IBAC has identified significant corruption risks associated with public sector procurement. More than a quarter of our investigations have examined allegations around suspected corrupt conduct in procurement processes, and three of the four public hearings we have conducted to date have examined allegations around corrupt practices in procurement.
Procurement is an everyday activity in the Victorian public sector, ranging from the purchase of low value goods and services to major infrastructure projects. Billions are spent by Victorian public sector agencies purchasing goods, services and capital works. That procurement is vulnerable to corruption at various stages – including the initial bidding process, the process of selecting a preferred provider, paying for and delivery of goods and services, and contract management.
This report examines suppliers’ perceptions of corruption in Victorian public sector procurement, based on a survey of suppliers who have contracted
goods or services to the Victorian public sector (comprising both state and local government), as well as suppliers who are interested in potential future contracting opportunities.
Why is it important to consider corruption in public procurement from the perspective of suppliers? As noted by Transparency International:
The cost of corruption in public contracting is not only measured by money lost. Corruption distorts competition, can reduce the quality, sustainability and safety of public projects and purchases, and reduce the likelihood that the goods and services purchased really meet the public’s needs. When procurement is corrupted by private interests and not directed by the public good, trust in governments is eroded.
IBAC’s survey found that 40 per cent of respondents believe corruption in public sector procurement to be either a major or a moderate problem, while 34 per cent said they were discouraged from seeking a government contract because of their concerns about corruption.
Other key findings from the survey include:
Construction and education were identified as the two industries where corruption was believed to be most likely to exist. Respondents who identified as working in these areas were more likely to believe corruption in those sectors was an issue.
Suppliers’ perception of the extent of corruption in the public sector was influenced by their perception of the extent to which certain behaviours were typical within the Victorian public sector:
44 per cent of respondents said they believed it was typical or very typical for public sector officials to accept gifts, while seven per cent said a public sector official had requested a gift. Almost all of those respondents (90 per cent) said they believed corruption overall was a major or moderate problem.
38 per cent of respondents said they believed it was typical or very typical for public sector officials to give suppliers unequal access to tender information, 66 per cent of whom stated corruption overall was a major or moderate problem.
25 per cent of respondents said they believed it was typical or very typical for agencies to leak confidential tender information, 74 per cent of whom stated that corruption overall was a major or moderate problem.
The procurement methods identified as most vulnerable to corruption were direct negotiations and procurement via non-tendered quotations. This reflects the greater degree of discretion exercised by public sector officials and less stringent controls in these processes, compared with panel contracts and tenders.
64 per cent of respondents said they would report corruption if they became aware of it. However those who believed corruption to be a greater problem were less likely to report it. The main barrier to reporting was a fear that reporting would negatively impact their organisation.
This report highlights action public sector agencies, the Victorian Government Purchasing Board (VGPB), Health Purchasing Victoria (HPV) and the Victorian Public Sector Commission (VPSC) could take to strengthen the integrity of public procurement processes, as well as suppliers’ perception of the integrity of such procurement:
The core questions for the survey were based on the survey of suppliers’ perceptions of corruption conducted by the NSW Independent Commission Against Corruption (ICAC) in 2010.
For IBAC’s survey, suppliers were largely contacted using databases managed by the Department of Treasury and Finance and Health Purchasing Victoria, with the addition of a small group of local government suppliers who were contacted separately by email. The survey was open from 16 November 2015 to 11 January 2016 and was also promoted by IBAC through media channels. In total, 1480 responses were
As with the NSW ICAC survey, there were three sets of survey items which canvassed suppliers’ perceptions of the:
- prevalence of corruption in Victorian public sector procurement
- extent to which specific behaviours associated with corruption are typical
- methods and stages of the procurement process most vulnerable to corruption.
Please note: due to rounding, percentage may not total 100.