1) In which forms does corruption occur
Corruption can occur in the crevices of the law. Corruption in capital works happens in many ways including bribes, kickbacks, collusion, bid rigging, and fraud. Corruption in procuring capital works.
Detecting corruption in selection and award of contact
ü Bribes and kickbacks---key decision makers seek to manipulate the procurement process to award the work to a particular contractor, in return for a payment from that contract. Bribes are payments received in advance, in return for an agreement from the decision maker to decide in a certain way. Kickbacks are payments made to the decision maker after the fact (for example, once the construction contract has been awarded to a pre-determined firm.
ü Bid rigging---includes actions that influence a bid in a non-competitive way to achieve a prearranged objective. For instance, bid rigging could include some type of information or procedural asymmetry to tip the scale in favor of a contractor or consortium (as in, sole-source contracts or manipulated bid specifications)
ü Fraud---Bidders misrepresent the qualifications of the firm or individual staff, in a way that materially affects their ability to undertake the project to the required standard. Such fraud may involve collaboration of decision makers or utility staff (for example, and agreement to not carry out proper site inspections).
Detecting corruption in design and construction specifications
Corruption during the procurement process may take the form of public officials favoring a particular design, material, or method of construction. How this takes place depends on the procurement method used. Project design, selection of materials, and method of construction can either be developed:
ü In preparation for the procurement of a particular firm to carry out construction, as is the case of traditional procurement
ü Together with a proposal to win the tender to carry out construction, as is the case under the design-build procurement.
When this procurement method is used, corruption may occur when public officials:
ü Choose a design that favors a particular firm—Public officials may deliberately select a particular design and method of construction because it favors one construction tenderer who may be better able to comply with that design method. (For instance, if a prominent Minister owns a steel company, so many designs for transport infrastructure specify steel, even though other materials may be as good or even better)
ü Choose materials that favor a particular supplier—Public officials may select a design which unnecessarily indicates specific materials to be used in order to favor a specific supplier (as in example above)
ü Choose the most expensive design—If a public officials plans to receive a commission for helping a specific firm win a construction bid—and that commission is calculated as a percentage of project costs—the public official has a vested interest in increasing the size, scope, or design of the project. (For instance, a commission of two percent of the cost of a four-lane roads is higher than a two percent commission on a two-lane road). Further—even in instances where a commission from a particular contractor has not been agreed upon—a public official may still choose the most expensive design in order to maximize the potential for concealing large bribes in the award of the contract and large fraudulent claims made during the project.
Detecting corruption in project supervision
Corruption in project supervision generally takes one two forms. On the one hand, a contractor may pay a bribe to an inspector to manipulate certification documents because materials or quality do not comply with specifications. Indicators of this type of corruption include:
ü Bias in inspection site---The contractor or project officials may insist on choosing the sites for inspections, or agree with the project inspector to only inspect specific sites
ü Falsification of documents---The project inspector may manipulate inspection certificates or quality tests to pass certification even when these tests failed or were never conducted.
Detecting corruption in contract claims and variations
Once project construction begins, another way to generate additional kickbacks is through change orders, variation orders, or contract amendments. The initial procurement is usually more transparent than post-award contract adjustments. Contract variations are more common in large infrastructure projects and can collectively increase the final price by 10-50 percent above the original contract price and extend the delivery period.14
Contract variations involve changes, which must be agreed to by both parties, but may be used to conceal substantial excess quantities or unnecessary services that would be billed but not delivered. This generally takes the form of either:
ü An increase in the price of the contract, for the same output or level of quality
ü A reduction in the quality of the contracted works for the same price.
2) How corruption can be reduced and Highlight the most relevant and feasible solutions
Increasing Probity in Capital Works
Increasing probity in capital works involves increasing transparency and accountability in the following stages of road projects:
ü Procurement, including selection of project participants and design and method of construction
ü Project implementation, including project supervision and contract claims and variations
Increasing probity in selecting project participants
Probity in selecting project participants relies on a well-run procurement process. Most governments have developed rules or fiduciary requirements for procurement processes. Yet, the rules may not be sufficiently detailed, may not be properly tailored to country circumstances, or may otherwise be inadequately designed to prevent fraud and corrupt practices. Even if the rules are well-designed, bidders and procurement agents may find ways around them, or may subvert standard procedures to carry out corrupt activity “behind the scenes”.
Three techniques that are generally useful to increase probity in selecting project participants are:
ü Strictly enforcing bid validity and contract negotiation periods. Practitioners may be hesitant to declare misprocurement when the process of selecting a winning bidder and awarding a contract takes too long, especially if a reasonable excuse is offered. However, long decision and negotiation periods may indicate poor and potentially corrupt practice, and should not be tolerated
ü Ensuring good record-keeping. Good record keeping reflects the kind of discipline required to minimize the prospects of fraud and corruption. Project procurement files should include, at a minimum, the records of advertisements, a copy of all prequalification and bidding documents (including bidders excluded in the prequalification process the losing bids, not just the winning bid), a copy of the minutes of the bid opening meeting, the report from the bid evaluation committee—including a clear statement of the rationale for any bids that are disqualified, the contract award, and a copy of the signed contract
ü Reviewing bids for unusual patterns. Once a number of bids have been run, and the government has collected information on the procurement packages and winning bids, practitioners should review this information for unusual patterns such as repeated packages just below certain procurement thresholds, similar bids submitted by losing bidders, and bid awards being “revolved” between a small number of bidders. If practitioners are untrained in spotting such unusual patterns, they can hire a fraud specialist or forensic accountant to assist in bid analysis. Such analysis should be repeated on a regular basis, and used to feed-back in to future procurement design.
Employing these three techniques can be difficult. To improve the bid evaluation process and increase probity when risk of corruption is high, sector practitioners might consider:
ü Using probity advisors and auditors. A probity advisor is an expert advisor who can advise on and approve procurement plans at the outset and during the selection process. An auditor checks on how the plan is implemented. Probity advisors and auditors can be appointed to oversee procurement processes in a sector, or across sectors.
ü Registering complaints. Complaints from losing bidders and public observers can highlight faults in the procurement system. Even the threat of a complaint can help to increase the likelihood that processes are followed. Complaints might be registered through a “hotline” established specifically for a large roads project or through a general procurement complaints hotline
ü Using e-procurement. E-procurement generally involves the advertising of bid opportunities, acceptance, and reward of bids via the internet. The use of the internet for advertising helps to ensure that the bidding process is transparent—all parties have access to the same information, all of which must be posted on a publicly-accessible site.
Increasing probity in design and method of construction
Increasing probity in design and method of construction generally involves improving the design of bid specifications. Bid specifications that are too narrowly defined or not in line with expected project outputs may indicate poor governance or corruption. To increase probity in the design of bid specifications, sector practitioners might consider:
ü External review of bid specifications
ü Public and community participation in project selection and design.
ü Planning and adequately implementing resettlement.
Increasing probity in project supervision
Effective project supervision includes monitoring, technical support, review, and reporting. Most project executing agencies have rules on how projects should be supervised. However, as with procurement rules, the mere presence of guidelines on supervision is not enough—practitioners must apply the rules intelligently and consistently, and adapt their methods to suit the project context. To increase probity in project supervision, sector practitioners might consider:
ü Third party oversight. In most large roads projects, a private engineering consultancy is hired to monitor construction. Bringing in a second line of supervision, for example, allowing scrutiny by a university engineering department or an NGO with the requisite expertise, can further increase probity in project supervision
ü Community oversight groups. Can be engaged to oversee project implementation.
ü Complaints Mechanisms
ü Publishing contract information. Third party and community members need good information about contract specifications and requirements in order to monitor effectively. One way to ensure access to this information and increase accountability is to make some contract and contract variation information available in the public domain. This information can be published, made available online, or displayed in a public venue.
Increasing probity in contract claims and variations
Increasing probity in contract claims and variations involves transparency and uniformity in setting and enforcing contract variation rules. Frequent and uncontrolled project variations create opportunities for forms of bid-rigging. Manipulating project variations can be discouraged by making rules on the specific instances when contract variations will be allowed clear from the outset.. The more stringently such rules are monitored and enforced, the harder it will be to use contract variations as an avenue for corruption.
Reference:
World Bank (2009), Capital Works; “Deterring Corruption and Improving Governance in Road Construction and Maintenance”, Transport Papers, TP-27, World Bank, Washington
