Iraqi Economists Network

شبكة الاقتصاديين العراقيين

Energy and Power SectorEnergy, Oil & Gas Policy

Iraq No-Bid Non-Competitive Contracting Practice – Constitutional Background. By Tariq Shafik, Jabbar al-Waggaá and Ahmed Jiyad *

In Iraq different constitutional, co-operation and legal instruments govern contracts whether for projects or procurement. The constitution provides relevant provisions as guiding principles that have to be adhered to by all Iraqi entities. Also agreements concluded between Iraq and international entities comprise mandatory measures of direct relevance

The Iraqi constitution has two fundamental principles of direct relevance to contracts for projects and for procurements and supplies: these are the application of modern economic principles, and the best interest of the Iraqi people.

Finally, the country has already specific and well-detailed instructions pertaining to projects and procurements contracting. The valid law No. 84 for the year 1985 “The Hydrocarbon Preservation Law” govern in particular contracts whether for projects or procurement required for the Oil Operation in the Country

According to the Constitution, “The State shall guarantee the reform of the Iraqi economy in accordance with modern economic principles.” Modern economic principles are many and diversified but for our purpose all contracts for projects and procurements should be subject to feasibility and priority assessment; to be open, transparent and competitive process, and good governance to ensure accountability and checks and balances. These are prerequisites and essential to ensure the second constitutional principles of “the best interest of the Iraqi people”.

The Iraqi government had committed itself to certain principles under the International Compact with Iraq-ICI, the regular stand-by agreements with the IMF and the World Bank, and UN convention against corruption, among others.

According to such commitments the government ensures: transparency and accountability of the utilization of the hydrocarbon resource; criteria for approving large investment projects; the procurements process and the project management process. In fact the government was committed, for example, to “Complete an audited review, by the Board of Supreme Audit, of the largest investment projects initiated in 2008”, based on the above mentioned principles. This also implies that such principles have to be adhered to by all ministries for all projects and procurements contracts.

Finally, the Ministry of Planning issued, in 2008, very elaborated directives pertaining to Public Contracts for both projects and procurements. The directives are mandatory by law on all federal ministries and local authorities, and provide detailed requirements covering the whole process and its phases of pre, during and post contracting. However, there have been serious malpractices in the contracting procurement process and/or during the execution phase resulting in serious waste of the public assets.

Regretfully, there are increasing number of such contracts and agreements that were concluded by both federal ministries and local authorities in such a way that they very well could:

  • Contravene the Iraqi Constitution and the principle of the best Iraqi interests enshrined in it
  • Renegade Iraq’s international commitments and obligations and this would undoubtedly eradicates further Iraqi image and reputation with its partners and international community
  • Violate existing Laws and mandatory contracting procedures and requirements that are established the directives of the Ministry of Planning.

Underlying reasons

 There are many underlying reasons for above malpractices and waste of pubic assets. Iraq’s rank as a failed state has been near the top. It remained at second and third position for few years, made little progress into position 9 among 178 countries last year, suggesting slight gains from the war-torn and occupation of the year 2003 but clearly has a long way to go yet. And, Transparency International (TI) rates Iraq at 175 position; the third position above the worse corrupt country. TI defines corruption as the abuse of entrusted power for private gain. This definition encompasses corrupt practices in both the public and private sectors. The Corruption Perceptions Index (CPI) ranks countries according to the perception of corruption in the public sector. To quote TI, transparency and accountability are critical to restoring trust and turning back the tide. Iraq, however, appears to have failed to make progress on the path of transparency and accountability.

International procurement contracts practices

The primary objective of an effective procurement policy is to obtain goods and services at the lowest possible price or, more generally, to achieve best value for money. The governing principles are:

  • Sufficient time is given to plan and run the procurement process. All procurement procedures must be undertaken in a manner which ensures integrity of the process and within appropriate timescales

Equal opportunity and equal treatment are provided to all bidders


  • Probity must be upheld throughout and at all time; i.e. that each procurement exercise transparently secures the best value for in the public interest, untainted by conflicts of interest, collusion or private advantage.


  • The objective is to achieve an outcome that delivers sustainability, efficiency and cost savings (where appropriate)


  • Vigorous competition among suppliers helps governments realize this objective.


General codes of conduct apply also to the procurement personnel. They contain conflict-of-interest regulations regarding personal affiliations with bidders and prohibitions against the acceptance of inducements.

Control, check and balance rules and regulations and their review to catch up with international codes and obligations are also required

India is an example of countries which have successfully instituted certain control and oversight functions carried out by a central authority such as an office of Procurement Comptroller and Auditor General (PC&AG). A member of PC&AG joins in the bidding design procedure to oversee compliance with the established procedures to stop fraud, malpractice and ensure the principle of value for money.

To enhance integrity in government procurements the PC&AG exercises conducting systematic analyses of weakness and irregularities and issuing circulars and instructions to prevent such risks. To strengthen further the mechanisms that ensure integrity and curb corruption in procurement the PC&AG provides that inclusion of Integrity Pacts (IP) with Penal Sanctions (PS) for any form of corruption.

The United Nations Global Compact, also known as Compact or UNGC, is a United Nations initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation.

Iraq is a member enjoying the prestige derived therefrom but has to deliver its policy, codes and obligation.

*) Senior Iraqi oil experts

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