The Self-Cleaning Dilemma: Reconciling Competing Objectives of Procurement Processes

Article excerpt

Abstract

The U.S. and the World Bank1 sanctions systems seek to ensure that firms and individuals conduct their work with integrity and that they comply with rules and regulations governing public procurement. The sanctions systems rely on the use of deterrence, which is most often achieved through debarment or exclusion of non-compliant contractors. However, in recent years, scholars introduced a self-cleaning theory, which proposes that firms and individuals should be allowed to regain the possibility of participation in public contracts if they have taken effec- tive measures to ensure that wrongful acts will not recur in the future.

The proponents of the self-cleaning theory argue that this will improve integrity, that contractors have a fundamental right to public contracts, and that it will increase competition. The application of the self-clean- ing theory to the U.S. and the World Bank sanctions systems illustrates that self-cleaning itself may not improve integrity due to lack of deter- rence, and that there is no fundamental right to public contracts, but that using self-cleaning instead of debarment increases competition. Since both integrity and competition are important objectives, there is a need to reconcile the existing tension.

The application of the self-cleaning theory to the U.S. and the World Bank sanctions systems demonstrates that it is possible to improve integ- rity and, at the same time, increase competition. These competing objec- tives may be achieved through designing a sensible sanctions framework, which takes into account a more flexible approach towards debarment and maintains deterrence, through restitution and other means.

I. Introduction

In public procurement, sanctions systems seek to ensure integ- rity. The objective is to ensure that firms and individuals that con- duct public work are not corrupt and that they meet their commitments to the public.2

The sanctions systems of both the United States and the World Bank have developed various mechanisms to address wrongdoing by non-compliant firms and individuals. Both sanctions systems, however, continue to rely on debarment as a key mechanism to deal with non-compliant contractors. Debarment allows the U.S. government and the World Bank to exclude firms and individuals from participating in public procurement. In addition to exclud- ing non-compliant firms and individuals, the threat of debarment as well as the impact of negative publicity deters contractors from committing wrongdoing.

In a recent work, Professor Sue Arrowsmith and her colleagues addressed a new self-cleaning theory and suggested that debarment may not be the best way to promote integrity.3 She argues that if contractors adopt certain rehabilitative or self-cleaning measures they must be allowed to participate in public procurement and avoid debarment.4 Professor Arrowsmith and proponents of the self-cleaning theory believe that this incentive-based approach will lead to a more sustainable fight against misconduct and in the long term will promote integrity better than a system based merely on deterrence and debarment.5

In addition to improving integrity, Professor Arrowsmith argues that the self-cleaning theory will increase competition.6 If sanction- ing authorities do not debar contractors but instead require them to undergo self-cleaning, the procurement systems will have a big- ger pool of competitors, which increases competition.

The self-cleaning theory, however, illustrates that procurement systems often face competing objectives.7 For example, debarment may improve integrity, but at the same time it may decrease compe- tition. The application of the self-cleaning theory to actual sanc- tions systems suggests, however, that the seemingly competing objectives of integrity and competition do not have to be mutually exclusive.

This Article will first examine the self-cleaning theory, how it is defined, what the self-cleaning measures are, and what the under- lining reasons are for adopting rehabilitative measures to avoid debarment. …