INTERNATIONAL EFFORTS FOR INTEGRITY AND EFFECTIVE

MANAGEMENT OF DEFENCE

Presentation to the Euro Atlantic Initiative Closing Conference on Transparency

May 14, 2009

Director, International Defence ProgrammeTransparency International

Mark Pyman

Transparency International

“We reiterate our commitments to the ideals that inspire the work of Transparency International and express our full confidence and willingness to work together to combat corruption in Mexico and throughout the world”

Vincente Fox, President of Mexico

• 1993, by ex World Bank staff• Independent, Not for Profit• In 100 countries• Addresses corruption through

constructive measures• Secretariat in Berlin• Funded by charities, gov’ts,

individuals and companies

International Defence ProgrammeSince Jan 2004Joint military + civilian teamInternational scopeImplementing and leveraging new approachesBuild integrity + reduce corruptionIn Defence Ministries, Armed Forces,national security.Funding:DFID, NATOSwedish MFA

Why care?What Defence people tell us

Defence

Waste of scarce resources It impacts operational effectiveness It reduces public trust in the armed forces Defence corruption can be very easy; and a target for politicians, re-election funds and reward for favours International companies shun corrupt economiesNational security

• Corruption can completely invalidate security strategies• Major corruption issues in Peace support, counter-insurgency, counter-narcotics, border security, state building• Nexus of military and exploitable assets in country

• Little or no doctrine, policy on how to approach the issue

Corruption in defence and security is a strategic issue

1. With global defence industry and export governments

- Tackle supply side issues- Engaged Lord Robertson, ex NATO Chief- Aim: a single global defence a-c code- Europe has developed and signed up

to a new defence anti-bribery standard. Covers all countries, all defence companies.

- Next step is to sign up the US. - Engage with Russia- Engage other major exporters,

2. With Defence Ministries Developing constructive measures to build integrity and reduce defence corruption in real situations in nations; Poland, Ukraine, Colombia and others.Capability building workshops

3. With NATO• 50 Countries supporting this defence a-c initiative• 5 day training module - 3 international courses, 20 nations: One national: Kabul• Integrity self assessment process for nations: Ukraine, Bosnia, Norway in 2008• Also in NATO Programme: Compendium of good practices (DCAF leading)

4. With conflict countries• Afghanistan, Colombia, Balkans• Lessons learned by forces in theatre• Doctrine needed on interventions• Integrity, a-c training for MOD/Army/Police• Approach to corruption as strategic issue

5. Development and research• World Bank, United Nations Peacekeeping• African Development Bank, African Union • Tunis workshops July 09 - 12 African nations• Conduct standards for defence officials • Opinion surveys, eg Trust in the military• Procurement integrity research

TI Defence Programme

Governments: Practical reform areas

1. Transparency of defence policy and defence budget2. Making a sound diagnosis of the key corruption and integrity issues3. Developing a defence integrity and corruption risk action plan4. Leadership days: Making the subject discussable and actionable5. Engaging civil society 6. Engaging the defence contractors7. Setting clear standards of business conduct for officials and officers8. Using surveys and metrics to monitor performance9. Establishing dedicated integrity training modules10. Using independent monitors on public procurements11. Raising the transparency of offsets12. Reform of the defence procurement organisation13. Developing doctrine for military in interventions

Defence Corruption risks - diagnostic

OTHERPROCESSES

POLITICAL

LEADERSHIP Appointments, Accountability

DEFENCE POLICYnot approved or published

DEFENCE BUDGETSnot transparent or debated

ORGANISED CRIME

CONTROL OF INTELLIGENCE

WRONG PRODUCT SALARY CHAIN

PROPERTY SALES

SECRET BUDGETS

PROMOTION, TRANSFERS

PRIVATE BUSINESSES

CONSCRIPTION

PROCUREMENT

OTHER INCOME SOURCES

COLLUSIVE BIDDERS

INCORRECTLY Specified or Evaluated

SINGLE SOURCE

OFFSETS

SELLER INFLUENCE

SUBCONTRACTORS

NEXUS OF DEFENCE AND ASSETS eg Oil

AGENTS/ BROKERS

FINANCING PACKAGE

ROADBLOCKS

REGIONAL POLICY

SMALL BRIBES

ETC

Diagnostic: Integrity Self Assessmentaimed at national Defence and Security Ministries

• With NATO, Poland• Questionnaire of

50 broad questions• Reviewed by group of 5-10

nations• Expert team follow-up• Pilots

– Bosnia July 08– Ukraine Oct 08 – Norway Nov 08

• Review Nov 08, finalised Feb 09

• 2009: Reviews in Afghanistan, Croatia, Montenegro, Latvia, Macedonia

Topics

1. Democratic control and engagement

2. Anti-Corruption policy in defence and security

3. Personnel – behaviour, policy, leadership, training, discipline

4. Planning and budgeting5. Procurement6. Operations7. Other financial processes8. Engagement with defence

companies

Defence Action Plan

No coordination (in the MoD)

+ Awareness of corruption and schemes within the MoD and military

Polish Ministry of Defence - start point - 2005

Many organisations involved in anticorruption activity:

Military Counterintelligence

−Lack of an anticorruption policy

Lack of a prevention bureau

Control Department (MoD) Military Police

Audit Bureau (MoD) Military Prosecutors Office

Supreme Chamber of Control

No external cooperation

Very few system changes

= Report on corruption – prepared, but no feedback occurred

Code of conduct for mil. & civil. per. in relationship with defence industry:

Anticorruption Reforms in the Polish Ministry of Defence

Code of Conduct

Code of Conduct for Professional Soldiers

Code of Conduct for Civil Servants

Both too general (no details, no examples) for practical enforcement

Existing regulations:

Act on lobbying in law making process Does not cover industry lobbying

Common PR events: only linked with contract signing or implementation

Everyone pays own bills No gifts

General common sense principles

Contact with arms producers: directly or at arms fairs. No agents

No cooperation or participation in events sponsored by industry

Detailed regulations:

Supervision of key points by the anticorruption bureau:

Stronger regulation on conflict of interests

II. Anticorruption Reforms in the Polish Ministry of Defence

Reforms in the procurement system

More electronic auctions

More information on the internet

Do they enable fair competition?Operational requirements

Technical requirements

Single source proc. or tender

Evaluation criteria

Quality assurance, testing

Are they accurate and objective?

Is the single source proc. justified?

Are they accurate and objective?

Are the proper tests expected?

The contract Is it accurate and assure MoD rights?

More tests; ordered by buyer, not by seller

Leadership daysMaking the subject discussable

• The TI Defence Programme has been pioneering high level discussions at Ministerial level on addressing defence integrity and corruption risk

• Attendance: 15 to 30, typically senior forces officers and leadership of the MOD. Duration: One day

• Typical agenda:

1. Understanding the problem

2. Diagnosing the issues for that country

3. Developing ways to address the problem

4. Engaging with staff and forces personnel

5. Outlining a plan

High level facilitated discussion can transform the readiness of leaders to engage

Working with Defence Contractors

International collaboration - TI facilitation

• Initiated by TI in 2005. Chair is Lord Robertson, former Secretary General of NATO. US and European companies

US: AIA, Lockheed Martin, Raytheon, Northrop Grumman, Boeing, Rockwell Collins, and othersEU: ASD, EADS, Thales, BAES, Finmeccanica, Dassault, Saab, Ruag, Thyssen, Rolls Royce, MBDA, Kongsberg, Agusta Westland, VT, SBAC

• Led to a pan-European initiative, now public• Now moving to training/education of second level defence companies

National Ministry collaboration with defence contractors• New approach, High scope for benefits• Defence Ministries can lead; can use top tier companies to assist• More scope: Defence Integrity Pacts• More scope: Insist on company anti-corruption compliance Programmes

The ‘Common Industry Standard’

No-corruption commitmentActive compliance Programme‘Tone at the top’

1. Compliance with laws and regulations2. Extent of application - through to subsidiaries and affiliates

3. Prohibition of corrupt practices4. Gifts and Hospitality 5. Political Donations and Contributions6. Agents, consultants and intermediaries7. Integrity Programmes8. Sanctions

Five pages, detailed text on agents (due diligence, agreements, etc)

Raising Business Conduct Standards in Defence Ministries and Armed Forces

TI research:

Purpose – to develop best practice for governments and armed forces in standards/rules for good ethical conductBackground: Numerous queries from media; apparent lack of clear guidelines in nations

Scope: 60 country MODs contacted; 32 detailed responses•Europe: Albania, Bulgaria, Croatia, Denmark, Finland, Georgia, Germany, Ireland, Latvia, Lithuania, Norway, Poland, Portugal, Romania, Russia, Serbia, Spain, Sweden, the Ukraine, UK•Africa: Kenya, Nigeria, South Africa, Tanzania, Uganda•Americas: Canada, Colombia, USA•Asia/Pacific: Australia, New Zealand, Pakistan

Research Conclusions

Best Performers: UK, Australia, Chile, USA, Canada, Germany, Norway, Romania

Structure: most countries relied on compliance-based regimes; better performing countries had ethics-based regimes backed up by hard rules

Bribery: universally noted as outlawed, but most regulations were poorly developed

Gifts and Hospitality: widely addressed; low reliance on quantitative regulations

Conflicts of Interest: mostly poorly developed

Post-Separation Employment: mostly not addressed

Training: Mostly poor or very poor

NATO Training module - Five-day course Building integrity and anti-corruption

Target: Military, civilians in the security sector at OF5 level Objectives: Strengthen integrity and reduce corruption

Concept of transparency and good governance How to integrate integrity and corruption

How to engage better with the public and civil society2008: UK Defence Academy July 2008

NATO School Oberammergau, September 2008

Sarajevo Peace Support School, Bosnia, Dec 2008

Participants from 12-15 nations at each one

2009: Kabul Feb 2009, Kabul Oct 2009Ukraine May 2009, Bosnia Dec 2009

Led by the UK Defence Academy with Transparency International

Course elements

What is Corruption?

Govt and Civil

Society

A

NATO View

Corruption in my

country

Mil corruption vulnerabili

ties

Integrity & AC tools

Personal

conduct

Legal enforcem

ent

Operations

Iraq/Afghanistan - Organised crime - Media

Education as an Integrity

Tool

Exercise

‘Defence Procurement’

Integrity Building -

How will I tackle it?

Integrity Building - Change Management

Processes Georgia MOD/NGO experience

States in Transition

Workshop Syndicate Presentations

Asset/eqpt

disposal

Conduct with

industry

Reform – The Bulgarian view

Workshop

ExerciseLecture/discussion

Independent civil society oversightof major procurements

• Example: Colombia: Procurement of 22 drug interdiction airframes

• TI invited to monitor• ‘Defence Integrity Pact’ signed• Corruption risk review of

– technical requirements – tender and contract

documentation– evaluation criteria

• Meetings with senior Military, Government officials, Independent Monitor and TI Colombia

• Public reports

• A good way of raising visibility• Respected people as monitors• Can be TI, or others• Used heavily in several countries• Intensive version - apply to major procurements only: Mexico, India• Light version - apply to all procurements eg India defence• Best practice: Mexico. Gov’t decides top 10 national procurements to be covered by Integrity Pacts

Colombia Defence Integrity Pact - Major Observations

• Core Purpose and Capability - unclear

• Future Capability - not considered• Simulation - not considered• Operational Evaluation -

inadequate • Prototype Inclusion - unwise• Tender Evaluation Matrix - too

operationally weighted• Pre and Post Contract Award -

insufficient controls• Offset Programme - no

transparency

OffsetsNo transparency - they are a significant corruption area

The issues

1. Can divert attention

2. Get less attention than main contract

3. Have unclear status in the evaluation

4. Multiple opportunities for individual reward

5. Poorly controlled

6. Happen later than contract award

Remedial measures• Offset contract to have same attention as main

contract

1. Require tender prices with and without offsets

2. Set up dedicated team to deal with offsets

3. Insist on clear pre-award commitments

4. Stronger due diligence required on offset brokers and on companies receiving offset money

5. Set formal offset evaluation criteria

6. Publish the evaluation criteria and the result

7. Separate offset obligation from main evaluation

8. Require independent monitoring and evaluation

9. Require a public progress report each year

10. Require a post implementation audit of the offset outcome and who benefited

Concluding remarks

+ Countries actively engaging; Big companies engaged+ NATO is a positive force for change+ New measures work, are welcomed+ Defence Ministries can lead their government in addressing

corruption - and some are- Leaderships need confidence- Expert capability needs building- Many large exporting nations are complacent- Offsets are a scandalous dark area

Key for success:Top level commitment + Civil society/ expert support

Thank you

Mark Pyman

Defence team contact:

anne-christine.wegener@transparency.org.uk

www.transparency.org

www.transparency.org.uk

www.defenceagainstcorruption.org