Towards a comprehensive business integrity system
many governments, and a readiness on the part of defence companies to act collaboratively in addressing the corruption risks involved. One of the most prominent areas of corruption in the defence industry, and, arguably, the most important to tackle first is corruption in the procurement of defence equipment.2 This involves large amounts of money, as well as highly technical expertise for determining the most appropriate purchases, testing the skills of even the most experienced procurement officers in sophisticated defence economies, such as the United States. Furthermore, procurement in defence is more veiled than in other sectors, as issues of national security can be used to uphold barriers to information about the details of contracts and purchases. This traditional climate of secrecy makes it easy for corrupt officials to avoid transparency and public accountability.3 Other procurement concerns include the trend towards non-competitive sourcing4 and the use of ‘offsets’, which are obligations on bidding companies to invest in other businesses in the country as a condition of being awarded the contract. Although banned by World Trade Organization regulations in other industries, offset requirements are ballooning in defence; now they are usually more than 100 per cent of the value of the main contract. These represent an uncontrolled and dangerous area of corruption risk.5
A collective action approach Transparency International, through its UK defence team, is leading a major project – ‘Defence Against Corruption’ (DAC) – to catalyse global efforts to combat corruption in the defence sector. The DAC team is working with multiple parties – defence companies (e.g. Lockheed Martin, Raytheon, BAe Systems, Rolls Royce, EADS, Thales, Saab), NATO, the World Bank – and with some fifteen nations (e.g. Colombia, Poland, Latvia) to develop practical tools and pilot them in real defence sector situations. The DAC team’s work complements national work on defence in other TI chapters, notably South Korea, India and Colombia. The DAC team has convened meetings of most of the major European and US defence companies, under the chairmanship of the former NATO secretary general Lord Robertson, to catalyse such action. In a major first step, all thirty European defence industry associations that are members of the AeroSpace and Defence Industries Association of Europe (ASD) agreed in 2008 to a common set of anti-bribery standards.6 It is anticipated that this will
2 Other risks involve inappropriate defence policies, (which is often due to defence lobbying), opaque budgeting and off-budget sources of extra defence revenue. 3 The ease of extracting money corruptly from defence, largely because of the secrecy, also means that there is a spillover of the infrastructure of corruption – the lawyers, agents, bankers, middlemen – from defence into other areas of government. 4 TI UK, ‘Offsets and Corruption Risk’, paper presented at Global Industrial Cooperation Conference, Seville, 12 May, 2008; TI UK, The Extent of Single Sourcing and Attendant Corruption Risk in Defence Procurement: A First Look, working paper (London: TI UK, 2006; final paper to be published in Journal of Defence and Peace Economics). 5 TI UK, 2008; 2006. 6 ASD Common Industry Standards, available at www.sbac.co.uk/community/dms/download.asp?txtPageLinkDoc PK=11260.
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