Evaluation of Procurement Ethics and Regulations in Latin America

Public procurement regulation and ethics more or less represent paths to stemming out corruption in the property and materials acquisition processes in public organizations, the two control tools are dependent of each other and stand out as the main pillars for achieving solutions for rampant corruption in public institutions and thus, they all require varied approaches depending on the magnanimity of the problems at hand.

In Latin America, the situation has been worsened by weak law enforcing and judicial institutions as a result of weak political institutions and poor leadership structures, ultimately providing a recipe for rampant corruption in public institutions. This research paper provides a comprehensive analysis of the implications of laws and ethics in public procurement in Latin America. Introduction Public procurement is the process of acquiring operational materials and capital assets which facilitate the day to day management of activities in public organizations (Transparency International Website, 2008).

Procurement is an organizational function entrusted to the management of public organizations who are expected to always make judgments and act to the best interests of the public. Different countries all over the world have in place different public procurement laws that seek to govern and streamline procurement processes to ensure that legal and ethical principles are observed by the leadership and management of public organizations. However, the effective administration and application of these laws remain elusive particularly in developing countries.

This is because as much as public procurement regulation and ethics more or less represent paths to stemming out corruption in the property and materials acquisition processes in public organizations, the two control tools are dependent of each other and stand out as the main pillars for achieving solutions for rampant corruption in public institutions and thus, they all require varied approaches depending on the magnanimity of the problems at hand.

In Latin America, the situation has been worsened by weak law enforcing and judicial institutions as a result of weak political institutions and poor leadership structures, ultimately providing a recipe for rampant corruption in public institutions (Transparency International Website, 2008). This research explored the significance, implications and effectiveness of public procurement laws with particular emphasis to Latin American Countries. Problem Statement

Public procurement processes in Latin American countries are characteristic of deep rooted corruption and cooperation among transacting parties, law enforcers and administrators of justice, a situation that makes it difficult for governments in the region to design and apply solutions that would be binding, long lasting and satisfactorily guard and validate public procurement processes. Therefore, this research paper addressed this problem by analyzing the effectiveness of procurement laws and ethics as probable solutions for stemming out corruption from procurement processes in Latin America’s public institutions.

Purpose of the Research The purpose of this research project is to evaluate the effectiveness of public procurement laws and ethics as tools for curbing corruption related issues from procurement processes. The research project has focused on the ways through which appropriate laws and ethics can be enforced to streamline procurement processes in Latin America. Significance of the Research The research project will form the basis through which anti-corruption laws and policies in Latin America will be enhanced and perfected to the recommended national and international requirements. Rationale of the Research

The rationale of this research was based on the persistent disconnects between Latin America’s regulatory and ethical mechanisms on the one hand and corruption in region’s public procurement processes on the other. The research project particularly analyzed the implications and challenges of formulating and enforcing regulatory and ethical principles in Latin America’s public institutions. In essence therefore, the research project was designed on the assumptions that the enforcement of regulatory and ethical principles in public procurement processes enhances the achievement of transparency in procurement processes.

Statistical analysis and assessment of the dependent and independent variables bearing direct and indirect influence over the practical objectives of the research were applied to deduct the functional aspects and relativity status of laws and ethics as corruption elimination tools in public procurement processes in Latin America. Research Question The research project was designed to demonstrate the implications of corruption on the public procurement processes in Latin America, with specific regard to the following question:

• To what extent can laws and ethics be adopted as long term solution to rampant corruption in Latin America’s public procurement processes? Hypothesis and Identification of Variables This research project tied the core empirical objectives to the corresponding determinant variables so as to draw clear distinctions between different constructs of the research and the subsequent operational variables. Core Empirical Research Hypothesis

The core empirical research hypothesis is: The prevalence of weak and ineffective enforcement and administration mechanisms for public procurement laws and ethics is responsible for the rampant corruption that is characteristic of procurement processes Latin America. Subsequently, corruption was identified as the dependent variable with procurement laws and ethics standing out as the independent variable for the research project. Research Limitations The expansive geographic coverage of the Latin American continent was the main limitation that was experienced during this research project.

As such lack of sufficient time and resources to interview and interrogate a wider spectrum of respondents across the Latin America impacted negatively on the scope of the project. Literature Review Comprehensive literature review revealed close relationship and dependency between laws and ethics in the fight against corruption (Carroll, 1979; Donaldson & Preston, 1995; Gibson, 2000; OECD Global Forum on Governance, 2004; Petersen, et al. , 2008). The arguments of each of these five journal articles are spelt out as follows.

The 2004 publication of the OECD Forum on Governance titled fighting Corruption and Promoting Integrity in Public Procurement set among its objectives the development of practical framework for detection and prevention of public procurement corruption among member and non-member countries. Classifying procurement information and secrecy in government is a recipe for corruption and thus, there is urgent need for governments to adopt simplified, transparent and elimination of discretionary agency chains in tendering procedures (OECD Global Forum on Governance, 2004).

To this end, the forum suggested that public institutions must always endeavor to reshuffle staff regularly, adopt codes of corporate governance and commitments by governments to anti-corruption practices to ensure the protection of public interests in public procurement processes (OECD Global Forum on Governance, 2004). As the OECD Global Forum on Governance, 2004 pointed out, capacity building as an integrity improvement strategy stands out as an effective corruption prevention in public bidding and contracting processes.

The forum acknowledged the significance of emphasizing and supplementing anti-corruption tools with appropriate regulatory and ethical frameworks to ensure sustained and replicable solutions in public procurement processes. Governments should always perform pre-emptive identification of risks in the bidding processes for public goods and services in addition to embracing international cooperation in fighting bribery and corrupt practices in public procurement processes (OECD Global Forum on Governance, 2004).

Donaldson and Preston (1995) were equally emphatic on their arguments for the significance of regulations in the protection of public interests in publicly owned corporate entities, as spelt out by the stakeholder theory of the corporation. According to Donaldson and Preston (1995), the stakeholder theory is backed by a descriptive justification as demonstrated by the role it plays in providing the implicit framework for prevailing practices in both public and private institutions with particular emphasis to legal applications and statutory laws (p. 75).

As Chirelstein (quoted in Donald & Preston, 1995) pointed out, the so called “business judgment rule” that vested organizational management with the exclusive rights to only pursue the achievement of stockholder interests have since been shattered by new legislations which seek to have equal treatment of all the interests of all stakeholders in organizations. Such regulatory benchmarks have the significance of eliminating secrecy and discretions from public organizations because stakeholder interests can only be addressed adequately through the full scale disclosures of organizational activities (Donaldson and Preston, 1995).

In his article titled Moral Basis of Stakeholder Theory, Gibson (2000) argued that businesses, whether public or private, owe fiduciary responsibilities not only to the owners but also to the entire spectrum of stakeholders. As such, the actions of the management must always be seen to take ethical approach to safeguard the interests of all stakeholders (Gibson, 2000). The stakeholder theory views morality as a prerequisite requirement for responsible actions at individual and organizational levels by the management.

Indeed, “acknowledging that management is practice is not only a responsibility but also a consonant characterized by unlimited ethical and morality principles helps in constraining and averting dubious and unfair organizational practices such as corruption (Gibson, 2000). Therefore, the journal article of Gibson (2006) offers idiomatic, normative and descriptive justifications for the stakeholder theory in business practices. The concept of corporate responsibility was meticulously summarized by Archie B. Carroll in a four-step pyramid that was contained in his 1979 CSR paper on corporate social performance.

The four-step pyramid has since been referred to as Carroll’s four-step model of CRS and it consists of four layers identified as economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities. Economic responsibility refers to the profitability prospects of the organization and Carroll identifies this aspect as the foundation up which all the other responsibilities rest. The aspect of legal responsibilities takes into account the necessity of a business organization to obey the law, with respect to law as the society’s codification of right and wrong.

On the other hand, ethical responsibilities refers to the need of the organization to observe the obligation to do what is right and fair and avoid doing harm in any way whatsoever. The philanthropic responsibility is discretionary in nature and simply encourages business organizations to be good corporate citizens and strive to contribute to the well being of the society by volunteering resource contributions without expecting financial profits from such actions.

All in all, the four categories of organizational corporate responsibilities demonstrate that business organizations emphasize on economic aspects, followed by legal and ethical aspects of their organizations with concerns for the discretionary aspects being the least in the order of preference (Carroll, 1979). However, the four components of corporate responsibility are not mutually exclusive, with the design only serving as a demonstration to the senior management of organizations on how much the different components of corporate responsibility are always in constant tension and competing mode.

Carroll has since transformed the four-step model in the numerous journals that he has published and today, the model reflects the economic situation as is in the world today. The other significant literature review item for this research project was Petersen et al. (2008) who pointed out how the dependency relationship factors between suppliers of goods and services and buyer organizations render the entire supply chain and contracting processes susceptible to influence and alterations. To this end, the authors proposed an empirical testing model through which buyer and supplier socialization and relationships can be monitored.

As demonstrated by the theory of resource dependency, there exist asymmetrical balance of power between supplier and buyers of goods and services, with suppliers holding advantage of power over buyers (Petersen et al. , 2008). Therefore, it is always important for buying organizations to explore and pursue balance of power through legal and ethical means as opposed to condoning irregularities such as corruption (Petersen et al. , 2008). Research Methodology The research methodology involved qualitative and qualitative research methods designed to achieve optimized data collection, analysis and sampling. Research Design

Group focus study was conducted on three groups of countries in Latin America which have in place definite public procurement laws and ethical guidelines. The three groups of countries comprised of a minimum of 100 respondents of either sex per group, making a total minimum of 300 participants for all the three target groups. The subject of the research project was validated by redefining the important functional aspects of public procurement laws and ethics. References were made from information databases including books, journal publications and websites in addition to appraising other indispensable data sources. Data Collection

Data was collected through instrumentation that included open-ended questionnaires and direct interviews with the objective of enhancing quality reprisal. The interrogation was aimed at evaluating the conceptualization of interviewees concerning corruption issues in public procurement processes in Latin America and how laws and ethics can facilitate individuals and organizations to positively contribute in protecting the interests of the public from the negative effects of corruption. The direct data collection approach was supplemented by the Delphi survey technique which was particularly applied in accessing and weighing expert opinions.

Ultimately, quantitative data collection and analysis involved unlimited reference to books, law journals, treaties, legislations, case laws and websites in addition to other appraised indispensable data sources validated through the SPSS software. Variables and constructs for investigation were drawn from extensive and comprehensive literature review of five journal articles and one book discussing legal and ethical issues in public procurement processes. Qualitative data collection was achieved through the administration of questionnaires and direct interviews and validated through an analytic induction process.

Operationalization of Variables The Operationalization of variables involved a two pronged analysis of the independent variable H0 and independent variable H0 set out as follows. Independent Variable H0 • Operational measure 1: Public contracts represent government public policy implementation with regards to provision of public goods and services. These contracts are intended to deliver public good directly by way of building new infrastructure and improving the existing ones but also indirectly by way of prudent investment of public funds and facilitating delivery of specific goods and services.

However, according to statistics from transparency International (TI), systematic corruption in Latin America inflates the costs of procurement in government by up to 25 % Transparency International Website, 2008). In the same measure, it is estimated that public procurement accounts for more than 70 % of expenditures in central governments of the Latin American region (Transparency International Website, 2008). • Operational measure 2: The response of Latin American governments to procurement corruption • Operational measure 3: Public sector and procurement law reforms in Latin America

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