WIXLIB

8Scenario 1In a bidding round, the terms of reference (includingtechnical specifications) are biased to favour onesupplier or to exclude potential competitorsThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.Description: Your company is preparingto submit a bid for the supply of telecommunications equipment to a state-ownedcompany. You are an experienced supplierof such equipment and know that several ofyour competitors are planning to submit bidsas well. While studying the tender documents, you notice that they include specifications that only the equipment of one of yourless-experienced competitors meets. You aresurprised because these specifications haveno impact on performance of the equipment;in fact, your technical experts consider thesespecifications outdated and that your equipment, and that of most of the other competitors, outperforms any equipment meeting therequired specifications. Some days later, youare approached by a person who suggests thatthe tender documents could be changed inyour favour in exchange for a payment.1) Demand prevention: How to reduce theprobability of the demand being made? Engage in a dialogue with the procurement agency to improve procedures in thefollowing areas: Get agreement from the procurementagency on the appointment of an independent consultant (individual, companyor international organization such as theWorld Bank) to supervise the entire bidding process Request a pre-qualification round toexclude bidders lacking technical and financial delivery capacity (either throughtheir own organization or through relevant contractors) Request a meeting with the procurementagency to better explain technical aspectsof your product or services Suggest publishing the terms of referencewidely Should the procurement agency relyon a technical expert, request that theprocurement agency disclose links andbusiness dealings of this expert with anyof the bidders Check and, if applicable, challenge (legallyand/or publicly) the qualifications of themembers of the body defining the terms ofreference Check if there are any specific relationsbetween the company whose equipmentfits the specifications and the procurementagency (or its directors or officers) Have the terms of reference reviewed bya qualified third party (such as an expert,civil society or employers’ organization) Engage with the procurement agency to discuss the results of the review of the termsof reference and explain your technicalspecifications Suggest to other companies bidding withyou to collectively address the procurementagency Challenge the terms of reference publiclyand/ or by reference to local laws or applicable procurement rules Approach the industry association ortrade association that provides technicalspecifications for your industry to ensurethat guidance for specifications is genericenough to allow all companies to bid andthat the specifications are up to standard2) Response to a bribery demand: How toreact if the demand is made? Reject the demand Keep a detailed record of the circumstancesof the bribe demand made Inform a relevant representative of yourclient that you have been approached withsuch a suggestion and report the demander

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10Scenario 2Intermediary offers company to win bidding uponpayment of loser’s fee during pre-bidding or bidding stageThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.Description: Companies A and B havebeen pre-qualified by a ministry to bid forthe supply of an infrastructure project. Anintermediary allegedly close to the ministryapproaches both bidders with the followingproposal: should company A win the project,it would contribute to a “loser’s fee” payableto the intermediary; if company B accepts tolose, it would receive adequate compensationfor the bid preparation.1) Demand prevention: How to reduce theprobability of the demand being made? Review likelihood that intermediaries willattempt to become involved in the contractnegotiations Engage in a dialogue with the procurement agency to improve procedures in thefollowing area: agree with procurementagency that no intermediaries can beadded to the process after bid submission Be aware that a donation or a subcontractrequested by the intermediary from company A could be a channel for the paymentof a loser’s fee to company B.2) Response to a bribery demand: How toreact if the demand is made? Solicited employees should immediatelystop discussions with the intermediary onthe grounds that the loser’s fee falls outside the scope of the bidding process, thuscould derail it Request from the intermediary a proposal inwriting to test the legitimacy of the demand Report to the ministry about the demandmade by the intermediary who claims toact on behalf of the ministry Refuse to engage intermediaries that havenot been selected prior to bid submission Challenge the merits of the loser’s fee thatcould increase the contract price to thedetriment of the government budget ornegatively impact the profitability of theproject to the detriment of the company’sinterestsExplain to the intermediary/procurementagency that the proposed scheme couldexpose all the parties (individual or company) to a prosecution risk not only in thecountry where the deal occurs but also incountries that ratified the OECD or relatedUN Conventions fighting corruption ormoney launderingRefuse payment on the grounds that suchloser’s fee violates the business principlesof your company and may violate applicable laws, more specifically, competitionlaws in your country and/or the host country of investment and procurement regulations in the host country, e.g. bid-riggingSolicited company should inform the othercompany of its refusal to accept the bidrigging scheme

11Scenario 3Bribe solicitation for confidential information duringpre-bidding or bidding stageDescription: You are running an overseasfield office for a multinational company andstill need a big deal to reach the annual salestarget. You are preparing the bid for a bigcontract that you are eager to win. A consultant who is close to the customer approachesyou and offers to reveal the evaluation criteria and provide you with information on bidsalready submitted by some of your competitors against the payment of a fee.1) Demand prevention: How to reduce theprobability of the demand being made? Establish effective, clearly communicatedpolicies for employees involved in the bidding process: Identify and openly addressincentives to pay bribes, especially towardsthe end of the year Identify and openly address incentives topay bribes, especially towards the end ofthe year Train employees on standard biddingprocedures and rules of interaction withagents and other intermediaries Consider incentives to report briberydemands Perform due diligence on agents, consultants and other intermediaries involved inbids: Awareness of “red flags”, as theseparties are often used to pay bribes toextortionists Eliminate any intermediaries that arenonessential to the bid, ask to prove need Maximize opportunities for detection byemploying additional control procedures todetect bribes: Reviews of heightened risk payments toagents/consultants/advisers used in thebidding process Implement regular, independent internal monitoring function that reports toa senior executive on heightened riskpayments to agents/consultants or to financial institutions outside of the projectlocation Avoid putting financial information in yourbid until the last minute to avoid leaks2) Response to a bribery demand: How toreact if the demand is made? Refuse payment Ask consultant to put request in writing Record meeting, keep minutes and reportto management Disclose to contracting party that you havebeen approached with information andthat there might be a leak in the process Disclose to competitors that you have beenapproached with confidential informationand suggest jointly approaching procurement agency with an NGO for increased scrutiny of the bidding process, which will limitthe value of the confidential information Industry initiatives: expose known extortionists for future reference Regulators: in regulated industries, alertauthorities of bribery demandsThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.

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13Scenario 4“ Kickback” scenario: Your sales representative isoffered hidden compensation by the customer orby an intermediaryDescription: Your company is bidding fora large foreign government contract whereone or several intermediaries are involved.One of the intermediaries approaches one ofyour employees and suggests entering into acontract to support the employee in the bidpreparation and states that the intermediarycan arrange to win the bid against paymentof an extra commission. The intermediary offers your employee a portion of this commission as a hidden compensation (“kickback”) ifyour employee accepts such an arrangementand secures from the company the approvalfor this extra commission.1) Demand prevention: How to reduce theprobability of the demand being made? Always operate as a team consisting of atleast two employees who must complywith strict reporting directives and controlmechanisms Set up clear company directives including awhistle-blowing policy and related (severe)sanctions for non-compliance Set up specific guidelines dedicated tonegotiations that expressly address thekickback issue with the obligation to immediately report any solicitation to management Emphasize in training sessions the criminaland reputation risks not only for the company but also for the exposed employeesthemselves Send regular reminder communications tothe exposed employees Include expressly the kickback case in consultants’ contracts as an event of immediate termination for material breach, andreserve legal actions Provide competitive remuneration for staffexposed to such offers Check market rates for commission ofintermediaries Require employees to sign a code of conduct statement regularly Try to establish an integrity pact thatclearly states that company staff does notaccept hidden compensationInclude in terms of contract/bid that salesrepresentatives accepting a kickback willbe sanctioned and that your company doesnot condone the practice2) Response to a bribery demand: How toreact if the demand is made? Immediately report to management or theappropriate officer assigned with mattersinvolving the code of conduct (e.g. compliance officer) Start an internal investigation by an independent party (i.e. corporate internal audit,compliance officer), in particular, performaudits on earlier transactions with thesoliciting person(s) Review bid terms with final terms andanalyse whether the solicitation has negatively reflected on the evaluation of yourcompany Protect the exposed employee if he or shereported the incident (otherwise sanction),i.e.: Transfer the exposed employee Appoint another company employee toaccompany the exposed employee in thenegotiations until the transfer is effective(this only applies if the employee operates on his or her own and not in a team) Record the incident and inform the customer at the appropriate level. Terminate any business relationship withthe intermediary.Note: During discussions, it was noted thatthe most difficult aspect is for a company todetect fraud by its own employees. The answers under point two were made under theassumption that the employee has reportedthe incident.The specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.

14Scenario 5A host country may impose or imposes a partnershipwith a designated local company that may presenthigh corruption risksThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.Description: In a call for tender, your company may be asked or is asked to contractwith a designated local company (such as aco-contractor, sub-contractor or consultant) asa pre-condition to bid. The designated company might not or does not have the necessary qualifications to perform the task.1) Demand prevention: How to reduce theprobability of the demand being made? Encourage local professional and businessassociations to engage with the governmentto enact laws and rules favouring freedomof contracting Seek the leverage of international financialinstitutions to enhance the freedom ofcontracting Engage in a dialogue with the procurement agency to improve procedures inthe following areas: allow for freedom ofsub-contracting for bids, i.e. pre-selectionof eligible local companies should be madeon the basis of objective financial, legal andtechnical criteria, including capacity to dealadequately with health, safety, environment and human rights requirements; insuch a pre-qualification process, compliance to generally accepted corporate socialresponsibility should be considered As a deterrent to prevent an imposed partnership, select (after due diligence), priorto an upcoming bidding process, a localcompany with good reputation and signwith it a joint bidding agreement with anticorruption provisions2) Responses to a demand: How to react ifthe demand is made? Resist the request from the governmentor governmental entities using financialand technical arguments highlighting theinability of the imposed local company tomeet the requirements of the project andthe standards of your company or thoseshared with other venture partners Negotiate with the government or governmental entity and propose to substitute theimposed company with another local company of your choice with a good reputationand higher financial and technical records Discuss this pre-condition with other bidders and civil society organizations andjointly approach the government to removethis requirement and allow for open selection of local contractors If a local company is effectively imposed onyour company and if, in your judgement,such company appears to be acceptable,insert adequate safeguard provisions in thecontract with the imposed local company(including termination clauses); suchcontract should include a detailed description of the scope of work and market priceremuneration, proportional to the servicesto be rendered

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17Scenario 6Client demands a last-minute “closure fee” to closea deal that is now too late to loseDescription: Your company is bidding for alarge government contract. After two or threeyears of costly negotiations, your companyis eventually awarded the contract. But justbefore the contract is being signed, you getsolicited for a bribe by a member of thepurchase committee. How can your companyovercome this situation in a legally acceptable way without losing the contract?1) Demand prevention: How to reduce theprobability of the demand being made? Elaborate a strict framework to supportthe negotiations: submit a detailed offerincluding terms and conditions and/or propose (if relevant) a draft contract, that bothincludes anti-bribery clauses and termination for default in case of bribery Define the scope of negotiation: make surethat the negotiation team has a clear mandate; inform the customer that the team isempowered with a specific limited mandatefor negotiation, which excludes any requestout of the scope of the call for tender terms During negotiations, including at closingtime, identify decision-makers (technical,budgetary, etc.) within the procurementorganization to determine where the solicitation could come from At bidding stage, consider involving mainactors in fighting corruption such as banksand export credit agencies that might havea good knowledge of customer/decisionsmakers and their practices2) Responses to a bribery demand: How toreact if the demand is made? Immediately inform your management anddefine an appropriate strategy (e.g. changing the negotiation team) Go back to the soliciting person with atleast one witness (management, adviser,bank representative) with the followingposition: Reaffirm your willingness to sign thecontract and ignore the solicitation In case the solicitation is reiterated: First, inform the person that the request is not acceptable Second, threaten to back off from thebid with public communication of thereasons for doing so, or actually backoff from the bid Set a deadline for signature based onthe terms and conditions previouslyagreed Go to customer that established the purchase committee to check the bid and inform him or her that the company has theimpression that they are being subjected toa solicitation; ask the customer to inquireand suggest repeating the bid if necessary If sufficient evidence is available, addressthe national anti-corruption body/agency/ombudsman Go public and expose the situation; beprepared to back off the projectThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.

18Scenario 7A company complaining about an unfair procurementprocess is threatened with a spurious criminalprosecution that will lead to a heavy fineThe specificrecommendations of thisscenario should be readtogether with the overallrecommendations of theAnnex to RESIST.Description: Company A knows that its competitor Company B has won the public bidbecause Company B bribed the public officialin charge of the bidding process. CompanyA makes a report to the police. Company Breacts with threats of phoney accusationsagainst Company A that would result inunjustified criminal proceedings againstCompany A unless it withdraws the report.1) Demand prevention: How to reduce theprobability of the demand being made? Instead of making a report on its own,Company A could approach other competitors that also lost the tender as a result ofthe bribe payments by Company B to thepublic official and make the report together; Company A thus reduces the probabilityof the demand being made as Company Bwould have to issue the threat against allof the companies involved, which is ratherunlikely (subject to antitrust laws or withthe help of local counsels) Instead of making a report to the police,Company A could address the public official’s superior or the competent fraudinvestigation unit in the public official’sdepartment and thus make it obvious thatany allegations by Company B would onlybe acts of revenge and thus deter CompanyB from making threats in the first place Company A could also inform the pressand the public that it has evidence of bribepayments by Company B to the public official in question. This would also reducethe likelihood of the demand by CompanyB being made in the first place2) Response to a bribery demand: How toreact if the demand is made? Explain to Company B that hard evidencehas already been submitted and that evenif the accusation would be revoked the casewould very likely go ahead anyway as theproceedings have now been started Threaten to (and then do) inform the perpetrator’s supervisor, superior or compliance officer or, as a last resort, the chiefexecutive of Company B, and likewise thesuperior of the public official If the tender in relation to which the threatis made is financed by a multinational c

ethical way, recognizing that such a demand may be accompanied by a threat. RESIST is . jointly developed by the UN Global Compact, Transpar-ency International, the International Chamber of Commerce and the World Economic Forum Partnering Against Corruption Initiative: