Two buyers shop for automobiles for government procurement in Nanjing, Jiangsu Province. Photo: CFP
Li Xianzheng, an official who worked at the procurement center of the Jilin provincial government in Northeast China, recently received a five-year prison sentence after it was discovered that he was receiving financial kickbacks, ranging from 1,000 to several thousand yuan, for every car he purchased on behalf of the government, China Youth Daily (CYD) reported.
He justified his actions to the court by saying that “taking kickbacks has been a common practice for us who worked at the government’s purchase center,” according to the report.
Government procurements, which are supposed to encourage competition and reduce government purchasing, have fallen upon a breeding ground of corruption.
According to data from the Ministry of Finance, China witnessed a skyrocketing budget increase in government purchasing from 100 billion yuan ($15 billion) in 2002 to 842 billion in 2010.
Meanwhile, corruption involving government procurement has surged, said Lin Yueqin, a researcher of economic studies with the Chinese Academy of Social Sciences who has been following procurement-related corruption, told the Global Times.
Chain of corruption
Anyone can be bribed and corruption can occur at every link upon the purchasing chain, from the approval of a government-purchasing program to bidding competitions, and even at the announcement of the winning bidder.
An urban construction engineer from Anhui Province who often participated in the bidding of government projects, told the Global Times they usually spent 10 percent of the project’s money to bribe those who would have a say in the decisionmaking process.
“Without bribing or connections, the bidding is doomed to fail,” said the engineer, who remains anonymous.
For example, in the process of checking the qualifications of bidders, some officials, after receiving a bribe from an unqualified company, would then enable the company to participate in the bidding, according to a CYD report.
Buyers, judges, and middlemen all form a strong chain where each link has its own interest. For example, middlemen help people to prepare their bidding materials.
With several practicing judges in place, there are many who serve as a judge on government procurement programs anywhere from 10 to 20 times in a single year, even though the law clearly states that a person can only serve as a judge on a government procurement program for no more than three times in one year, according to a report by Nanfang Daily.
“Middlemen, or agent companies, usually contact the judges directly on behalf of the bidders,” which makes corruption harder to find, the insider said.
Lin told the Global Times that government procurement corruption is more serious in second-and third-tier cities than it is in major cities like Beijing and Shanghai.
“In small cities, there are usually few strong bidders for a program. The bidders may join hands to win a bid and then share interests, which monopolizes the market and excludes start-ups or small ventures,” Lin said.
Besides, some bidders, after they have spent large sums of money to win the bids, tend to have substandard qualities in the programs so as to reduce expenses, he added.
Independent supervising
China implemented a Tenders and Bids Law in August of 1999 and released the Government Procurement Law in June of 2002. Both laws stipulate that those who have illegally participated in the process of bidding on government projects could be blacklisted and disqualified from bidding for one to three years.
“The punishment is lenient compared with some countries where offenders may lose their license forever,” Lin said.
Supervision is anything but stringent. In one case, the National Audit Office (NAO) revealed that a few service providers for the Beijing-Shanghai high-speed railway construction program had siphoned some 300 million yuan from the State. It was also discovered that they were repeat offenders, according to a report by the Beijing-based Economic Observer.
According to NAO, the report further said that some of these offenders had taken over 53 million yuan from the State in 2009 by using fake invoices.
Gu Liaohai, a Beijing attorney and expert in government procurement lawsuits, told the Economic Observer that China needs to establish independent supervising bodies and an information publication system in order to ensure that the laws which deal with government procurement are properly enforced.
Independent third-parties like a professional law office, auditing office, or an industry association, should be invited to participate in the procurement process and serve as external supervisors in the fight against corruption, Chen Ji, a professor with the Capital University of Economics and Business in Beijing, told China National Radio.
“Besides sound laws and better enforcement supervision, resoluteness to fight corruption on the part of the government is the most important force with this problem,” Lin said.
He Chusu contributed to this story