ACRC recommended laws related with "Integrity Pact" be amended

- By legislating the basis of the Integrity Pact and penalties upon violation, transparency and justification are expected to be secured for public contracts.
- The compliance rate of the Integrity Pact should be included into pre-qualification evaluation of a bidder for public contracts.
- Organizations that place orders can share information about entities who have violated the Integrity Pact by including into contract information whether contractors comply the Integrity Pact.

It is expected that a contract should be terminated with an entity--even though in the middle of implementation--that has violated the Integrity Pact by providing money, goods and treats in the process of bids, awarding, concluding and implementing a contract order placed by the government and municipalities. The list of entities that have violated the Integrity Pact will be released on Korea ON-line E-Procurement System.

The Anti-Corruption and Civil Rights Commission (ACRC) assessed influence of corruption for "State Contract Law" and "Local Government Contract Law," drew up measures to revise relevant laws that oblige a conclusion of the Integrity Pact when public organizations place an order or sign a contract for provision of products and goods, and recommended the Ministry of Strategy and Finance and the Ministry of Public Administration and Security improve systems.

"Integrity Pact" was suggested by the Transparency International under which public officials and civil contractors agree that they will not exchange bribes when public organizations place an order or sign a contract for provision of products and goods, and penalties should be imposed on entities that have violated the contract, including termination of the contract and deprivation of opportunities for bids.

Every public organization in Korea has adopted the Integrity Pact including Dongjak-gu, Seoul in 2000, and the size of contracts in the public sector amounted to KRW 104 trillion as of 2008.

However, the Integrity Pact has been criticized for maintaining its name only because it has been implemented with no provision in the relevant laws and thus no legal effect at all for violation of the contract.

* Out of 3, 624 contracts that have been posted in Korea ON-line E-Procurement System for the past three years, only one contract was terminated due to the provision of money and goods (ACRC, 2009).

The recommendation of the ACRC includes that the Integrity Pact be concluded for orders placed by public organizations, and the bid, awarding and concluding a contract be terminated when the violation of the Integrity Pact occurs.

If much of the contract has been implemented, the ACRC recommended that the contract council discuss the issue, acquire the approval of the head of the relevant central department (or head of municipalities) and decide whether the contract should be implemented, with consideration of public interest and damage to the country.

In addition, the ACRC recommended the list of entities that have violated the Integrity Pact be released on Korea ON-line E-Procurement System, and administrative organizations include the compliance rate of the Integrity Pact into evaluation criteria for pre-qualification for a bid.

* Information sanction is expected by notifying organizations that place an order of entities that have been involved in corrupt activities in the process of public procurement.

The ACRC's recommendation is expected to stop the tradition where construction contracts continue even after contractors are found to provide money, goods and treats for awarding contracts with the government or municipalities by filing a lawsuit.

An official of the ACRC mentioned "The Integrity Pact has been adopted all over the world, e.g. Italy, Argentina, India and Mexico, but they have all suffered poor effectiveness. By stipulating the contract on the relevant laws, Korea will become a model country to operate the system effectively."