Government Procurement Challenges: Fakes, IP theft and Corruption

October 15, 2013
Categories: Government Procurement

Government procurement challenges: fakes, IP theft and corruption

The costs and risks associated with corruption and violations of intellectual property rights in government procurement are alarming and on the rise, as detailed in our newly published whitepaper on government procurement.

Consider just a few examples…

  • Counterfeit medicines have killed as many as 200,000 people in China in one year alone.  As the secretary-general of Interpol recently pointed out, that number is far higher than the global death toll from terrorism over the past 40 years, which stands at about 65,000.
  • The U.S. Defense Department reports that its supply chains have been flooded with counterfeit parts, with cases ranging from fake Kevlar body army to fake microprocessors for jet fighters and nuclear submarines. The problem introduces risks in the form of system failures, with the potential for injury and death.
  • Throughout the 27 European Union member states, an estimated €120 billion is lost to corruption in government procurement each year. The region’s ongoing fiscal crisis is, in part, a product of this corruption, according to the anti-corruption group Transparency International.

The trend has been a catalyst for some governments to subject vendors and their supply chains to greater scrutiny–using their substantial purchasing power to insist that contractors adopt programs to prevent corruption and IP theft.

For example:

  • Executive Order (“EO”) 13103, signed by former U.S. President Clinton on September 30, 1998, imposes obligations on federal contractors to ensure that they are not violating IP rights in software. Specifically, Section 1(c) of the EO provides that “Contractors and recipients of Federal financial assistance . . . should have appropriate systems and controls in place to ensure that Federal funds are not used to acquire, operate, or maintain computer software in violation of applicable copyright laws.”[i] The Obama Administration has committed to reviewing the steps federal agencies have taken to implement EO 13103
  • The EU Public Procurement Directive, 2004/18/EC, requires Member States to adopt laws that exclude from participation in government procurement any bidder that has been convicted of corruption or fraud and permits them to exclude bidders for “grave professional misconduct.” The Directive also allows contracting authorities to impose specific contract performance conditions on successful bidders, in particular with regard to social and environmental issues. Similar provisions exist in the EU Defence Procurement Directive, 2009/81/EC.

Learn more about government actions and best practices that contractors can take to foster compliance with evolving requirements in our whitepaper, “Government Procurement: Driving Responsible Business Practices.”

Click here to download a copy of the full whitepaper.



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