Recent World Bank report helps companies mitigate procurement and integrity risks globally

Hogan Lovells lawyers from several jurisdictions proudly shared their knowledge on key characteristics of exclusion systems in six jurisdictions. Partners Peter Spivack (Washington, D.C.) and Tommy Liu (Hong Kong) also served as panelists at the Directory’s launch event, where they discussed the impact and value of the Directory in the private sector and provided an overview of exclusion systems in China, Hong Kong, and Asia-Pacific.

Why is the Directory a critical resource?

By using the Directory’s standardized information and terminology, legal, compliance, and procurement teams can reduce their risk of exclusion and enhance their reputation as reliable partners in the global public procurement marketplace. The Directory also facilitates risk assessment exercises and clarifies integrity responsibilities for contractors that participate in projects financed by international financial institutions.

Understanding and mitigating procurement, regulatory, and integrity risks in government and multilateral procurement

The Directory introduces, explains, clarifies, and ultimately provides solutions to a complex business problem: exclusion from government revenue sources. Suppliers of goods and services to governments and multilateral organizations, such as the World Bank Group and the Inter-American Development Bank Group, face a multi-layered and evolving landscape of procurement, regulatory, and integrity risks. The Directory, which is periodically updated, is a resource that can help legal, compliance, and procurement teams understand and keep abreast of the particularities of applicable exclusion systems to their operations, especially as these systems evolve.

Navigating exclusion: Commonalities, differences, and trends

The Directory reveals commonalities, differences, and trends in surveyed exclusion systems, such as:

• substantive and procedural rights;
• applicable grounds for exclusion;
• scope and applicability on companies (and/or individuals);
• potential official or unofficial recognition of exclusion decisions by other organizations or jurisdictions (the so-called cross-debarment);
• monetary remedies and criminal referrals; and
• benefits of compliance programs.

Companies can use these insights to benchmark their compliance programs, anticipate regulatory expectations, identify opportunities to avoid or shorten exclusion periods through corrective action, and understand what the deterrent and remedial aspects of exclusion systems may be on their operations.

Relationship management: From mitigation to opportunity

The Directory demonstrates that the majority of surveyed exclusion systems seek to promote suppliers’ ethical and responsible behavior. A robust compliance program in most jurisdictions can not only be a shield against sanctions but also a strategic asset. Effective compliance programs and proactive relationships between legal, compliance, and procurement teams help companies identify and mitigate risks early, structure projects to address potential vulnerabilities, and respond constructively if issues arise. The Directory’s comparative, standardized information enables procurement, legal, and compliance teams to communicate using a common language, assess risks with greater precision, and design controls tailored to each jurisdiction’s requirements.

Balancing deterrence, remediation, and competition

While exclusion serves as a deterrent, the Directory shows that many jurisdictions balance it with the need to preserve fair competition, promote the adoption and enhancement of private sector compliance programs, and ensure the delivery of better services and products. The Directory provides examples of how different systems combine deterrence with remediation through compliance by providing possible earlier termination of debarment sanctions for companies that evolve to stronger compliance systems. No company is immune to mistakes, but those that demonstrate reliability, invest in remediation, and maintain strong compliance cultures are better positioned to recover and continue participating in government and multilateral procurement.

Due diligence resources

A common – but not universal – feature of the surveyed exclusion systems is public exclusion lists, which often provide the grounds for a party’s exclusion. The Directory identifies the websites where these lists are hosted, enabling companies to consider the exclusion and its rationale as part of their third-party due diligence. Companies should consider these listings as potential red flags requiring further inquiries prior to making business decisions.

A single, standardized resource for global compliance

The Directory provides a single, standardized overview of exclusion systems in 36 national, sub-national, and multilateral jurisdictions. Legal, compliance, and procurement teams can leverage this unique resource to proactively structure projects and controls that recognize and mitigate regulatory, compliance, and integrity risks. Our cross-practice, global, multidisciplinary team has trusted relationships with regulatory and enforcement agencies worldwide and stands ready to help legal, compliance, and procurement teams navigate complex exclusion, regulatory, and law enforcement issues.

Authored by Peter Spivack, Tommy Liu, and Nikolaos Doukellis.