Public procurement accounts for 13% of GDP across Organisation for Economic Co-operation and Development (OECD) countries, representing a third of their total government expenditure.

Independent charity the Open Contracting Partnership (OCP), which works in more than 50 countries to ensure fair dealing on public contracts, values total global public procurement spending at a whopping $13tn per year – a sum that inevitably attracts large-scale pilfering.

On International Anti-Corruption Day last year (9 December), ICAEW members gathered at Chartered Accountants’ Hall to hear how that vast financial flow is exploited by bad actors. Representatives from both the OECD and OCP outlined the risk factors driving public procurement fraud and corruption. They also presented strategies for government bodies to strengthen their defences.

Narrative of distrust

For OECD Head of Infrastructure and Public Procurement Paulo Magina, three of the biggest fraud risks that public bodies face are:

1. The complexity of relevant legal frameworks, regulations and procedures.
2. Close contact between public and private entities.
3. The multitude of actors and business sectors involved.

These vulnerabilities, Magina explained, span the entire public procurement cycle, from identification of needs and tendering all the way through to contract execution and closure.

Transparency is fundamental for maintaining public trust, Magina stressed. Data on public procurement processes should be simplified and visualised for non-expert audiences. Such transparency empowers citizens to engage with the process, enabling them to identify issues and advocate for change with elected officials. “Open data standards, allowing data reuse, are important,” he noted. However, recent OECD findings reveal concerning gaps: while 60% of OECD countries publish contract amendments, only 20% release completion certificates – and less than 10% are sharing progress reports or final audits.

That patchiness feeds into a broader narrative of distrust. As OECD Deputy Head, Infrastructure and Public Procurement, Erika Bozzay told the audience: “Citizens of OECD countries are deeply sceptical about the integrity of civil servants. More than 43% think that a civil servant would accept a bribe to speed up a service, and only 36% think they wouldn’t. That sends out an important message about how citizens perceive the behaviour of public procurement officials, as many of those officials are also civil servants.”

One speaker explained how public engagement can work in practice, recounting an amusing example of a citizen activist using open procurement data to investigate toilet roll supplies to national rail services. “It shows how transparency enables citizens to scrutinise even the most mundane aspects of public spending,” they pointed out. No matter how small, such grassroots oversight helps ensure accountability for taxpayer money.

Magina and Bozzay urged attendees to refer to the OECD’s Recommendation on Public Procurement. Published in 2015, the paper sets out an extensive set of best practices designed to tackle this type of corruption, and charts OECD’s ongoing work in the field.

Institutional response

According to OCP Executive Director Dr Gavin Hayman, annual UK public procurement spending tops £300bn. As such, scrutiny of public procurement spending has intensified significantly over the past decade.

For example, in 2015 the Electoral Commission found that ‘one-party councils’ with weak electoral accountability are 50% more prone to corruption than their competitive counterparts. That coincides with foregone savings of 1-4% of contract value – around £2.6bn per year. More recent findings are equally concerning: a 2020  government review found that 23% of local councils had experienced procurement fraud in the 2017-18 financial year, while the 2022 policy paper Transforming Public Procurement criticised the current state of data on public contracts and proposed ambitious transparency reforms.

To address those challenges, the OCP has developed the Open Contracting Data Standard (OCDS), a non-proprietary framework for public procurement transparency that has been adopted by every country with an OCP presence. 

In parallel, Hayman hails Ukraine’s Prozorro initiative – a fully accessible and searchable public-contracts database and tendering system – as a leading example of how to hardwire transparency into the process by design. Launched in 2015, Prozorro has halved local entrepreneurs’ perceptions of corruption in public procurement.

Through its work, the OCP has documented within the OCDS 73 red flags for public procurement corruption. In his talk, Hayman outlined four key measures that officials can take to manage those indicators, and explained how the OCDS can help.

1. Know your procurement process
   Typically, public procurement unfolds in five phases: planning, tendering, bid award, contract drafting and project implementation. Each phase contains crucial sub-stages, from initial budgeting, specifications and bid evaluation to issuance of timelines and, finally, making payments. Implementation – where most of the spending occurs – demands particularly tight scrutiny. Councils must ensure their bidding process is transparent and ethical from the start. As such, any missing data should be flagged immediately.

2. Identify key risk indicators
   Councils can cross-reference their procurement data with the OCDS’s library of red flags to highlight any potential concerns. The red flags are divided into five categories, named after broad corruption issues: low transparency, collusion risks, bid-rigging, fraud and low competition. Hayman advises council leaders to carefully consider the procurement process they have in mind for a specific project and ask, in that context, “What would those issues look like?”

3. Track issues throughout the procurement cycle
   The OCP provides examples of common red flags that can occur at each stage – for example:

• Planning Overly restrictive eligibility criteria
• Tendering Unusual direct awards, or emergency procedures
• Bid award Contract concentration with single bidders
• Contract drafting Above-market pricing
• Implementation Payment without full service delivery

4. Institutionalise your response
   Enshrine risk management into institutional policy. Create clear workflows for addressing red flags, integrate solutions into staff guidelines and set up monitoring systems to track potential risks.

Businesses beware

Public procurement is fundamentally a two-way relationship: public bodies need goods and services, while private companies seek to supply them. However, with trillions in public spending at stake, the responsibility for maintaining ethical standards falls on both sides. Whether they work in public bodies or private suppliers, accountants play a vital role in this ecosystem, safeguarding relevant financial controls and auditing measures.

Those responsibilities carry serious weight, as Quinton Newcomb, Partner and Head of Commercial Crime at Fieldfisher, stressed. He warned that private companies face severe consequences for ethical breaches, including complete debarment from future public contracts, if found liable for corrupt dealings with government bodies.