Issues of corruption are hitting the headlines locally and there has been an increase in the number of cases before the courts on the same matter. Most, if not all, of the media reports and court cases on corruption hover around procurement and to be more specific, it is public procurement.
In that regard, prevalence of corruption is the major motivator of reforms by development partners using governance structures to manage it. The problem is not limited to Zimbabwe alone; it is a worldwide encounter that affects both the developed and developing countries.
It must be noted that procurement is not the source of corruption. Procurement only presents an opportunity for corruption. The procurement activities can then enable proliferation of the corruption cancer.
Procurement activities are the easiest measures of the degree of propensity of corruption. It is important to mention at this point that corruption is not necessarily promoted by procurement activities but there is an opportunity for corruption in procurement.
Controls are not the effective corruption remedy. The more controls the more desire to circumvent the controls the more corruption sprouts. Empirical evidence reveal that where decisions are made is in most cases is the source of corruption in procurement.
There is also a strong relationship between the state of the economy and politics where another strong relationship between procurement and politics exists. Public procurement has been used in many countries to fund political activities. Governments have been toppled using public procurement contract awards in many countries.
The economics “agency problem” is the major source of procurement corruption. The interest of the elected politicians and appointed administrators, the bureaucracy differ in most instances. The issue of political alignment of the administrators is pertinent.
Why interests differ is mainly because of information asymmetry. In this case, the agents who are the administrators are closer to the action whereas the policy maker, the politicians are far from it.
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The agent drives the procurement process and understands the procurement technicalities, the elements and information necessary to make a procurement decision. In this case, the agent is more powerful than their employer because of the information power.
The power comes from the information held by the agents that they can abuse; they use it in their best interest at the detriment of the policy maker who is far away from the action.
Transparency has been rated the main catalyst to manage information asymmetry in procurement. Effective reporting is necessary to keep the policy makers and other oversight bodies in the loop as to the rational of the procurement decisions.
What is reported thereby influences the extent of the information asymmetry. Transparency principles therefore need to be rooted in the procurement regulations. Transparency is critical because it reduces the abuse of discretion by the agents.
The agent-principal relationship extends from the macro to the micro level.
As much as procurement activities are delegated to the bureaucracy at a national level, procurement is also delegated in organisations. Control of elements of the business such as costs relates to the control of the agent – principal relationship and the principal – agent relationship at the end of the day affects the quality of procurement decisions.
E-procurement has been identified as one of the effective tools for managing corruption because of the capacity of neutralise the information asymmetry between the agent and the principal.
lNyasha Chizu is a fellow of the Chartered Institute of Procurement and Supply writing in his personal capacity: Feedback: [email protected], Skype: nyasha.chizu
