Warding off restrictive conditions and consulting markets: How Integrity Pacts encourage competition and fairness

This article is part of a series exploring the positive impact of Integrity Pacts in public contracting processes, backed by evidence from 18 pilot projects in the EU.

Whether intentional or due to inadequate design, restricting competition is one of the most detrimental practices in public contracting. When government contracts are awarded to undeserving companies, the quality of goods or services tends to suffer, and with them, the public.

People across the European Union (EU) believe that this is not a rare occurrence. According to Transparency International’s Global Corruption Barometer – EU 2021 survey, 52 per cent doubt that government contracts are allocated in a competitive and fair manner. Bribes and personal connections, they told us, often decide who wins the contracts.

Undeniably, bribes and personal connections are one element of the story. In the cases of bid-rigging, for example, they lead to several companies agreeing on which bids to submit and of what value, effectively raising the price of goods and services. At times, public officials in charge of tendering may also be involved in bid-rigging by adjusting tender specifications to favour or limit participation of certain companies.

Such cases can be prevented when an independent party monitors the public contracting process.

Integrity Pacts provide just that.

Integrity Pacts safeguard public funds by embedding a third party: an independent monitor who follows a public procurement process through the different stages. When potential threats to competition and fairness are identified, they point those out and recommend actions to prevent risks from turning into real problems.

In Hungary, for example, the government decided to extend the country’s M6 highway, building a new international link to the Balkans. Recognising the strategic importance of the project and the high corruption risks of infrastructure works, Transparency International Hungary joined the contracting and managing authorities in signing an Integrity Pact.

Thanks to this mechanism, our Hungarian chapter had an opportunity to review public tender documents and flag issues in time. They noticed that some of the selection criteria were unnecessarily limiting and risked restricting competition. One of the criteria, for instance, called for the bidding firms to be entirely specialised in highway design. Had the tender gone forward, this condition would have excluded companies that may be experienced enough in highway design but also worked on other types of roads.

Following Transparency International Hungary’s recommendations to change such restrictive criteria, the conditions were revised, opening the door for greater competition.

Potential bidders were hard to find in the case of the project monitored in Romania, where the National Cadastre Agency was looking for companies that would support its land registration efforts throughout the country. The agency had already launched several tenders before the civic monitoring started but faced a significant lack of interest for some of the contracts.

Once an Integrity Pact was signed on the project, the independent monitors – Transparency International Romania and the Institute for Public Policy – reviewed these discouraging results. They quickly realised that more information was needed about the market itself, the companies’ capabilities, and the need to carry out such projects.

Even when public institutions recognise this lack of market understanding, they can be reluctant to engage with the companies out of fear of appearing to be colluding with them. In this case, the presence of independent civic monitors relieved that fear and added a layer of transparency to the project.

With monitors’ support, the agency discovered what kept the firms from bidding, adjusted the contract values, timelines and terms of reference, and relaunched the tenders. The effects were immediate. From the original 15 to 30 per cent of contracting lots receiving bids, their share rose to 40-50 per cent after the changes were made.

In Hungary and Romania, independent monitors’ recommendations improved procurement criteria by adapting them to the realities of the national and industry contexts. Their independent analysis and expert knowledge afforded the projects additional legitimacy and transparency throughout the process, resulting in better outcomes for all: the companies, the contracting authorities and the public.

Across the 18 piloted projects, we have observed that Integrity Pacts consistently led to improved quality of procurement, protecting competition and, through it, public funds.

Similar results are to be expected wherever Integrity Pacts are used next.