Abstract
This paper presents the results of Work Package (WP) no. 10 of project Mechanisms for Assessing the Risk of Crime (MARC) consisting of a pilot study to test the Crime Risk Assessment Mechanism (CRAM) on European Union (EU) public procurement legislation. The research scope was restricted to Directive 2004/18/EC adopted by the European Parliament and the Council on 31 March 2004, which consolidates the previous directives in the same field. To this end, the research partners involved realised a survey of the literature, case study analysis and interviews, which highlighted the opportunities for economic/financial/organised crime inherent in specific items of EU public procurement legislation. Based on these inputs and sources, the researchers applied the CRAM to Directive 18/2004/EC and then developed a set of recommendations for better implementation of the methodology created in Project MARC. The exercise revealed some methodological difficulties with reference to the application of the CRAM in the pilot study. In particular, the following problematic aspects were revealed: the delta assessment (i.e. measurement of the differential in crime risk between the new and the old EU directives on procurement); the computational issues of the MARC formula (namely: elaboration of a synthetic Legislative Quality Index (LQI) and Market Vulnerability Index (MVI); reading LQI and MVI indicators not as separate entities but as linked together; risk that the same negative aspect of a legislative act may be double-counted under different indicators); the overlap between the MVI grids; and the content and wording of individual LQI/MVI indicators. The article concludes with a list of suggestions on how to repair these methodological shortcomings of the CRAM.
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Notes
In the context of this pilot study, the term “old directives” refers to Directives 92/50/EEC, 93/36/EEC and 93/37/EEC (concerning public service contracts, public supply contracts and public works contracts, respectively) as amended by European Parliament and Council Directive 97/52/EC.
The survey by Cardiff University also contains an overview of the new directive and a comparison with old directives in the field of EU public procurement. This WP10 also benefited from the work of HEUNI, which conducted a survey of public procurement practices in three EU member states (Denmark, Finland and Estonia).
In this regard, however, it should be made clear that the final decision on whether and how to intervene in this sector rests with the policy makers, also considering the other non-criminological aspects of the impact assessment.
See Savona on Initial Methodology in this issue.
Although the MARC Research Consortium has put forward various proposals for measuring Seriousness, no consensus has yet been reached on this element in the CRAM. It is consequently not possible to apply it in the context of a pilot study.
This happens when the nature and the function of the two acts are not sufficiently similar for easy comparison to be made (e.g. a draft Regulation and a Recommendation) or when the two acts address different matters. See the minutes of the MARC Consortium meeting of 27–28 October 2005, available at the MARC Web site: marc.unicatt.it.
See minutes of the meeting of 7 July 2005, available at the MARC Web site: marc.unicatt.it. It should be noted that consensus on the exact formulation of the individual indicators and on the quantification mechanism has not yet been achieved among the research partners.
See Savona, Curtol, Martocchia, Nicola, Regulation of Offshore Banking Services and Financial Entities, in this issue.
Compare, for instance, the difference between the internal structures of Directives 93/36/EEC and 93/37/EEC (on the award of public supply contracts and public works contracts, respectively) and that of Directive 92/50/EEC (on the award of public services).
The impact of this indicator on crime is dubious, however, and relying on it to predict possible crime has even been judged unwise. It could be argued that clarity is better achieved by a long and detailed definition than by a brief and cryptic one, which may be less precise and create margins for different and contrasting interpretations. This point will be resumed later in the final recommendations for improving the MARC methodology.
See Bovis 2005.
Only Denmark has established a monitoring system on bidders, the Serviceattest (Service Certificate), according to which a bidder is obliged to report a previous sentence when submitting the tender. This system also allows the public body in charge of the process to request relevant information from the National Crime Register kept by the Danish Ministry of Justice.
The overlapping of some indicators among the different categories of crime and their formulations is one of the methodological weaknesses that will be discussed in the final section of this pilot study, which deals with the difficulties encountered in applying the CRAM and makes recommendations on how to improve the MARC methodology.
For a more detailed explanation of the MVI components, see Savona, Curtol, Martocchia, Di Nicola, Regulation of Offshore Banking Services and Financial Entities, in this issue.
With regard to defence procurement, a proposal for a new directive is currently under scrutiny. Specific crime risk assessment in this field has thus been postponed until this new piece of legislation enters into force.
Another provision indirectly increasing the costs, because it imposes a stricter regime of social and environmental protection, is art. 23.3.b (establishing social and environmental protection among the technical specifications to be included in the contract).
These types of crimes are defined with reference to the following EU legislative texts and provisions: Art. 2(1) of Council Joint Action 98/733/JHA (defining participation in a criminal organisation), art. 3 of the Council Act of 26 May 1997 and art. 3(1) of Council Joint Action 98/742/JHA (defining corruption), art. 1 of the Convention relating to the protection of the financial interests of the European Communities (defining fraud), and art. 1 of Council Directive 91/308/EEC of 10 June 1991 on prevention of the use of the financial system for the purpose of money laundering (defining money laundering).
As pointed out by Cardiff University, however, the Advocate General in European Court of Justice (ECJ) Joined Cases C-226/04 and C-228/04 made clear that the purpose of checks on whether a tenderer has fulfilled this obligation is “to guarantee the reliability of tenderers”, not to detect possible criminal infiltration in tendering procedures.
Under the old directives (see art. 24, dir. 93/37/EEC, art. 29 dir. 92/50/EEC, art. 20 dir. 93/36/EC), exclusion in these cases was not compulsory, only optional.
Although it might be argued that the lack of implementing procedures regarding traceability and the loose provisions on subcontracting are due to the poor quality of the law, it was decided to consider them in the context of vulnerability because they appear to concern this area more directly. This decision will be discussed in the final section on the difficulties encountered in applying the MARC methodology.
Art. 45 para. 1, last part, dir.) reads “the contracting authorities [...] may, where they have doubts concerning the personal situation of such candidates or tenderers, also apply to the competent authorities to obtain any information they consider necessary on the personal situation of the candidates or tenderers concerned” (italics from the authors).
The problem of implementation is particularly evident in Italy (see Greco in Garofoli & Sandulli, 2005, 575–611). With the entry into force of Presidential Decree 45/2000 (D.P.R. 28 December 2000 no. 45), substitute documents certifying the “good conduct” of an enterprise/director can be used instead of official documents issued by competent authorities. Moreover, the “good conduct” certificate obtained by a private person from the judicial authorities does not include all the information required by the directive: specifically, it does not include plea bargaining sentences and other convictions for which the “not mention benefit” (foreseen by art. 175 Italian code of criminal procedure) can be given. According to the European directive, these type of convictions are, instead, relevant to the exclusion criteria ex art. 45, para 1, dir., but, because of the loose implementation provisions cited above, contracting authorities can only obtain the necessary evidence through self-certification or if they conduct active checks on them (which is not required under the present directive).
On the opportunity of establishing an EU-wide database of excluded companies across member states to be held and maintained (including regular updating and deleting) by Eurojust, see Corner House (2005: 10). This central system would also be a remedy for possible practical difficulties related to language and the speed of obtaining information on tenderers by contracting authorities.
In view of this loophole, the results of the HEUNI survey on three member states are not surprising. See note 12 for further details on the failure to implement the provisions contained in art. 45, para.4, dir.
Although this crime might be considered under the optional excluding grounds established in art. 45, para. 3, dir.
The World Bank’s Listing of Ineligible Firms, for instance, provides thus for exclusion: “in the case of a debarred firm, ineligibility extends to any firm or individual which directly or indirectly controls the debarred firm or any firm which the debarred firm directly or indirectly controls. In the case of a debarred individual, ineligibility extends to any firm which the debarred individual directly or indirectly controls”. See http://web.worldbank.org/external/default/main?theSitePK=84266&contentMDK=64069844&menuPK=116730&pagePK=64148989&piPK=64148984.
Compare the numerous studies on the use of subcontracting by mafia organisations cited in Zgagliardich, 1996.
Cases: Holst Italia (December 1999, C-176/98); Ballast Nedam Groep (14 April 1994, C-389/92); Ballast Nedam Groep II (18 December 1997, C-5/97).
In Italy, in view of long-standing criminal infiltration of the procurement sector (see footnote 27), there have been legal provisions dealing with this problem since 1982 (art. 21, Law 13 September 1982, so-called Rognoni-La Torre, on organised crime). Certifications of “good conduct” are required not only from the contractor but also from any subcontractors. Law 19 March 1990 no. 55 (so-called Rognoni-La Torre bis) strengthened the system of controls on these provisions.
Contract award criteria are still: (a) the lowest price or (b) the tender most economically advantageous from the point of view of the contracting authority (taking account of various criteria such as quality, price, technical merit, aesthetic characteristics, etc.).
As underlined by Dorn-Levi’s survey, however, the electronic handling involved in electronic auctions and dynamic purchasing systems may introduce other types of crime risk related to cyber hacking into online systems to obtain confidential or competitor information. The directive should have taken note of this risk and of the necessity that contracting authorities ensure security and privacy should have been provided in the context of this directive.
On the opacity of the new procedures, see Bovis C., op. cit., p. 629.
These indicators partially correspond to MVI money laundering indicator nos. 8, 9 and 10 and MVI corruption indicator nos. 12 and 13.
In particular, control measures have been established in the following provisions: art. 49 (quality assurance standards), art. 50 (environmental management standards) and art. 55 (social protections and respect of working conditions standards).
IMPORTANT NOTE: In order to avoid possible misunderstandings in the interpretation of the following tables, it should be clear that a positive score (++, +) in the LQI indicators reflects the presence of a problem in the quality of law. Vice versa, a negative score (−, −) in the LQI indicators means that the new directive is, respectively, greatly decreasing or decreasing the LCRI, thus reducing the probability that the new legislation will produce crime.
References
Bovis, C. (2005). The new public procurement regime of the European Union: A critical analysis of policy, law and jurisprudence. European Law Review, 30, 607–630, October.
Corner House. (2005). Still serious loopholes in ECGD’s anti-corruption procedures. Sturminster Newton, 10, Devon: The Corner House, October.
European Commission. (2005). Commission staff working paper report on the public consultation on the Green Paper on Public-Private Partnerships and Community Law on Public Works and Concessions. Brussels, 3.5.2005.
Greco in Garofoli, R., & Sandulli, M. A. (2005). Il nuovo diritto degli appalti pubblici (pp. 575–611). Milano: Giuffrè.
Zgagliardich, G. (1996). Subappalto e leggi antimafia nei lavori pubblici (pp. 1–11). Milano: Giuffrè.
Acknowledgements
Substantial input to this paper was made by the University of Cardiff (UK), which provided the Università Cattolica del Sacro Cuore, and Ghent University, with an annotated bibliography of all sources, including grey literature and press reports, and a survey/sub-study that served to specify the criminal opportunities created by past and current EU public procurement legislation.
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Curtol, F., Pesarin, G. & Vander Beken, T. Testing the Mechanism on EU Public Procurement Legislation. Eur J Crim Policy Res 12, 337–364 (2006). https://doi.org/10.1007/s10610-006-9029-9
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DOI: https://doi.org/10.1007/s10610-006-9029-9