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Center for International Private Enterprise

ECONOMICREFORM Feature Service® June 30, 2011

Procurement Reform in Russia: Implications for the Fight Against Corruption Dina V. Krylova Business Perspective Foundation Alexander Settles Higher School of Economics, Moscow

Article at a glance • Corruption in the Russian procurement system, costing an estimated $35 billion in annual losses, has become the subject of sustained public scrutiny. • The 2005 Procurement Law improved many procurement practices but failed to address issues such as the quality of winning bidders’ performance and procurement officials’ undue influence over who wins public tenders. • Recent proposed amendments to the Procurement Law generated a heated debate on how the law should be further reformed in order to limit corruption.

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

Public Procurement Debate in Russia In March 2011, Russia’s Federal Anti-Monopoly Service (FAS) promised an investigation of a Russian military unit that had awarded a contract for $200 million for the maintenance of 41 Volkswagen automobiles. It was enough money to have purchased 1,000 new cars of the same kind as the 41 being maintained. The details of the transaction came to light not through a government whistleblower or muckraking journalist, but thanks to an online government database created to encourage transparency. Procurement websites maintained by the Russian government are being increasingly mined for information by Russia’s bloggers. The result is a growing public fascination with public procurement, one of the most visible realms of government spending. Also in March 2011, a blogger with nearly 40,000 followers challenged the head of the country’s leading economics and public policy university to a debate on procurement reform, which was watched online by an audience of thousands. The blogger, Alexei Navalny, has launched a readersupported website devoted to exposing corruption in government procurement. Navalny, who is also a proponent of minority shareholder rights and corporate transparency, was seeking to challenge new proposed amendments to the law on procurement, commissioned by the Kremlin, which he believes enshrines corrupt practices. On the other hand, Yaroslav Kuzminov, Rector of Moscow’s Higher School of Economics (HSE), whose experts helped draft the new legislation, defended the amendments on the grounds that they will both combat corruption and ensure that government agencies receive the highest quality goods and services for funds expended, while improving the current procurement system. The debate took place against the background of Russian President Dmitry Medvedev’s public demand in 2010 for comprehensive reform of the procurement system, which reportedly loses an estimated $35 billion annually to corruption.

Government procurement, once an opaque realm rarely discussed with much vigor in policy circles in Russia, is now the subject of sustained scrutiny. With that in mind, it is useful to examine the degree to which public procurement in Russia has undergone reform during the past three years, as part of the effort to combat corruption, strengthen oversight, increase purchasing transparency, and reduce subjectivity in the process. These changes have been adopted as part of an overall attempt to improve the business climate, encourage investment, and strengthen governance, integrity, and transparency in the country. Public procurement in Russia not only includes government agencies at the federal and local levels, but also involves state-owned corporations and related firms. Since the 2008 financial crisis, procurement reform has been driven by a desire to increase the efficiency of public purchasing and to rein in public expenditures. Another significant incentive is Russia’s need to improve procurement procedures to join the World Trade Organization (WTO). Procurement reforms, combined with recently implemented rules that require the disclosure of government officials’ and their immediate family members’ income and assets, now give the Russian public a look inside the “sausage factory” of public spending. This article delves into both the overall approach that Russia has taken toward procurement reform, as well as some of the technical nuances of the proposed reforms that are at the heart of the ongoing debate. In order for the new procurement regulations to be effective, they must increase transparency and accountability in government agencies’ acquisition of goods and services, and change the process for qualifying and selecting suppliers. This article outlines the legal framework and its recent changes, describes the debate that reform has generated, and analyze how this debate has been resolved during the most recent round of reforms. We also lay out a roadmap for future steps, trying to glimpse the post-election procurement landscape in Russia.

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

The Challenge of Reforming Public Procurement

Broadly speaking, the existing law’s supporters include members of the entrepreneur community, bidding firms, and certain arms of the government, including the Ministry of Economic Development and the Federal Anti-Monopoly Service (FAS). Opponents include government and municipal clients and the majority of functional government departments, including the Ministry of Industry and Trade and the Ministry of Regional Development. Those that support the law find that it provides transparency and aids in the reform of the supplier selection process. Supporters, however, are divided on how procurement might best be reformed in the future, a question addressed later in this article.

Currently, Russian government purchases are regulated by Federal Law No. 94-FZ, adopted on July 21, 2005: “On the Placement of Orders to Supply Goods, Carry Out Works and Render Services for Meeting State and Municipal Needs.” This law, now reflecting the amendments of 2009 and 2010, establishes the main principles of public procurement and regulates the relationships between government personnel and private sector actors taking part in the process. Public procurement reform is part of an overall strategy ordered by then-President Putin and later reinforced by current President Medvedev to reduce corruption and government expenditures. After adoption of the 2005 law, however, government officials and businesses alike developed many ways to game the system, in order to direct public contracts to connected bidders and undermine the process through the provision of substandard goods and unsatisfactory services. In other instances, initial payments were embezzled without any provision of goods or services at all. Recognizing problems with implementation of the law, policy experts, government officials, and other stakeholders moved to institute a series of reforms, in particular to improve the review process for contractors, reduce the likelihood of waste, and increase competition for public tenders.

Main Innovations of the 2005 Procurement Law A variety of experts recognize in 94-FZ many innovative features in the design of the public procurement process. When the government ordered that the law be revised in 2009, the resulting amendments reflected international experience and best legal practices aimed at reducing subjectivity in selecting winning bidders. The changes related to the process of placing orders, the introduction of e-procurement, the use of a financial guarantee instead of qualification of bidders, and the creation of a third party payment system. In 2010, another revision was drafted, but has not yet been adopted, thus touching off the current debate.

The latest legislative proposal now under debate, developed with the help of HSE, aims to further reform Russia’s procurement system. Even before the recent flurry of public commentary on the law, there had been significant debate concerning the instruments in the 2005 law, and the way the law is implemented. The discussion, of course, is far from hypothetical as changes to the law would have clear financial consequences for key players in both the private and public sectors.

When drafted in 2005, 94-FZ was a significant breakthrough for improving transparency and reducing corruption in state purchases in Russia, which had been a key cause of inefficient expenditure of government budget funds. According to the Ministry of Economic Development and FAS, the procurement law substantially limited possibilities for corruption between government entities and private sector suppliers in the following ways.

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

Increased access to information for bidders The newly-created official procurement website (www.zakupki.gov.ru) allows anyone to view information on national-level bids. The website makes it possible for a user to choose any region of the country and learn how to take part in the procurement process. Regional sections of the national website and two related websites list all the information on government purchases for regions and municipalities. Access to this information gives suppliers the opportunity to participate in tenders throughout the country. For example, in the regional procurement markets of Moscow and St. Petersburg, there are many participants from the Far East, Siberia, the Ural Mountains, and the North Caucasus. Such access to information addresses one of the major problems of the previous procurement environment by creating a uniform economic space in the field of state contracts. At the same time, some supplier searches for information about government orders have become more complicated under the new law. There was no uniform website for all state and municipal purchases until recently. Instead, suppliers had to visit the individual websites of regional and municipal governments. To correct this, a comprehensive website was launched in early 2011, which allowed for the expansion of the number of participants in state tenders and increased competition among bidders as well as decreasing the overall bid price of state contracts. Preliminary qualification of auction participants The procurement law also establishes a comprehensive list of requirements for participants to follow when placing an order. If these requirements are not followed, the organization is considered a negligent supplier. The reform of the procurement process changed how bidders were qualified. Previously, pre-qualification of suppliers was based on an expert review of capabilities, assets, or previous work. This was replaced by a financial

guarantee using a surety bond. If a supplier fails to deliver on a contract, the supplier forfeits this bond, is listed on a “negligent supplier” registry, and is unable to bid for two years. Some exceptions were made to these new rules. The 2009 revised law allows for the establishment of requirements for the pre-qualification of participants bidding on state tenders related to defense and security, requirements include the bidder’s demonstrated capacity, technological proficiency, financial stability, and adequate labor to complete the job. Bidders may also need pre-qualification to participate in tenders for construction, reconstruction, and major repairs where the maximum price of the contract is greater than 50 million rubles, and for similar work done in the last five years costing more than 20 percent of the initial (maximum) price of the contract. Prequalification can be used in these cases since there are measurable criteria based on previously completed work, in addition to saving time and ensuring that only competent bidders participate in the tender. Preliminary qualification for auctions also can be accomplished by restricting the maximum volume of the order for first-time companies delivering goods or rendering services to the state. Implementation of the administrative appeal procedure The law also provides for the possibility of appealing the actions (or inactions) of procurement agencies and other specialized organizations that place orders for the purchase of the goods, work, or services for the state’s needs. Such appeals can be carried out electronically. This procedure allows for a speedier process for submitting complaints and requesting judicial consideration. Procurement appeal documentation was included in the new electronic system for document circulation as part of Russia’s “Electronic Government” program. In practice, this administrative appeal procedure operates much more effectively than the judicial

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

process. Data from 2006 to 2009 showing the number of complaints received and the number of completed inspections is presented below. The considerable growth in the quantity of complaints received is an indication of trust by businesses in the new system of state contracting. Accounting Period 2006 2007

2008

2009

Number of received 2,443 9,955 14,344 19,285 complaints (52%) (58%) (53%) (48%) (% valid) Number of 625 inspections completed Number of actions 731 concerning administrative offenses

11,786 18,337 33,587

5,068 7,389 12,817

Source: Russian Federal Anti-Monopoly Service

Contracts can be concluded strictly on the conditions of an auction The law has limits regarding making changes to the final conditions of contracts based on the principle of “a firm price,” which allows only for a price reduction, not an increase. Contract winners are not permitted to renegotiate higher prices after entering into a contract. In the past, it was common for government suppliers to increase their prices after agreeing to a contract when the government agency faced the difficult process of terminating the contract and finding a new vendor.

Since then, a supplier who wishes to be a public contractor must provide a bank guarantee, guarantee agreement, and/or a bank deposit as a financial guarantee. Liability insurance was eliminated because the instrument proved to be ineffective, since insurance companies engaged by suppliers were not paying compensation to the government when suppliers failed to deliver. At the same time, revisions to the law introduced a new financial instrument for guarantees for large entities. A large firm with at least 300 million rubles in capital may issue a guarantee for an amount not more than 10 percent of the amount of available reserves in place of other financial guarantee provisions. Improving the procedures for conducting on-line auctions Since July 1, 2010, electronic auctions can only be held on designated internet sites managed by Sberbank, the Moscow city government, and the Republic of Tatarstan, a reflection of those entities’ political clout. Also from that date, federal agencies with outstanding tenders placed through ordinary auctions are obliged to use electronic tenders exclusively. Non-electronic open auctions for federal agencies were ended. Further, regional and municipal agencies were required to use e-tendering as of January 1, 2011. Small businesses set aside for state tenders As of November 2010, the small business set aside was reduced from five percent to two percent of the value of the contract. The smaller deposit requirement for bidders is designed to make the process more accessible to smaller firms. Proposed extension of the law to new types of legal entities

2010 Revisions to the Public Procurement Law Changes in financial guarantees to improve contractor performance In July 2010, the public procurement law was amended to eliminate the use of liability insurance as a means of guaranteeing contract performance. –5–

There remains one type of legal entity that receives government budget funds but is not covered by 94-FZ: state corporations and stateowned corporations. New legislation is under consideration to create a separate procurement law to cover these entities, which operate as regulated natural monopolies or in the interests of the state.


Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

The Ministry of Economic Development has drafted a relevant federal law. The draft legislation has been the subject of considerable debate. Plan for creating a federal contract system In 2009-2010, there was discussion of the possibility of creating a federal contracting system. Currently, the Ministry of Economic Development has drafted a plan for the preparation of the legal framework for the formation of a complex federal contracting system. Under that plan a federal contracting system would be in place by 2015.

The Benefits of the Existing Public Procurement Law More transparent procurement opportunities The basic strength of 94-FZ is that it shifts the focus of procurement priorities from the suppliers (from whom to buy) to the state purchases (what to buy). This new approach allows companies more equal access to procurement, especially with e-auctions in place. The establishment of a website to list all public tenders provides, for the first time, a clear view of what the government was purchasing. This increased level of transparency has led to the cancelation of tenders that represented obvious attempts at embezzlement or were for work already completed. The Ministry of Economic Development and FAS (which developed the 2005 law) support the law, based on how it has functioned. Their data shows that the implementation of 94FZ since 2005 has significantly decreased the possibility of widespread illegal enrichment for most government procurers. Budgetary savings Supporters of the current law focus on improvements made to public procurement through the introduction of the e-portal as a means for on-line tendering. They argue that by providing a centralized and managed system of electronic auctions for state tenders, the law created a single economic space and reduced regional governments’ undue influence. The adoption of this centralized

e-tender system is anticipated to create up to one trillion rubles in savings annually, according to estimates from FAS. This amounts to 15-20 percent of the total expenditure on public procurement, including regional budgets. The danger, of course, is that federal authorities may come to exercise undue influence over the highly centralized process. The statistics for 2006-2008 reflect a growth in government savings after 94-FZ came into force. According to a recent FAS statement concerning public procurement, 2006 budget savings amounted to 131 billion rubles; in 2007, 208 billion rubles; in 2008, 251 billion rubles; and in 2009, 184 billion rubles. That is a four-year total of 770 billion rubles. After the first three quarters of 2010, the budget savings (including from on-line auctions) had already reached 140 billion rubles. These savings are largely due to the replacement of administrative pre-qualification of participants prior to auctions with financial guarantees for the completion of obligations from suppliers. Improved competition In 2008-2009, the number of participants in state auctions increased compared to 2007. According to statistics reported by Rosstat (the Russian State Statistics Agency) in 2008, the average number of suppliers taking part in open procurement auctions was 26 participants per auction, versus nine participants per auction in 2007, when the auction form of procurement was implemented. The new government measures, which transform many state and municipal procurements that previously were directly awarded into competitive auctions, have raised the probability that businesses will participate in transparent and honest auctions. According to government figures, the initial price of state contracts, even in highly corrupt industries such as construction, has sometimes decreased by as much as 30-40 percent. An analysis of contract performance, where a considerable decrease in the initial price has been achieved, indicates that the businesses participating in the state and municipal procurement process have carried out their obligations on time and produced high quality –6–


Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

goods and services. In addition, the law created a code of rigid rules for customers and suppliers who carry out state and municipal purchases, which became obligatory for all participants.

Shortcomings of the Current Law and the Reform Debate

Increased participation by small businesses

According to those who want to make further changes to the current law, 94-FZ’s greatest failing is that it straitjackets government officials by overemphasizing the observance of formalized rules. There have been cases since the adoption of 94-FZ where patently unqualified bidders have won a tender but failed to deliver. In other incidents, contractors have simply disappeared with the advance payment. Kuzminov, Yasin, and others at the HSE point out that there needs to be a balance between a clear and consistent process and the government’s ability to receive the best products and services for its money.

Winning bidders fail to deliver

It has become typical for small and mediumsized businesses to participate in auctions. For many companies, primarily small firms, the new law has created conditions whereby government contracts have become a primary revenue stream and guide overall production. This is evident by the increase in the number of companies dedicated to providing goods and services to government agencies. In the second half of 2009, the government began enforcing state and municipal responsibilities to reserve a certain number of tenders open to bids from small businesses only. To encourage state and municipal governments to engage small businesses in the procurement process, a penalty of 50,000 rubles was set for governments that failed to contract with such firms.

In his debate with Navalny, Yasin argued that further revisions to 94-FZ are necessary, such as improving performance guarantees by suppliers and curbing FAS’s role in the arbitrary cancelation of contracts and blacklisting of firms. Financial guarantees and supplier blacklists have resulted in new corrupt approaches to acquiring government funds. The agencies issuing tenders need to be involved after setting the conditions of the tender to maintain their fiduciary responsibility for public procurement. The FAS is stretched too thin to police all government contracts in all regions, while also fulfilling its principle role of guarding against anti-competitive practices in the private sector.

Financial guarantees instead of pre-qualification The 2009 revised law also replaced the process of expert-verified pre-qualification of bidders (with some exceptions) with financial guarantees whereby penalties exist for non-performance by suppliers. Financial guarantees encourage the supplier to fulfill the contract and guarantee the procurer/the government agency damages if the supplier does not fulfill the contract. Their effectiveness, however, remains under debate.

Controversy over pre-qualification of bidders One of the most strenuously debated aspects of 94-FZ are the issues of bidder qualifications, pre-qualifying bidders, and the consequences of qualifying bidders before entering into procurement agreements. Misunderstandings regarding the role of creating organizational qualifications for competitive procedures led to differing opinions. Legislators decided that qualifying bidders was one way for the procurers to eliminate “unnecessary”

The amendments prepared by the HSE proposed that government agencies should be able to carry out participant pre-qualification or change the price and terms of contract performance through post-award negotiations if this would lower costs and produce government savings. The amendments would also give state agencies the right to unilaterally terminate a state contract.

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

participants and to determine in advance the results of the tender, leading to a more corrupt process. This was a key consideration in deciding whether or not to cancel pre-qualifying bidders. In most cases, pre-qualification of bidders is forbidden. However, in certain cases, participant pre-qualification is a means to guarantee that prospective bidders can provide a reasonable level of quality and will maintain the required level of performance throughout the contract. Purchases of complicated intellectual products, the production of strategic items connected with safety, building designs, and the performance of research are examples of contracts where pre-qualification may be necessary, and the law provides an exception for these cases. Limited recourse against negligent contractors Supporters of further reforms to 94-FZ also maintain that the new law limits the procurer in its relationship with the contractor. The requirements of the Russian Budgetary Code indicate that allocated funds must be fully used within a fiscal year. Therefore, when contract infringements by outside contractors occur in either the third or fourth quarter of the fiscal year, it is nearly impossible for the customer to protect its rights in arbitration court since the court decision may only be finalized in the following year; that is, after the government financial year ends. This leads to deliberate failures to meet the contractual dates by state contractors. The realities of the present legislation are that the procurer, in practice, is actually deprived of protection under the Civil Code from the right of unilateral refusal to execute the contract in cases of infringement by the contractor. The present law gives negligent contractors an opportunity to acquire a considerable number of orders without consequence or disqualification for failure to complete the terms of performance established by the customer. Blacklisted suppliers are those who either backed out of a contract or have had a court terminate their state contract.

Lack of transparency among private sector contractors The implementation of 94-FZ has revealed that the customers (government agencies) often lack the ability to formulate the requirements and criteria used to determine contract awards. Many see this as negative; that the law has supported transparency to the detriment of other principles of procurement, particularly those of economy and effectiveness. Moreover, many critics believe that transparency is not reciprocal. The transparency of the customer – the government agency obliged to publish its tenders and disclose winners – is paramount, while private sector participants remain protected by the procurement process and it is unclear who benefits from public tendering. There are rumors that a continuing source of corruption is the involvement of government officials in the private firms that win government tenders. Little information is available concerning beneficial ownership. There continues to be no public disclosure of the private sector expenditures made to satisfy a government contract. The private sector books remain closed even once a firm wins a government contract. Controversy over procurement in research and development There is also fierce discussion concerning the system of evaluation and the method of comparison when considering offers on research and development (R&D). There are two main concerns in this discussion. The first is the price and terms of performing the work. According to the new law, the price and terms must be weighted at a level of at least 55 percent of the bid evaluation. Thus, the weighting of preliminary qualification considerations equals 45 percent of the bid’s evaluation. This criterion serves as a sort of “anti-dumping mechanism” by preventing participants without the necessary qualifications and capabilities from winning by bidding a very low price. To win a tender using

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

Conclusion

this strategy, a bidder would need to offer a bid five times lower than the initial price of the contract. However, according to critics of the law, this measure is not sufficient and still allows for the possibility of artificially low “dumping” bids from unqualified bidders. In this situation, the government agency does not want to terminate the contract, since budgetary funds for its payment must be used in the current calendar year, and canceling the contract may lead to the loss of funds.

The importance of public procurement for the Russian economy is significant, since procurement accounts for 18 percent of the country’s GDP, according to 2009 data from Rosstat. This number becomes substantially greater if procurement by state-owned corporations, dominant in large sectors of the Russian economy, is included. The impact of corruption in both public and private sectors when it comes to procurement is equally significant, and thus so are efforts to reform the current Procurement Law in order to limit corruption.

The second criticism is that the quality of the bid and the qualification of the bidder are subjective, since it is very difficult to formalize all of the requirements of the R&D related bidding process. Through the evaluation and comparison of the bids by the specified criteria, the selection commission has the right to evaluate the business reputation of the bidder, its work experience, its capacity, the equipment it owns, its labor force, financial resources, and other indicators necessary for predicting performance. Furthermore, the selection commission can evaluate the personnel qualifications of the participant. The use of an expert selection commission, using criteria established by the procurer, is widely used in Russian organizations and generally believed to be subjective. The Russian Ministry of Education and Science, in particular, will likely face high levels of failed contract performance on R&D projects by unqualified contractors and “dumping” incidents when tendering major projects.

Although not perfect, 94-FZ is based on market principles and represents an important improvement over the way public procurement had been carried out in Russia in the past. There are positive results both within the business community and certain sections of the government, and thanks to procurement reforms to date, three major state and social goals have been achieved: • Development of competition and improved transparency in the procurement process; • Systematic decrease in opportunities for corrupt practices in state procurement; • Considerable savings of state funds. One major issue has not been solved by the procurement reforms introduced over the past eight years: the quality and effectiveness of private sector provision of public goods and services. The continuing high cost of infrastructure construction, military procurement, and even procurement of basic commodities with well-known market prices indicates that 94-FZ has not solved the problem completely.

The FAS intends to develop appropriate measures to prevent the possibility of such practices. The mechanism that protects auctions against the admission of unqualified and incompetent companies will monitor the obligatory publication of the results of previous R&D projects. Legally, this mechanism already exists, but is not enforced. The organization also needs highly skilled scientific employees to prevent “dumping” and other lackluster contractual performance.

Moreover, procurement professionals need a higher degree of ethics training and subject matter knowledge. In their professional education, they are instructed almost exclusively to concentrate on

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Procurement Reform in Russia: Implications for the Fight Against Corruption

Center for International Private Enterprise

procurement legality without focusing on ethics, negotiation, or the business knowledge necessary to select the best price for the goods and services purchased. Future reforms must focus on this “soft side” of the procurement process. Another problem in combating corruption in public procurement is the lack of reliable information concerning the financial impact of the reforms. Needless to say, there are no official statistics on kickbacks, bribes, and other forms of corruption. Estimates by Transparency International place Russia’s annual losses to bribery at $300 billion, much of it related to corruption in large transactions such as state tenders.1 The costs of flawed procurement – and difficulties in estimating such costs – go beyond bribes. The most difficult to measure are losses due to the lack of competition among suppliers. One method to estimate these losses has been to compare the retail price of foreign-produced products in their home country and the cost of delivering such products to a Russian government agency. The law does not yet touch on the issue of foreign firms and individuals involved in public procurement, as these entities still are excluded or discriminated against in the process. The reforms in the law do have limitations, as it is nearly impossible to legislate the behavior of those in government and the private sector that supply them. The lack of a well-developed fiduciary duty and professional competence among officials involved in the public procurement process continues to undermine the reform effort. The disclosure of all bidding documents, including beneficial ownership of bidders, has not even been considered as tool to open up the process, even though in other countries the disclosure of who benefits from bids on government contracts has been used effectively to discourage collusion or related party transactions.

The lack of such reforms in Russia results in: • Steering contracts to specific vendors; • Overpricing tenders; • Manipulating the qualification and review process for “contract returns,” whereby bid winners pay a percentage back to the official who approves the contract; • Threatening firms that do not pay bribes with blacklisting. Public attention to these issues has put the spotlight on the many types of corruption in public procurement that collectively redistribute tax rubles away from needed budgets, limit the efficiencies that can be generated through the private production of public goods and services, corrupt government officials, undermine the rule of law, and perpetuate the general weakness of legal and economic institutions in Russia. Continuing public procurement reform in Russia is crucial for the establishment of the rule of law, as corruption in the procurement process feeds the culture of corruption and deprives Russians of the full value of public spending. Russia’s imminent WTO accession and its extensive efforts to encourage foreign direct investment underscore the need to adopt international standards. The current debate on the substance of proposed reforms is a welcome and necessary element of a healthy public discourse, and a key step towards improving the competitive position of the Russian economy. Endnotes 1

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“The impact of corruption on foreign business in Russia,” May 14, 2010, http://www.bbc.co.uk/worldservice/ news/2010/05/100514_russia_corruption_hs.shtml. _____________________________________________


Procurement Reform in Russia: Implications for the Fight Against Corruption

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Dina V. Krylova is the president of the Business Perspective Foundation. She is also a member of the coordinating council of Russia’s Federal Anti-Monopoly Service. Alexander Settles is professor of corporate governance at the Faculty of Management, National Research University - Higher School of Economics, and has been a consultant to the World Bank, Organization for Economic Cooperation and Development, and the Center for International Private Enterprise. His research and teaching focus on corporate governance, corporate social responsibility, international management, and public policy. Prior to joining the faculty at HSE he was a Fulbright Scholar in Russia and worked at the University of Delaware. The views expressed by the authors are their own and do not necessarily represent the views of the Center for International Private Enterprise (CIPE). CIPE grants permission to reprint, translate, and/or publish original articles from its Economic Reform Feature Service provided that (1) proper attribution is given to the original author and to CIPE and (2) CIPE is notified where the article is placed and a copy is provided to CIPE’s Washington office.

The Economic Reform Feature Service is CIPE’s online and electronic article distribution service. It provides in-depth articles designed for a network of policymakers, business leaders, civic reformers, scholars, and others interested in the issues relating to economic reform and its connection to democratic development. Articles are e-mailed and posted online twice a month. If you would like to subscribe free of charge, please join the CIPE network by entering your e-mail at www.cipe.org. CIPE welcomes articles submitted by readers. Most articles run between 3-7 pages (1,0003,000 words). All submissions relevant to CIPE’s mission will be considered based on merit. The Center for International Private Enterprise (CIPE) strengthens democracy around the globe through private enterprise and market-oriented reform. CIPE is one of the four core institutes of the National Endowment for Democracy and an affiliate of the U.S. Chamber of Commerce. Since 1983, CIPE has worked with business leaders, policymakers, and journalists to build the civic institutions vital to a democratic society. CIPE’s key program areas include anti-corruption, advocacy, business associations, corporate governance, democratic governance, access to information, the informal sector and property rights, and women and youth.

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