Public Confidence and Public Contracting

Public Confidence and Public Contracting

Must we accept a pay-to-play system?

By Christos Papoutsy

Regulations for the public contracting process of governments usually award contracts to the lowest bidder. But the process can be corrupted by inside deals, revolving-door lobbying, and "creative accounting," all of which undermine the public's trust in its institutions. How does a public body ensure the integrity of its contracting process? What role should lobbyists have in the contracting process? What about consultants and lobbyists that were former government officials? When is it a good use of taxpayer money to hire an outside consultant? Are no-bid contracts acceptable?

In today's economy, many of the goods and services the public needs are so specialized that governments often do not have the experience or staff even to write the specification for complicated projects. Officials are turning to lobbyists, consultants or even to the bidders themselves for assistance in defining project requirements. This inside participation, however, taints the subsequent bidding process, as bidders can define a specification bid in such a way that they become the only "potential responsible bidder."

See also the HCS article Business Institutionalization
Promotes Excellence, Combats Corruption by Christos Papoutsy

The corruption of public contracting did not begin with high technology. The awarding of contracts--often on a no-bid basis--to political contributors and friends, involving favoritism, and corruption of both the buyer and bidder, is an old ethics problem. Governments should ban contractors from receiving government contracts if they have directly or indirectly made political contributions. A purchasing code of ethics should be established to encourage a fair, open and transparent system of analyzing and awarding public contracts so as to promote fiscal efficiency and effectiveness. Governments need to operate as socially responsible entities, just like corporations, with transparency and accountability on behalf of its stakeholders, The Taxpayers.

For many years, contract bids were awarded to the same contractor in the format of design-bid and design-build. As the requirements of government projects have become more complex, government contract agencies have begun to utilize specialized consultants to assist in writing the specifications for contract bids. Often the design-bid portion of the contract is awarded to one contractor and the design-build portion to another.

When the design of the project is very special, low bids are not always the first choice. Other important factors, such as the bidders' financial strength, contract history, experience, and ability to complete the contract on time within the specifications affect selections. A reputable, government-registered consultant can often provide the technical expertise that does not exist within the government's contracting staff and the best method to specify and analyze the bids and awards. Failures in meeting completions result in significant cost over-runs and invite fraud and corruption, as well as a lack of confidence from the stakeholders. Problems with bid awards and projects also hinder a government's financial institutions from obtaining the best bond and money ratings.

For less complex projects, the open-bid process continues to be the most relied upon process for bidding, awarding, and completing government projects. A balance of interests must be negotiated in order to provide the taxpayer with a quality product and service, at an appropriate cost.

To avoid bribery and corruption of the bid-award process, the government's system must be accountable with proper oversight. Governments should develop a code of ethics for public contracting, reviewed periodically with employees and contractors. Governments also need to establish guidelines to assist staff in measuring the CSR (Corporate Socially Responsible) rating of each bidder as an incentive for them to operate as a corporate socially responsible contractor.

All stakeholders benefit when the contracting process operates ethically and efficiently. Bidders receive contracts from governments, continued eligibility to participate in the bidding process, and support from their own stakeholders and the public. Governments earn the confidence of taxpayers. Taxpayers benefit from efficient, reduced governmental costs, and enjoy the ultimate services or products delivered to them. Yet, as the final recipient of the contracted goods or services, the taxpayer also serves as a compass for the entire process, a final oversight for all of the participants. In other words, the taxpayer also serves as the moral compass for the process.

For more information about Mr. Papoutsy, his free international lecture series, or to read other articles of his on corporate socially responsible business or business ethics, visit the Business Arena and Ethics sections of Hellenic Communications Services (HCS) website, http://www.helleniccomserve.com or the web pages of the Christos and Mary Papoutsy Distinguished Chair in Ethics at Southern New Hampshire University. Mr. Papoutsy welcomes comments and questions and can be reached via email at papcoholding@papcoholdings.org .