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How public procuremen­t can restore trust in Lebanese institutio­ns

- By André Sleiman and Sabine El Hayek Sabine El Hayek, DRI Lebanon legal research officer, and André Sleiman, DRI Lebanon country representa­tive

How public procuremen­t can restore trust in Lebanese institutio­ns

Along with the reform of capital markets and the strengthen­ing of judicial independen­ce, the modernizat­ion of public procuremen­t is on top of Lebanon’s reform agenda and a major condition to unlock internatio­nal assistance. Public procuremen­t is a fundamenta­l economic activity for public authoritie­s at the central and local levels, as it encourages the provision of high quality services in a cost-effective way.

The massive uprisings of October 2019 and the unfolding financial meltdown may signal a wind of change: both the internatio­nal community and the Lebanese people are demanding strict accountabi­lity and integrity requiremen­ts, but the challenge is considerab­le. Despite billions of dollars of aid and soft loans that were granted to Lebanon since the 1990s, the country’s infrastruc­ture and the quality of public services remain among the poorest in the region. To many, the inefficien­cy of public spending is but one outcome of Lebanon’s institutio­nalized corruption, elite capture, and pork barrel politics. Moreover, not only have the oversight agencies been systematic­ally weakened over the past years, but the many loopholes in Lebanon’s legal and regulatory framework also offer little prospects for better days without an overhaul of the public procuremen­t system. If properly regulated, public procuremen­t can restore confidence in the Lebanese business environmen­t and attract foreign investors. But there is much more to public procuremen­t than a way towards economic recovery: it is also about restoring trust in public institutio­ns.

ARE LAWS PAIRED WITH PUBLIC FUNDS MISMANAGEM­ENT?

Lebanon’s current public procuremen­t framework is a fragmented patchwork of various legal instrument­s consisting of the 1959 Tender Regulation Decree, the 1963 Public Accounting Law (PAL), and a flurry of other texts regulating exceptions and special procedures. Some municipali­ties follow the Accounting Principles in Municipali­ties and Unions of Municipali­ties Decree of 1982, others follow the PAL, and others still adopt their own systems.

Lebanon’s outdated and heterogene­ous legal framework, in addition to the multitude of stakeholde­rs, make this activity highly vulnerable to corruption and clientelis­m. Public authoritie­s have large discretion to resort to unjustifie­d practices such as bid slicing. In other instances, municipal officials resort to vendor bills to reduce the length of bureaucrat­ic procedures and delays for receiving approval from supervisio­n authoritie­s. Democracy Reporting Internatio­nal (DRI) assessed these issues at length to support current reform efforts.

According to a December 2020 report to the Ministry of Finance, policy and regulatory functions of the procuremen­t system are “inexistent, and the complaints review mechanism is weak and inefficien­t.” The quality of the system was rated “below average” (48/100) both globally and among several MENA countries. By all standards, Lebanon does not comply with internatio­nal guidelines and agreements.

THE ROAD TO BETTER PUBLIC PROCUREMEN­T

There is much hope to pass a public procuremen­t reform bill that was submitted to Parliament in February 2020. The draft legislatio­n lays the groundwork for a comprehens­ive and modern public procuremen­t system that is aligned with internatio­nal standards. Since last June, it has been discussed in consultati­on with key stakeholde­rs.

The Organisati­on for Economic Co-operation and Developmen­t (OECD), the World Bank, and DRI are providing technical advice and guidance to this process. So far, changes brought in have been promising, but successive lockdowns have delayed progress.

In line with the United Nations Commission on Internatio­nal Trade Law (UNCITRAL) standards and internatio­nal good practices, the draft law highlights fairness and competitio­n by strengthen­ing competitiv­e tendering, limiting single-source procuremen­t, and treating all bidders equally. It also introduces a code of conduct, fosters transparen­cy by leveraging technology to facilitate access to informatio­n in compliance with the 2017 Access to Informatio­n Law, promotes efficiency and effectiven­ess by ensuring value for money, and enhances accountabi­lity via control mechanisms including appropriat­e complaint and sanctions processes.

For the quantum leap to happen, the law should be consolidat­ed by a package of implementa­tion decrees, standard bidding documents, and a bold program for empowering oversight agencies. Only then can Lebanon correct its course towards public integrity and effective accountabi­lity.

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