption
initiatives by progressively reviewing and reforming its policies and
procedures to ensure the correct use of the funds entrusted by its
64 NESTI
member states. This included the improvement of its procurement
guidelines, the creation of an independent Investigation Office (INT)
and the establishment of a two-tier sanction system.7 The WBG
sanction system is characterized, inter alia, by:
- A Sanctions Board (SB) composed by three World Bank staff and
four external members.8
- The use of the standard of proof “More likely than not.”9
- A range of sanctions foreseeing the consideration of aggravating
and mitigating factors. A debarment with conditional release for a
minimum period of three years is considered the baseline
sanction.10
- The inclusion of the sanctions of debarment with conditional
release and conditional non-debarment, stressing the importance
of rehabilitation measures by the sanctioned entity/individual.11
- Principles for the application of sanctions to corporate groups,
affiliates, successors and assigns.12
- A Voluntary Disclosure Programme (VDP) to allow entities or
individuals like vendors or consultants to come forward and
disclose past misconduct to the World Bank Group.13
‐ The possibility to reach settlements.14
- The publication of the list of the debarred firms and individuals
and, as of 2011, of the full text of the Evaluation and Suspension
Officer (EO) determinations (if not contested) and of the SB’s
decisions.15
The degree of public access to the information along with the
other aspects, as mentioned above, justify the identification of the
World Bank’s sanction regime as a best practice in the area of anti-
corruption in public procurement.16 Additionally, the volume of the
money distributed by World Bank through loans, credits or grants
makes it the largest development bank in the world and, as such, the
actions of this institution receive an impressive attention by other
international organizations, borrowers or entities involved in projects
financed by the Bank.17
All of the other mentioned MDBs faced similar constraints (such
as balancing their fiduciary duty with the avoidance of political
interference18) in fighting fraud and corruption to the ones met by the
To continue reading
Request your trial