Open Contracting Scoping Study

REPORT ON BRITISH INTERESTS AND PRIORITIESWest Africa Open Contracting Assessment Project

February 28, 2017

Produced By

Supported By

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ScopingStudyonOpenContractinginWestAfrica:

ReportonBritishInterestsandPriorities

February28,2017

SubmittedbyDevelopmentGateway,Inc.1110VermontAvenueNWSuite500|Washington,DC20005USA

SubmittedtoUKForeign&CommonwealthOffice

ContactPointAndrewG.Mandelbaum|SeniorProgramOfficer|DevelopmentGatewayamandelbaum@developmentgateway.org

LeadAuthorBrookHorowitz|CEO|IBLFGlobal

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Contents

Introduction

Methodology

Legalandregulatoryframeworksinthefivecountries

Whatthecompaniestoldus

Howbadiscorruptioninthefiveeconomies?

Doescorruptionpreventinternationalcompaniesfrominvestinginamarket?

Doescorruptionpreventinternationalcompaniesfromparticipatinginpublictenders?

Areinternational(includingBritish)companiesatacompetitivedisadvantageinpublictenders?

RecommendationsfortheBritishGovernment

AppendixI–OpenContractingPrinciples

AppendixII-Corruptionperceptionsinfivecountries

BenchmarkingPublicProcurement2017

TransparencyInternationalCorruptionPerceptionsIndex2015

IbrahimIndexofAfricanGovernance2011-2015

BertelsmannTransformationIndex2016

WorldBankEnterpriseSurvey2008-2016

TraceMatrix2016

WorldBankEaseofDoingBusiness2017

WorldGovernanceIndicators-ControlofCorruption2010-2015

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IntroductionThe purpose of this report is to support scoping studies on open contracting inWest Africa and to identifypotentialBritishinterestsandprioritiesintheregion.

ThegoalforthisprojectistogaugethestateofopennessofpublicprocurementprocessesinfiveWestAfricancountries (Ghana,Nigeria, Senegal, Liberia andGuinea) and to identifyopportunities forprocurement reformandtheadoptionofOpenContractingPrinciples(seeAppendixI).

Through this specific consultancy, the project seeks to understand prospects for increasing the prosperity ofWestAfricannationsandtheUKthroughcollaborationonimplementationofOpenContractingprinciples.Itwilldothis throughtheprovisionof recommendations to theForeign&CommonwealthOffice (FCO)onpotentialBritishinterestsandprioritiesthatwouldbenefitwiththeimplementationofOpenContractingreforms.

Thispaperlooksspecificallyatinternational(andespeciallyBritish)companyinterestsinthesefivemarkets.Wehave analysed third party surveys and indices of the corruption environment, especially around publicprocurement,andhaveconductedourowninterviewsof17companieswitha long-termcommitmentto,andknowledgeof,thesemarkets.

Building on these sources,wehave identified 9 recommendations for theBritishGovernment about possibleapproaches to supporting West African countries to improve procurement practices and to support Britishbusiness in these markets through technical assistance, capacity building and stronger coordination ofdevelopmentaid,tradepromotion,andanti-corruptionpolicies.

ImprovingprocurementpracticesinWestAfrica:

1) Invest intechnologiestosupporttransparencyandopenness intheprocurementprocess, includinge-procurement

2) Buildcapacityandsharepublicprocurementbestpracticesfromothercountries

3) Supportinitiativestounderstandtheownershipstructureoflocalcompanies

4) BuildcapacityofSMEsinWestAfricancountries

5) Linkanti-corruption,tradeanddevelopmentandengagebusinessinaid

6) Strengthengovernanceandlawenforcement

SupportingBritishcompaniestoengageinWestAfricaneconomies:

7) SupportpromotionofBritishcompaniesinWestAfricanmarkets

8) SupportBritishcompaniesindealingwithcorruptionrisk

9) Leveragethepoweroftheprivatesectorindevelopmentprojects

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MethodologyWehaveusedamixofthirdpartyresearchandourownprimaryresearch.

Themostdirectly relevant thirdparty research is thatof theWorldBank’sBenchmarkingPublicProcurement(BPP)project1.BPPhasbeenrunningfor3years,andnowcovers180countries.Forthefirsttimethisyear,allfivecountrieswhicharepartofthisstudyarecovered.Wehaveexaminedtheirfindingsinfullandincludedasectionanalyzingthemaindifferencesandsimilaritiesbetweenthecountries.

BPPcoverssomeimportantareasofthepublicprocurementprocesswhichallhaveabearingontheextentthatOpen Contracting (OC) Principles are being followed. The data highlights such areas as publication of tendernoticesanddocuments,theaccessibilityoftendersforsmallandmediumsizedcompanies,andthedigitalizationoftheprocurementprocess.Thefindingsgosomewaytocomparingthelevelof“disclosureandparticipation”(akeytenetoftheOCPrinciples)inpubliccontractingatleastasembodiedinthelegalandregulatorycontext.OnanumberofareaswhicharenotexplicitlycoveredbyOCPrinciplessuchascomplaintsprocedure,theygointodetailonprocesswhichwillmeetthe importantoutputoftheOCPrinciples“ofmakingcontractingmorecompetitiveandfair”.

BPPdoesnotdealwiththesupervisoryroleofcivilsociety,whichisanimportantpartoftheOCPrinciples.Anditdoesnotreflectthelevelofcorruptionandabusesofpublicprocurementontheground.Itdealswiththelegalandregulatoryframework.Incountries-andthefivecountriesofthisstudyaregoodexamples–wherethereispredominantlyweak rule of law and institutions, combinedwith poor governance and enforcement, the gapbetween the rules and regulations and what actual happens in public tenders will be particularly wide. Theinterviews picked up on this. The World Bank argues that a legal and regulatory framework that clearlyestablishes the ground rules, constitutes a good start for building a system which achieves free and opencontracting.

In this study, we analyze the BPP results for the five countries and show their comparative advantages anddisadvantagesinvariouspartsoftheprocurementprocess.Atthesametime,togiveatasteoftherealitiesofthe groundwe have conducted a number of interviews of our own. Apart from highlighting the discrepancybetweenthelawandthepracticeontheground,theyalsodemonstratetheextenttowhichcorruptioninpublicprocurement,orattheveryleast,theabsenceofopencontracting,isstoppingordiscouragingBritishandotherinternationalcompaniesfromcompeting.

From our own interviews, we quickly established that it was impossible to isolate difficulties in publicprocurementasthemainreasonforBritishandotherinternationalcompanies’reluctancetodobusinessinoneor other country. Thereweremanyother factors at play in influencing their decision including the economy,business opportunities, political stability and of course, corruption risk in areas other than procurement (forexample facilitating payments for customs or other public officials). However, without a doubt, publicprocurementisahighriskareaforBritishcompanies.

For the sake of completeness, and for our readers’ future reference, we have reproduced some key indiceswhichreflecttherealitiesofcorruptioninthesecountries.Indeed,whencompaniesmakeadecisiontoinvestordivest in a country, as a starting point, they often refer to indices such as Transparency International’sCorruption Perceptions Index, the World Bank’s Ease of Doing Business Index, the World Bank’s World1BenchmarkingPublicProcurement2017,WorldBankGroup.http://bpp.worldbank.org/reports2Although someprocuremententity staff inNigeria are technicallyofficersof theBureauof Public Procurement,which

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GovernanceIndices,IbrahimIndexofAfricanGovernance,theBertelsmannTransformationIndexandtheTraceMatrix.Whateverthemethodologiesusedbytheseindices,thefactremainsthattheyareinfluentialinguidingcompaniesthataredecidingabouttheirtradeandinvestmentstrategies.Forthisreason,wehaveextractedaselectionofthedataaboutthefivecountriesandhaveincludedtheminAppendixII.

Ourown interviewswerewith representativesof17Britishandothernations’companieswithmanyyearsofexperience of doing business in these five countries. In practice it was very difficult to get interviews withspecificallyBritishcompanies–manycompaniesareinanycasemultinationalinnature.TherearealsoveryfewBritishcompaniesrepresented inLiberia,GuineaandSenegalwithwhomwecouldestablishcommunications.SosomeofthecompanieswereUS-based,orlocalcompaniesrunbyBritishnationals.ThecorruptionchallengestheyencounteredwereinanycasesimilartothoseanyBritishcompanywouldencounter.

The peoplewe interviewedweremostly CEOs, heads of public affairs, or in the professional services sector,senior or managing partners. We found very few people who had had direct experience of bidding in localtenders.However,theyeitherworkedwith,orfor,peoplewhohad.

Theindustriesselectedwerethosewhereweexpectedtheretobethehighestchanceofpublictendersissuedbythelocalauthorities.

Theinterviewswereconductedoverthecourseof3weeksbyphone.Eachinterviewlastedbetween40and50minutesandwasconductedasaninteractivediscussionratherthanQ&A.However,eachparticipanthadseenalistoftopicsinadvance.Weagreedwiththeparticipantsnottopublishtheirnamesandcompanies.

LegalandregulatoryframeworksinthefivecountriesThe World Bank’s analysis of different groups of countries according to income level is revealing. All fivecountries of this study relate to the categories “Sub-Saharan Africa.” Liberia, Senegal and Guinea are “lowincome”economies,GhanaandNigeriaare“low-middleincome”economies.Westartbylookingatthebroadtrends in the regions, according to theWorld Bank research, thenwewill look at the five countries inmoredetail.TheBPPresultsforthefivecountriescanbefoundinAppendixII.

Thetablebelowshowstherather low levelofonlineavailabilityofpublicprocurementdocuments in the lowincomecountriesincomparisonwithhigherincomeeconomies.Itpointstoanimportantbutnotsurprisingfact:thelevelofelectronicprocurementislowinthefivecountries.Althoughe-procurementprovidesnoguaranteethattenderswillbeconductedopenlyandfairly,bytakingoutthe“humanelement”fromtheprocess,itmakesitalotharderforcorruptpracticestotakeplace.E-procurementalsohasotheradvantagessuchasensuringbidsdonotgetlost, loweringtransportationcostsofbiddingdocuments.AlthoughOCPrinciplesdoesnotstipulatethat e-procurement is themethod that has to be shown, it is generally accepted that this is thebestwayofachieving OC Principle 4: “Governments shall develop systems to collect, manage, simplify and publishcontractingdataregardingtheformation,award,execution,performanceandcompletionofpubliccontractsinanopenandstructuredformat,inaccordancewiththeOpenContractingDataStandardastheyaredeveloped,inauser-friendlyandsearchablemanner.”

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TheBPPalsoconfirmsotherinformationshownbytheresearchstudiesconductedforthisproject.Forinstance,BPP analyzes in some detail the complaints procedure. Although complaints procedure is not mentionedspecifically in the OC Principles, there is an important section on “participation, monitoring and oversight.”AlthoughtheOCPrinciplesfocusmostoncitizenactivismtoexposemalfeasanceinpublicprocurement,thereisnodoubtthatinthefirstinstancethebiddersthemselvesneedtohaverecoursetosomekindofreviewprocess.Thetransparencyofthatprocesswillalsoleadtogreateraccesstodataforthepublicandotherplayers–notnecessarily just the bidders. Interestingly, the five study countries, the complaints procedure, most often ishandledbytheprocuringentityitself,andnotanindependentreviewbodyorthecourts.Althoughcivilsocietyandprivatesectorrepresentativesareincludedonthecomplaintscommitteesinsomeofthecountries(suchasSenegal),thiscanleadtoaconflictofinterestwheretheprocuringbodywillnotwishtoincriminateitselfandwill reject such appeals. Moreover, not all countries’ legislations mandate that the results of the reviewdecisions should be published – for example in our five countries, Guinea and Liberia fall into this category.Finally,where independent auditing is anoption, theseoversight bodies are typically under-resourced and inneedof training, leading to limited (e.g.Ghana,where only performance audits have been conducted) or noaction(e.g.GuineaandNigeria,whichhavenotundertakenauditsofanykind).

Itisworthmentioningtheaccessibilityofpublicprocurementforsmallandmediumsizedenterprises(SMEs),astheresearchforthisprojectshowsthatSMEsinmanycountriesareconcernedaboutthecompetitionposedbyinternationalbusinesses.AccessibilitytopublicprocurementforSMEsisnotnecessarilyanissueofcorruption,butofopenaccessandhighercompetition,whicharebothimportantcriteriaunderpinningOCPrinciples.SMEscanbediscouragedfromparticipatinginpublictendersinanumberofways.Forexample,theamountofthebidsecuritywhichisrequiredinall45Sub-Saharaneconomiesandoftheperformanceguaranteewhichisrequiredin 27 of the 28 economies, can be placed at a high enough level to make participation prohibitively costly.Another area of possible exclusion of SMEs is the punctuality of payment to suppliers. In the low incomeeconomies, payment for products and services is 31-90 days which may create serious cash flow problems.Althoughthiswouldnothurtalargemultinationalbiddingforbusiness,aUKnewentrantexporterortheirlocaldistributortooneofthesecountrieswouldcertainlythinktwicebeforesubmittingabidundertheseconditions.

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The five countries are fairly representative of their respective groupings in the analysis above. Turning to acomparisonofthefivecountries,weseethatintermsofcallfortenderandpre-tenderdocumentation,thefivecountriesscorerelativelylowcomparedtoothercountriesintheworld.Thelackofelectronicsystems,absenceofobligationstoposttenderdocumentsonlineareallareasforimprovement.Guineafaresslightlyworsethantheothers–therulesdonotstipulateforinternalmarketanalysisguidelinesduringthemarketresearchphase,andthereisnostatedtimeframeforaddressingbidders’questions.Nigeriafaresslightlybetterbecauseitistheonlycountryofthefivewhichallowsfor-althoughdoesnotrequire-consultationbetweentheprocuringentityand the private sector and other stakeholders for needs assessment. This does not mean that in the othercountries there is no pre-tender contact between bidders and issuers, but it does mean that there is morechance that this contact couldbeunofficial innature, and therefore couldprovidea space foruncompetitivepractices.

In terms of accessibility for SMEs, Ghana scores lowest of the five for bid submission processes. While bidsecurity is expressed as amaximum percentage in the other countries, Ghana allows the amount of the bidsecurity instrumenttobeestablishedat thediscretionof thebiddingauthority–thusgivingopportunities forofficialstosetitatalevelthatcoulddisenfranchiseordiscouragecertaincompaniesfrombidding.Liberiascoresbestinthissectionbecauseitusesdifferentformsofbidsecurity,albeitatthechoiceoftheissuingauthority,anditspecifiesatimeframeforthereturnofthebidsecurity.Additionally,in2014,LiberiaapprovedtheSmallBusinessEmpowermentActwhichestablishedthatforeachfiscalyear,at least25%ofallpublicprocurementcontractsshallbeallocatedandprovidedtoLiberian-ownedSMEs,ofwhichat least5%shallbeallocatedandprovidedtowomen-ownedSMEs.Accordingtointerviews,althougheffortshavebeenmadetoimplementthis,itwon’tberegulateduntil2017.

WhileLiberiaisincentivizingSMEstobidinsomeways,itscorespoorlyonperformanceguaranteeandpaymentofsuppliers,whichwillactasadisincentive toSMEs.Unlike theother fourcountries, ithasnotimeframeforreturnofperformanceguarantee.Whileitguaranteespaymentofsupplierswithinthe31to90-daytimeframe,ithasnolegalobligationoverwhentobeginprocessingpayment.Inthiscategory,Ghana,NigeriaandSenegalperform better. On the performance guarantee, Senegal is one of the few countries in theworld that has a

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separateentitytooverseethedecisiontowithholdtheperformanceguarantee.Allthreecountriesareabletopaypenaltiesorinterestincaseofpaymentdelays.

The complaints regime varies from country to country. In Guinea, Senegal and Nigeria, the rules stipulate arelativelyshort leadtimefordecisionsfromthefirst-tierreview,comparedtoGhana.GuineaandNigeria2arethe only countries where the complaint could conceivably be reviewed by someone other than the peopleagainstwhomthecomplaintisbeingbrought,thusavoidingpotentialconflictsofinterest.However,inGuinea,ourcountrystudyrevealedonly5 instancesofcancellationsduetocomplaintsandzeroauditshaveoccurred.DatawasnotavailableinNigeria.Ghanaistheonlycountryofthefivewithmandatorytrainingforthepeopleundertaking the review process. The World Bank analysis refrains from putting a score on the complaintsprocedures,buteachofthesevariationswillhaveanimpactontheeffectivenessofthecomplaintsprocedureinensuringanopen,competitiveprocesswhichinturnwillleadtovalueformoneyforthestate.

In the next section, we turn from the comparative assessment of the laws and regulations to the practicalchallengeswhichcompaniesbiddingforbusinessinthefivecountrieshavetoface.

Whatthecompaniestoldus

Howbadiscorruptioninthefiveeconomies?

AlltheindicatorsandindicesshowthatGhanaandSenegalareamongsttheleastcorruptinSub-SaharanAfrica,and Nigeria and Guinea are amongst the most corrupt. Liberia is in between, although closer to the morecorruptendofthescale.

Thecompaniesweinterviewedconfirmedthis,notingthatthesurprisingdifferencebetweenGhanaandNigeria– two neighboring countrieswhichwere both part of the British Empire, which gained independencewithinthreeyearsofeachother,andinheritedlegalsystemsbasedontheBritishsystem.

Somerespondents felt that the levelof corruptionwas in somewaysdependenton thepolitical stabilityandinstitutionaldevelopmentofacountry.Soforexample,Liberia,emergingfromaCivilWar,hadsimplynothadthe time to rebuildand stabilize its institutions.On theotherhand, itwaspointedout thatNigeriahasquitedeveloped institutionsanda fullbodyofanti-corruption laws including thedraconianEconomicandFinancialCrimesCommission(Establishment)Actof2002–butitalsohasthehighestlevelofcorruption.

AnotherviewwasthatmorewealthycountriessuchasNigeriahadamoreseriouscorruptionproblempreciselybecauseitisamineralandextractiveindustry-richcountryandthattherewasmuchmore“corruptmoney”togoaround.However,LiberiaandGuinea,withGNIof$400and$460percapitaareamongstthepoorest(thoughadmittedly resource rich) countries in the world, but also the highest level of corruption. By chance, as thisreport was being written, this was illustrated by news of the major scandal of an alleged $10.5 millioncommissionpaidbyRioTintotoaconsultantinconnectionwiththeacquisitionofminingrightsintheSimandouironoreprojectinGuinea.

Indiscussinghowcorruptionmanifestsitself inbusinesstransactions,thedifferencebetweenacountrywherecorruption is “endemic” and where it is being brought under control was in the kind of corruption. In less

2Although someprocuremententity staff inNigeria are technicallyofficersof theBureauof Public Procurement,whichrespondstocomplaints,manyprocurementofficersremainwithinthecivilservice.

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corrupt countries, it wouldmanifest itself in facilitating payments for services, education, healthcare. In themorecorruptcountries,itwasaconstantinbusinesstransactionsbetweencompaniesandbetweencompaniesand the government including in public tenders, purchase of concession licenses and major infrastructureprojects.

Throughout all the countries, interviewees noted that gift giving is fairly standard practice – even thoughdisproportionategiftsareillegalaccordingtotheUKBriberyAct,andevensomedomesticlegislations.InNigeriagifts for a minister’s daughter’s wedding is so widely practiced as to be almost impossible to circumvent.Internshipsincompanies’headquartersarealsostandardpractice(thepopularityofthispracticemaybegintowanefollowingthehighprofilepenaltyimposedonJPMorganbytheUSDepartmentofJusticefollowingsimilarpracticesinChina).

Doescorruptionpreventinternationalcompaniesfrominvestinginamarket?

Thegeneral consensus from the companieswe interviewedwas that corruptiondoesnotprevent them fromdoingbusinessinamarket.Allthecompaniesweinterviewedhadworkedformanyyearsinthesecountriesandwere familiar with the corruption risks, and the legal consequences of getting it wrong. In terms of riskmanagement,theywereveryexperienced,andaslongastheyfollowedcertainguidelines,theywouldbeabletodobusiness.

Thereweremany other factors, in addition to corruption risk, that could discourage foreign companies frominvesting inor tradingwithaparticularcountry.These includethestateof theeconomyoreconomicpolicies(e.g.Nigeria’sforeignexchangerestrictionsandartificiallyhighexchangerate),political instabilityandsecurityrisks(e.g.Liberiaduringorpost-civil-war),healthrisks(e.g.LiberiaandGuinea’soutbreaksofEbola),relativeGNI(e.g.Nigeria’sGNIpercapitaof$2950comparedtoLiberia’s$400)andpopulationsize(e.g.Nigeria’s179millioncomparedtoLiberia’s4million).Ourrespondentsalsocitedanumberofotherfactorssuchaslanguagebarriers(Britishbusinesspeoples’poorknowledgeofFrenchinfrancophonecountries),theleveloftheirgovernment’ssupport for trade and investment promotion, and the prevalence of local content requirements in the hostcountry.

Whatcanbeconcludedisthatwhilecorruptioninitselfwillrarelydrivecompaniesoutofacountryorpreventthemfromentering,thecombinationofahighlevelofcorruptionwithanynumberoftheaboveotherfactorswillhaveadetrimentaleffectonacompany’sappetiteforinvestment.Intheenditisamatterofothermarketsappearingtobemoreattractive.Atthecurrenttime,ourintervieweessuggestedthatNigeria,withitsongoingeconomiccrisisandpoorrecordoncorruption,islessattractivetomanyforeigncompaniesthansmaller,morestableandlesscorruptcountries,likeSenegal.

Doescorruptionpreventinternationalcompaniesfromparticipatinginpublictenders?

Whilecorruptionwouldnotstopcompaniesfrominvesting,itdoesactasastrongdisincentivetoparticipationinpublictenders.

TheentireapproachofaBritishcompanythatismanagingitscorruptionriskistoavoidplacingitselfinahighrisksituation.Apublictender–theplacewherebusinessandgovernmentdobusinesstogether–ispotentiallyahighrisksituation.

Thereareverymany formsofcorruption inpublicprocurement. Itdepends largelyonthekindofcontractualand tenderingarrangements, theamountofmoney,and the strategic importanceofaparticularproject. The

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tenderswhichwediscussedwiththecompaniesincludedbiddingforaservicecontractandbiddingforlandorproduction concessions. In termsof size and strategic importance and therefore thepotential for corruption,theyarequitedifferent.

Herearesomeoftheareasinpublicprocurementwhichthecompaniesmentionedasmakingpublictendersanunattractiveformofdoingbusiness,recognizingthatsomeapplyinsomecountriesmorethaninothers:

1) Announcementofpublictenders:Riskofunfaircompetitivepracticesinpublicprocurementbeginswiththeannouncementofpublictenders.Theannouncementmaybe“open”butinfactdistributedtoaverysmall selection of potential competitors. Another form of exclusion is timing: the “least favouredcompetitors”get tohearabout thebidvery late in theday, thisputting thematadisadvantage.Theformof announcement (traditional paperbasedpublication versus electronicmeans such as email orweb-site)isalsoaformofdiscrimination.

2) Pre-bidding procedure and specification:Whilst the World Bank Group encourages an open needsassessmentandtheopportunityforthegovernmenttotestthesupplierstoensurethattheyarereallypurchasing the rightmaterial or services for the task, pre-bidding procedures are oftenmurky. Theypresent anopportunity for bidders and issuers to agreeon anarrow specificationof a project to theexclusion of other bidders. So pre-bid consultation may be a very good thing, since it increases thechancesofahighvalue-for-moneytender,butas longasallcompetitorshaveanequalopportunitytogainaccesstothegovernmentdecision-makers.

3) Formal tendering procedure: The companies we interviewed distinguished between the formaltendering procedure and the behind-closed-doors negotiations which often undermine the formalprocess.Evenabidwhichhasalltheelementsoffairplay,transparencyandopencompetitionasstatedunderthelaw,canbeabusedbytheseinformalprocesses.Thelackofelectronicprocurementsystems,includingannouncementsof thebidandthedecision,all servetoprovidewindowsofopportunity foruncompetitivepractices.

4) Announcementof results:Anumberofcompanies toldus that theyhadexperiencedcaseswhentheprocurement authority hadnot informed themabout the final decision. Indeed theyhadonly knownthat the project was actually going ahead when they heard that works had started under themanagementofarivalcompany(usuallythebidbythenhadundergoneseveralalterations).Companiesinvest substantial time and resource in putting a bid together, and this lack of discipline in seeingthroughtheprocesstotheend–whetherdeliberateornot–simplyunderminesthecredibilityofthegovernmentofficialsoverseeingtheprocess.

The respondents gave a number of examples of corrupt practices (sometimes under the guise of“incompetence” or “bureaucracy”) that at least discouraged, if not prevented, foreign companies fromparticipatinginpublictenders.Atthespecificationstageofthetender,thepublicofficialsdeliberatelyplacedaceilingforbidsatsuchalowlevelthatinternationalcompaniescouldsimplynotcompete.Abribewouldhelpto“lift”theceilingtoalevelwhichenabledtheinternationalcompanytocompete.

Thehighamountofthebidguarantee–insomecase15%ofthecontractvaluepayableinadvancecouldactasa disincentive. Additionally, interviewees reported a number of cases of the bribes being solicited – andsometimespaid–forthecontractpaymentprocesstobeinitiated.Inotherwords,youhavetopaytogetpaid.OnemajorinfrastructurecompanyhaddivestedfromNigeriacompletelyafterithadnotbeenpaidalargesumfromagovernmentproject.

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Casesofgo-slowbureaucracyabound.Itisafavoriteproceduretoextractfundsfrombidders–fromthetenderdocuments thathavenotbeenmadepubliclyavailable to the timingandpublicationof the finaldecision.Alltheseareopenfor“negotiation”.

Broadly speakingour respondents relayedapictureofofficials “trying iton”, sometimeswithgreat creativityand imagination.Whileofficialbusiness isstandardized,corruptbusiness ishighly individualized.Respondentsfeltthatcorruptofficialswerealwaystryingnewtechniquesaccordingtothecompaniesandindividualsatthetable.

Overall,itappearedfromoursurveythatnotmanyforeigncompaniesparticipateddirectlyinpublictenders.Sowhileacompanymightbewillingtoparticipateinamarketthroughotherformsofinvestmentandtradesuchas single source contracts and company-to-company transactions, itwas lesswilling toparticipate in a publictenderwherethechancesoflosingorfacingotherbarrierstosuccessarehigher.

Weheardfromseveralrespondentsthatwhenabid lookedparticularlyopaqueoruncompetitive,theywouldwithdrawcompletely.ThisisnotbecauseofanethicalpositionorevenconcernabouttheUKbriberyact–it’sasimpleeconomiccalculation.Participatinginapublictenderisoftenatimeconsumingandcostlyprocess.Thereisnoincentivetoparticipateifitlookslikelythatthetenderhasbeentiedupinadvance.

Ifcompaniesdiddecidetoparticipateinapublictender,theycouldfindwaysofdoingso,whileminimizingtherisk.Forexample,theycoulduse localcompaniestobidforthemasproxies.Localcompanieswillhavecloserrelations(sometimesevenfamilyties)withgovernmentdecision-makers.TheUKBriberyActmakestheuseofagents as a way of avoiding responsibility for bribery illegal. However, in practice, companies can protectthemselves from frontline riskbyusingagents, andby training theagents andensuring that theagentshavesigneduptoanti-corruptioncomplianceprinciples (what isknown in the legislationas“adequatemeasures”).Onespecificexamplewastheinsistenceoftheissuingauthoritytodealwithalocalcompany.Thelocalcompanywouldcreateanalliancewithaninternationalcompanyandwouldbethedirectbidder,doublingitsbidinordertopaynecessary“costs”.Whenoneinternationalcompanyrefusedtoparticipateinthescam,itwasblacklistedforcorruptactivities!

Another tactic of companies is to be absolutely clear - even vocal - about their commitment to internationalcomplianceprinciples,andtoflatlyrefusegivinganykindofbribe.Severalrespondentsconfirmedthatthiswasthemostpracticalandeffectivewayofresistingsolicitation.Afterafewattempts,wordwouldgetoutonthemarketthataparticularBritishcompanywouldneverpayabribeandthepeoplesolicitingwoulddesist.

WelearntofonecasewhereaBritishcompanybidforaprojectknowingfullwellthatacompetitorwouldwinit.Aftera fewmonthsof theproject implementationphase, thewinningbidder (fromChina) failed todeliveraccordingtocontract,andtheissuingauthorityconcludedasinglesourcecontractwiththeBritishcompanytocompletetheprojectontime.

These examples illustrate that it is not impossible for companies to participate in public tenders in the fivecountries,buttherisksareamongstthehighestthatcompanieswillfaceandthereforeitisnotsurprisingthatcompaniesconcentrateonotherkindsofbusiness.

Areinternationalcompaniesatacompetitivedisadvantageinpublictenders?

There was a consensus that foreign companies are at a disadvantage compared to local companies. Localcompanies have local ties with government officials, and may be able to reach agreement “off the record”

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during thepre-tenderstage. Insome instances, suchas inNigeriaandSenegal, legislationgivespreferencetolocalcompanies,or,inthelattercase,tocompaniesregisteredintheWestAfricanEconomicMonetaryUnion.One companymentioned a casewhere they bid for a contract only to find that the bidding documents hadchanged. Theyhadnot been informed.When they lost thebid, theywerenot informedon that either. Theyconcludedthatitwasacasewherethebidhadbeenwrappedupinadvancebehindcloseddoors.

Our respondents felt that British companies were not discriminated against in public tenders compared tocompaniesfromothercountries.TherewasnomoreorlesssolicitingforbribestowardsBritishcompaniesthantowardscompaniesofothernationalities.

ManyrespondentsfeltthatBritishcompaniesdidnotperformaswellascompaniesfromothercountries,butthatthiswasnotbecauseofbriberysolicitationortheunwillingnessofBritishcompaniestopaybribes.Rather,it was because of companies from other countries bidding with a high level of state support. France andGermanywerementionedasexampleswherethegovernmentswereparticularlysupportiveoftheircompanies’trade and investment in Sub-SaharanAfrica. Another positive examplewas the Canadian Embassy in SenegalwhichhashelpedtosetupanAssociationofMinesinthecountry.Culturalactivitieswerealsomentionedasapositiveway of supporting a country’s trade – a good examplewas the French Institute in several countries.TherewasagoodunderstandingoftheBritishposts’andBritishCouncil’sroleandefforts,buttherewasalsoafeeling thatmorecouldbedone toby theseorganizations to supportBritishcommercial interests.This couldtaketheformoftradedelegationstoandfromtheWestAfricancountries,amorerelaxedvisaregime,positivepressandapragmaticapproachtobusinesswithoutatendencyto“lecture”onhowtodobusiness–includinglecturingaboutcorruption!Capacitybuildingandtrainingofpublicofficialsandtechnicalassistanceprogramswhich included British companies in their design and implementationwasmentioned several times as a toppriority.

Chinese companieswerementioned asmajor competitor inWestAfrica able to place British companies at acompetitive disadvantage. Apart fromundercutting by a large amount, Chinese companies also came inwithlargefundingandexportguaranteepackages,along-termcommitmenttoinfrastructuredevelopment,veryhighlevelpolitical representationeven to the levelofHeadsofState.Whatever thenatureofChinesecompanies’behavior,therealityisthatBritishcompaniesareplacedatacompetitivedisadvantage.

Someof theBritish companieswe spoke to felt that therewasnopoint in competinghead-to-headwith theChinese.TheypreferredtowaitoutabiduntiltheChinesehadfailedtodeliverthattheypromisedandthenpickuptheprojectthroughadirectawardbythecontractingauthority.AnothercompanysuggestedthattheycouldplayaroleasaprojectmanageronChinese-ledprojects.Onbehalfofthelocalgovernmenttheycouldoverseethebiddingandtheperformanceofthesupplier.

OthercountrieswhichmadecompetingtoughforBritishcompanieswereSouthKoreaandIndia.

RecommendationsfortheBritishGovernmentBritish Government leadership in anti-corruption is well recognized and appreciated. There was also anawareness that DFID and the FCO are already doing a lot on anti-corruption in thesemarkets, although therespondents were not aware of precisely what was being done or what had been achieved. It is thereforepossible that some of the recommendations already match policies and aid programs that the British

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Government is already funding. In that case there may be a case for stronger public information andcommunicationaboutexistingaidprogramsthattouchuponanti-corruptionandOCPrinciples.

There was some doubt as to British anti-corruption programs effectiveness in these countries. A shortcomparison of DFID’s 28 priority countries anti-corruption plans of 2011 and their relative position on TI’sCorruptionPerceptionsIndexin2011and2015showsverylittledemonstrableprogress.

Therespondentsfeltthatafocusonsomeparticularareasoftheanti-corruptionagendawhichcouldalsohelpBritish companieshaveabetter chanceof competing,wouldbeauseful contribution toeconomicand socialdevelopment. There was a strong consensus that a sensible place to focus would be on improving publicprocurement.Anyprogramthat“puttheOpenContractingPrinciplesintopractice”inthesemarketswasseenasagoodidea.

Someoftherecommendationssharedbycompaniesinterviewedforthisreportareprovidedbelowandrelateto the general categoriesof support for improvingprocurementpracticeswithinWestAfrica and support forBritishcompaniestoengageintheseeconomies.

SupportingProcurementPracticesinWestAfrica

1) Investintechnologiestosupporttransparencyandopennessintheprocurementprocess,includinge-procurement: It is clear that all five countries need further investment and technical assistance insettingupfullyelectronicprocurementsystems.Againtherecouldbeexchangesonaregionalbasis.Itwas pointed out that this does not need necessarily to be a national level program. There are goodreasonstostartinoneortwomunicipalitiesandthenspreadtheexperiencelocallythroughprofessionalchannels. For our respondents, a particularly important area connected with technology and e-procurementwas transparencyandopennessof theentireprocurementprocess– theywould like toseearealeffortbytheBritishandhostgovernmentstobuildtransparencyintothesystemandtodesigncorruption out of it. The British Government, in their opinion, could play an instrumental role bysupportingarapidtransitiontowardse-procurementandprocurementtransparency.

2) Build capacity and sharepublic procurement best practices fromother countries: TheWorld Bank’sBPPrevealswhichcountrieshavestrongpublicprocurementpracticeswhichcanbeshared.Indeedthiscanbe sharedona regional andan internationalbasis. International financial institutions suchas theWorld Bank, EBRD or African Development Bank, international development organizations such DFIDandUSAID,andglobalmultinationalshaverigorousprocurementprocesseswhichcouldbesharedwiththeprocurementagenciesofthesecountriesaspartofatechnicalassistanceprogram.

3) Supportinitiativestounderstandtheownershipstructureoflocalcompanies:Byallaccounts,conflictsof interest are very frequent. Thebeneficialownership registerbeing setup in theUK is amodel forother countries. The UK Government could actively promote policies to accelerate the adoption ofbeneficialownershipprinciplesandcouldfundprojectstobuildcapacityoflocalorganizationstosetupappropriate systems. During the recent Open Government Partnership summit in France, Nigeriacommitted to establishing a Beneficial Ownership registry. FCO should consider providing support tosuchefforts.

4) Build capacity of SMEs in West African countries: SMEs are very vulnerable to corruption anduncompetitivepractices.ResearchforthisprojectshowsthatSMEsinsomecountriesviewinternationalcompaniesasa threat to theirmarketstatus,when, in fact,adherencetoOpenContractingPrincipleshaspotentialtoincreaseeconomicopportunitiesforbothSMEsandinternationalcompaniesbyroutingout corrupt andunfair practices.Developmentor Prosperity projects could focusonhelping thehost

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governments to open public procurement to participation by more SMEs, build capacity of SMEs toparticipate in public tenders, and generally to provide training for SMEs in basic compliance andresponsible business techniques, including how to resist corruption. Thiswould enhance competitionanddrivegrowth,aswellasimprovetheriskprofileofinternationalcompanies’supplychains.

5) Linkanti-corruption,tradeanddevelopmentandengagebusiness inaid:Manyrespondentsfelt thatcoordinationbetweenFCO,DFIDandDITaroundtheissueofcorruptionwasquiteweak.Theystronglyrecommendedanewapproach,withcompaniesdirectlyengagedintheprocess.Manyrespondentsfeltthatanydevelopmentassistancegoingintoacountryshouldhaveananti-corruptioncapacitybuildingcomponent.Theyalsofeltthatfuturedevelopmentassistancecouldsomehowbemadeconditionalondemonstrableprogressontacklingcorruption.

6) Strengthen governance and law enforcement: From the beginning of the complaints procedure to asuspension, penalty or punishment, it takes years for a case to move through to completion (if thecomplaint is followeduponatall).Capacity-buildingandtrainingofprosecutorsandjudgesaswellasinternal auditors and investigators could be useful contribution to speeding up the process. Onerespondent suggestedprioritizing theuseofProsperity Fundsona)publicprocurementprocesses; b)nationalbudget formationprocess;andc)accountability framework.Anothersuggestedenhancementofwhistleblowerprotection.

SupportforBritishCompaniestoEngageinWestAfricanEconomies

7) Support promotion of British companies in West African markets: One approach - the “directapproach” is toreplicatethemore forceful tradepromotionof theFrenchandGermans. It ispossiblethatastheUKdepartsfromtheEU,therewillbelessconstraintsonthegovernmenttosupportingitscompanies in thesecountries (althoughEUmembershipnever seems tohaveconstrainedFrenchandGermancompetitiveenergies).Anotherapproach–the“indirectapproach”–wouldbetoassistBritishfirms in developing consortia with Chinese, Indian and South Korea construction and infrastructurecompaniestocompetetogetherinWestAfricaprojects.GiventhatUKcompaniesareunlikelytobeabletocompetedirectlyinpublictendersinthesemarketsintheforeseeablefuture,abetterstrategymightbe to develop a more strategic approach by partnering with companies from the emerging G20countrieswhichareactiveinlowincomeandlow-middleincomeeconomies.

8) SupportBritishcompaniesindealingwithcorruptionrisk:Whilethecompaniesweinterviewedwereallexperiencedinthesemarkets,newentrantswillfinditdifficulttomanagecorruptionrisk,especiallyifthey are inexperienced in developing countries. Respondents recommended stronger anti-corruptionsupport service. One idea is to create a network of Anti-Corruption Experts in British Embassies,Chambers of Commerce and local pro-business anti-corruption NGOs to offer advice to Britishcompanies.

9) Leveragethepoweroftheprivatesectorindevelopmentprojects:CompaniesdonotexpecttheBritishGovernment to go it alone, and aremore thanwilling tomake their own contribution of time “pro-bono”astheirownCSRcontributiontothedevelopmentoflocalmarkets,alevelplayingfieldandruleoflaw.Infact,therewasageneralsentimentthat,despitealltherecenttalkinDFIDofconnectingtradeand aid, there was very little engagement of British companies in finding solutions to corruption indeveloping markets. Certainly the UK companies we spoke with felt quite disengaged and felt thatsometimestheBritishGovernmentwasexpendingalotofenergy,resourceandfundsinthisareawithlittlebeneficialresult.Examplesofwherecompaniescouldsupportgovernmenteffortsincluded:

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a. Aprofessionalservicefirmsofferedtoconductpublictenderreviewsasathird-partyindependentorganization.

b. Aprojectmanagementfirmofferedtoactonbehalfofthehostgovernmentasasupervisorofthesupplier’scompliance

c. Anumberofcompaniesofferedtosharetheirrigorousprocurementprocesseswithgovernmentsd. ExperiencedBritish companies could share their experienceof corruption riskmanagementwith

newentrantsintothesemarkets.Thesecouldbetreatedaspilotprojects,whichcouldbegivensomemodestseedfundingbyDFIDortheProsperityFund.

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Appendixi–OpenContractingPrinciplesOpenContractingGlobalPrinciples3

Preamble

ThesePrinciplesreflectthebeliefthatincreaseddisclosureandparticipationinpubliccontractingwillhavetheeffects of making contracting more competitive and fair, improving contract performance, and securingdevelopmentoutcomes.While recognizing that legitimateneeds for confidentialitymay justify exemptions inexceptional circumstances, these Principles are intended to guide governments and other stakeholders toaffirmatively disclose documents and information related to public contracting in a manner that enablesmeaningfulunderstanding,effectivemonitoring,efficientperformance,andaccountabilityforoutcomes.ThesePrinciples are to be adapted to sector-specific and local contexts and are complementary to sector-basedtransparencyinitiativesandglobalopengovernmentmovements.

AffirmativeDisclosure

1. Governments shall recognize the right of the public to access information related to the formation,award,execution,performance,andcompletionofpubliccontracts.

2. Public contracting shall be conducted in a transparent and equitable manner, in accordance withpublicly disclosed rules that explain the functioning of the process, including policies regardingdisclosure.

3. Governmentsshallrequirethetimely,current,androutinepublicationofenoughinformationabouttheformation, award, execution, performance, and completion of public contracts to enable the public,including media and civil society, to understand and monitor as a safeguard against inefficient,ineffective,orcorruptuseofpublicresources.Thiswouldrequireaffirmativedisclosureof:

1. Contracts, including licenses, concessions, permits, grants or any other document exchangingpublicgoods,assets,orresources(includingallannexes,schedulesanddocumentsincorporatedbyreference)andanyamendmentsthereto;

2. Relatedpre-studies,biddocuments,performanceevaluations,guarantees,andauditingreports.

3. Informationconcerningcontractformation,including:

1. Theplanningprocessoftheprocurement;

2. Themethodofprocurementorawardandthejustificationthereof;

3. Thescopeandspecificationsforeachcontract;

4. Thecriteriaforevaluationandselection;

5. The bidders or participants in the process, their validation documents, and anyproceduralexemptionsforwhichtheyqualify;

3OpenContractingGlobalPrinciplesonwebsiteofOpenContractingPartnership.http://www.open-contracting.org/get-started/global-principles/

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6. Anyconflictsofinterestuncoveredordebarmentsissued;

7. Theresultsoftheevaluation,includingthejustificationfortheaward;and

8. The identity of the contract recipient and any statements of beneficial ownershipprovided;

4. Information related toperformanceand completionofpublic contracts, including informationregardingsubcontractingarrangements,suchas:

1. Generalschedules,includingmajormilestonesinexecution,andanychangesthereto;

2. Statusofimplementationagainstmilestones;

3. Datesandamountsofstagepaymentsmadeorreceived(againsttotalamount)andthesourceofthosepayments;

4. Servicedeliveryandpricing;

5. Arrangementsforendingcontracts;

6. Finalsettlementsandresponsibilities;

7. Riskassessments,includingenvironmentalandsocialimpactassessments;

8. Assessmentsofassetsandliabilitiesofgovernmentrelatedtothecontract;

9. Provisions inplace to ensure appropriatemanagementof ongoing risks and liabilities;and

10. Appropriate financial information regarding revenues and expenditures, such as timeandcostoverruns,ifany.

4. Governmentsshalldevelopsystemstocollect,manage,simplifyandpublishcontractingdataregardingthe formation, award, execution, performance and completion of public contracts in an open andstructuredformat,inaccordancewiththeOpenContractingDataStandardsastheyaredeveloped,inauser-friendlyandsearchablemanner.

5. Contracting information made available to the public shall be as complete as possible, with anyexceptions or limitations narrowly defined by law, ensuring that citizens have effective access torecourseininstanceswhereaccesstothisinformationisindispute.

6. Contracting parties, including international financial institutions, shall support disclosure in futurecontracting by precluding confidentiality clauses, drafting confidentiality narrowly to cover onlypermissible limitedexemptions,or includingprovisionswithinthecontractual termsandconditionstoallowforthecontractandrelatedinformationtobepublished.

Participation,Monitoring,andOversight

1. Governments shall recognize the right of the public to participate in the oversight of the formation,award,execution,performance,andcompletionofpubliccontracts.

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2. Governments shall foster an enabling environment, which may include legislation, that recognizes,promotes, protects, and creates opportunities for public consultation and monitoring of publiccontracting,fromtheplanningstagetothecompletionofcontractualobligations.

3. Governmentsshallworktogetherwiththeprivatesector,donors,andcivilsocietytobuildthecapacitiesof all relevant stakeholders to understand, monitor and improve public contracting and to createsustainablefundingmechanismstosupportparticipatorypubliccontracting.

4. Governmentshaveadutytoensureoversightauthorities,includingparliaments,auditinstitutions,andimplementingagencies, toaccessandutilizedisclosed information, acknowledgeandactuponcitizenfeedback, and encourage dialogue and consultations between contracting parties and civil societyorganizationsinordertoimprovethequalityofcontractingoutcomes.

5. Withregardto individualcontractsofsignificant impact,contractingpartiesshouldcraftstrategies forcitizenconsultationandengagementinthemanagementofthecontract.

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AppendixII-Corruptionperceptionsinfivecountries

BenchmarkingPublicProcurement2017

BenchmarkingPublicProcurement20174

4BenchmarkingPublicProcurement2017,WorldBankGroup.http://bpp.worldbank.org/reports

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TransparencyInternationalCorruptionPerceptionsIndex2015

TICPI20155

Ghana:56 Senegal:61 Liberia:83 Nigeria:136 Guinea:139

5 Transparency International Corruption Perceptions Index 2015, http://www.transparency.org/cpi2015#downloads

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IbrahimIndexofAfricanGovernance2011-2015

IbrahimIndexofAfricanGovernance6

BusinessEnvironment

2011 2012 2013 2014 2015 Trend

Ghana 57.2 54.9 57.5 52.9 52.1 -5.1

Guinea 31.3 31.8 32.8 28.7 31.3 0.0

Liberia 37.0 37.2 36.0 39.4 38.2 +1.2

Nigeria 31.8 33.0 32.3 34.2 35.3 +3.5

Senegal 49.5 52.7 52.9 51.1 51.3 +1.8

OverallGovernance

2011 2012 2013 2014 2015 Trend

Ghana 68.0 67.5 67.0 64.7 63.9 -4.1

Guinea 43.7 44.1 44.0 43.7 43.3 -0.4

Liberia 49.3 50.0 49.0 49.3 50.0 +0.7

Nigeria 44.2 44.2 44.7 43.5 46.5 +2.3

Senegal 56.4 58.3 60.3 61.0 60.8 +4.

6IbrahimIndexofAfricanGovernance.http://iiag.online/

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PublicsectorAccountabilityandTransparency

2011 2012 2013 2014 2015 Trend

Ghana 86.6 86.6 86.6 79.5 79.5 -7.1

Guinea 39.3 39.3 46.4 46.4 46.4 +7.1

Liberia 72.3 70.2 64.0 64.0 64.0 -8.3

Nigeria 53.6 59.8 57.7 55.7 57.7 +4.1

Senegal 67.0 71.1 71.1 71.1 73.2 +6.2

CorruptioninGovernmentandPublicOfficials

2011 2012 2013 2014 2015 Trend

Ghana 60.0 60.0 60.0 60.0 60.0 0.0

Guinea 0.0 0.0 0.0 0.0 0.0 0.0

Liberia 40.0 40.0 20.0 20.0 20.0 -20.0

Nigeria 0.0 0.0 0.0 0.0 10.0 +10.0

Senegal 40.0 40.0 40.0 55.0 60.0 +20.0

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CorruptionandBureaucracy

2011 2012 2013 2014 2015 Trend

Ghana 71.4 71.4 71.4 38.1 38.1 -33.3

Guinea 28.6 28.6 28.6 19.0 19.0 -9.6

Liberia 42.9 42.9 42.9 19.0 19.0 -23.9

Nigeria 28.6 28.6 28.6 19.0 19.0 -9.6

Senegal 42.9 42.9 42.9 57.1 57.1 +14.2

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BertelsmannTransformationIndex2016

BertelsmannTransformationIndex20167

7 Bertelsmann Transformation Index 2016, http://www.bti-project.org/en/home/

25

26

27

WorldBankEnterpriseSurvey2008-2016

WorldBankEnterpriseSurvey8

8 World Bank Enterprise Survey. https://www.enterprisesurveys.org/

28

TraceMatrix2016

TraceMatrix20169

9 Trace Matrix Report. http://www.traceinternational.org/trace-matrix

29

30

31

32

33

34

WorldBankEaseofDoingBusiness2017

WorldBankEaseofDoingBusiness201710

10 World Bank, Ease of Doing Business Index 2017, http://www.doingbusiness.org/rankings

35

36

37

WorldwideGovernanceIndicators-ControlofCorruption2010-2015

WorldwideGovernanceIndicators–ControlofCorruption11

2011 2011 2013 2013 2015 2015

Country/TerritoryWBCode

Estimate Rank

Estimate Rank

Estimate Rank

GHANA GHA 0.04 59.24 -0.07 56.87 -0.18 53.37

GUINEA GIN -1.11 11.85 -1.04 14.22 -0.97 15.38

LIBERIA LBR -0.62 30.33 -0.68 27.01 -0.61 31.25

NIGERIA NGA -1.13 10.43 -1.21 9.00 -1.10 11.06

SENEGAL SEN -0.53 36.49 -0.25 50.71 0.03 59.13

Estimate: Estimate of governance (ranges from approximately -2.5 (weak) to 2.5 (strong) governanceperformance)

Rank: Percentilerankamongallcountries(rangesfrom0(lowest)to100(highest)rank)

11 World Bank Worldwide Governance Indicators 2017, http://data.worldbank.org/data-catalog/worldwide-governance-indicators