How to buy a government contract in Denmark
October 29, 2006According to Transparency International one of the largest problems with corruption world wide is with public contracting :
An avoidable misuse and abuse of public funds results from corruption. Corruption in public contracting leads to a distortion of fair competition, the waste of scare resources and the neglect of basic needs, perpetuating poverty. Massive market inefficiencies can also arise from corruption and, in the extreme, lead to the destruction of development opportunities. If corruption in public contracting is not contained, it will grow. It is estimated that systemic corruption can add 20-25% to the costs of government procurement, and frequently results in inferior quality goods and services and unnecessary purchases.
In Denmark this happens on a wide scale. In particular with municipal IT contracts as reported in this report (in Danish) from DR TV in Denmark.
What happens is that IT consulting companies invite municipal CIO’s, mayors and council members out on so called study trips. The purpose is officially to learn how they can use IT better in their municipalities. They receive fancy invitations to visit the US, Hong Kong, Singapore and elsewhere. The actual municipality has to pay for this trip which is the way they make it legal. This doesn’t change the influence these companies buy over the elected officials, just reduces the cost to the company buying them off.
The worst company in all of this is one of my clients at the moment and I won’t go into exactly who they are for obvious reasons, but it really is sick. I will state though that I am not involved in anyway with government contracts.
In Denmark at least 30% of our income goes directly to the municipalities. This rate varies a bit as the municipalities have a high level of independence in how they spend their money and on what. Therefore there is a lot of money to be made in these contracts. In reality most of these municipalities have very similar needs, so companies selling to one has a lot invested in selling their products/services to others.
The TV program I linked to above mentions that the worst thing is that the companies pick up the tabs at one or two dinners when they are abroad, but I think the whole idea of them offering these highly unnecessary trips is the real point of corruption.
Just think how cheap it is for them to do this. In Panama when Danish companies buy government contracts they normally are forced to transfer a few million dollars into the contracting ministers nephews bank account, but in Denmark they can do it by inviting people on a trip that their tax payers have to pay for. Brilliant!
I have more respect for the Panamanian politicians who actually demand a major cash payment before favors are offered, the Danish ones are just too god damn easy. But then again the state is best at using money.
Comments:
Well... I agree with you that corruption in government contracts are awfull. Well corruption in general is awful - period.
As seen in the Irac conflict, where government contracts (for military, security, food and logistics etc.), has been under virtually no control. It happends.
I think there is a big difference if a danish gorvernment (or municipal - or companys own by municipals) pay for trips to potential customers - Especially when the company youre talking about is making a surplus (which the do, because the have good customer relations). If you did se the research of this particular Client you are talking about 14 days ago in DK TV, you would have seen, that it didn't have any effect on the customers, that they were offered trips to florida etc.
Anyway, you should have mentioned the US Conflict in Irac - and all the bad things about government contracting, which are out of controll. There you can talk about corruption.
It's not the same thing as
Posted by: Thomas at October 31, 2006 05:48 PM
I forgot to emphasize that even though Pelle has a point, Denmark is still of of the least corrupt contries in the world (actually we've been on the number one spot for 3-4 years in a row). today we're as a country has slide down to number 4-5 on the list, because of theres been evidence of private firms and there cartel like behavior to keep up prizes - but still, Denmark has some of the lowest corruption compared to the rest of the world.
So Pelle's got a point, but it would be more fair, to choose a country where you see some serious corruption. - and we have to remember, that no country is free of corruption - not even Denmark ;-)
Thomas
Posted by: Thomas Robert Madsen at October 31, 2006 06:09 PM
The real reason I wrote this piece is because of Denmarks squeaky clean record. There is lots of corruption throughout the world even in Denmark. I have lots of tales of corruption throughout the world that follow the normal patterns. The Danish approach to corruption falls out of the normal ways of doing it though, so I worry that perhaps Transparency International don't even monitor it here.
You also mention that it these trips didn't have an effect. Of course they do, if not they wouldn't offer them. The associations in mention do "win" contracts repeatedly from these municipalities, perhaps contracts they shouldn't have had.
Posted by: Pelle at November 1, 2006 01:54 AM
