Gaps in procurement framework enable corruption says new research by PublicFinance.lk

PublicFinance.lk has announced the launch of its latest research brief “Backwards in blacklisting: Gaps in Sri Lanka’s procurement framework enable corruption.” 

This report identifies two critical gaps within Sri Lanka’s public procurement system, particularly the inadequacies in blacklisting mechanisms against corruption. It also shows how backward Sri Lanka is compared to other South Asian countries in this respect. 

PublicFinance.lk which is part of Verite research, said corruption in public procurement undermines competition and pushes up the price of contracts, leading to waste of scarce public resources. Blacklisting, or debarment, is a tool available to deter fraud and corruption in procurement by preventing companies found guilty of such misconduct from participating in government procurement for a specified period. 

The aim is to deter and stop companies from engaging in wrongdoing.

The latest research brief finds that the existing public procurement regulatory framework has failed to protect public funds from being misused and stolen by failing to blacklist firms engaging in fraudulent and corrupt practices. To rectify this situation, there are two critical gaps that need to be addressed without delay.

The first is a gap in the law – the procurement guidelines do not provide for blacklisting of contractors/suppliers for engaging in fraud and corruption. The guidelines however provide for blacklisting of contractors who default/fail to meet their contractual obligations. 

The second is a gap in compliance, i.e., the failure to even blacklist defaulting contractors that default on their contractual obligations. This second gap shows that bridging the first gap – the gap in the law – is not sufficient. It shows that in addition to including fraud and corruption as valid reasons for blacklisting, it is also necessary to have in place provisions to ensure compliance; for example, by having provisions to penalise non-compliance.

The research also finds Sri Lanka to be extremely backward, even compared to other South Asian countries, with respect to these practices. The regulatory frameworks of other countries in the South Asian region identify engaging in corrupt practices as a valid reason for blacklisting. Unlike Sri Lanka, these countries also have functional online databases of blacklisted firms.

The Economics Research Teams of Verité Research compiled the study. The team comprised, Subhashini Abeysinghe, Bulani Weerawardane, Ishini Randeniya, Aarathi Sirinivasan, Mathisha Arangala and Jason Hingert. Overall research support was provided by Nishan de Mel. Editorial support was provided by Suresh Yogasundram.

The research can be accessed online via https://publicfinance.lk/en/report/blacklist-for-defaulting-contractors