Measuring and managing corruption risks in public procurement

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Presentation transcript:

Measuring and managing corruption risks in public procurement Measuring and managing corruption risks in public procurement. Lessons from around the globe Mihály Fazekas University of Cambridge and Government Transparency Institute misi.fazekas@gmail.com High level Workshop on Corruption Measurement, G7, Rome, 23/10/2017 This project has received funding from the European Union’s Horizon 2020 research and innovation Programme under grant agreement No 645852 2018.11.09.

Two key messages Corruption can be proxied objectively Many good and replicable corruption proxies exist, but they need to be tailored to context We know what works and what doesn’t While considerable evidence gaps remain. Plus effective solutions are deeply political and hard to sustain 2018.11.09.

Why worry about public procurement? ~Third of government spending Links to quality of institutions, development Lots of data globally Very corrupt 2018.11.09.

I. Corruption proxies 2018.11.09.

Conceptualizing public procurement corruption indicators Tendering Risk Indicators (TRI) Contracting body Supplier Contract Particularistic tie 5-20 tested indicators in each group Contracting Body Risk Indicators (CBRI) Supplier Risk Indicators (SRI) Political Connections Indicators (PCI) November 9, 2018

Modelling corrupt contracting: single bidding Distribution of contracts according to the advertisement period Tight deadline Probability of single bid submitted for contracts compared with the market norm of 48+ days Single bidding Single bidding on competitive markets matches the the corruption definition directly Binary logistic regression controlling for contract value, main product market, contracting body type, location, etc. Source: EU’s Tenders Electronic Daily (TED), Portugal , 2009-2014 2018.11.09.

Linking supplier risks to tendering risks: Suppliers registered in tax havens Tax havens (Financial Secrecy Index)  higher corruption risks (single bidding, Corruption Risk Index) EU28, 2009-2014 N=28,642; differences are significant at 0.001 level Source: Fazekas, M., & Kocsis, G. (2017). Uncovering High-Level Corruption: Cross-National Corruption Proxies Using Government Contracting Data. British Journal of Political Science. https://www.cambridge.org/core/journals/british-journal-of-political-science/article/uncovering-highlevel-corruption-crossnational-objective-corruption-risk-indicators-using-public-procurement-data/8A1742693965AA92BE4D2BA53EADFDF0 2018.11.09.

Lack of competition ~ single bidding (on competitive markets) Single bidding correlates with subjective indicators of corruption N=587,075 contracts Source: Fazekas, M., & Kocsis, G. (2017). Uncovering High-Level Corruption: Cross-National Corruption Proxies Using Government Contracting Data. British Journal of Political Science. https://www.cambridge.org/core/journals/british-journal-of-political-science/article/uncovering-highlevel-corruption-crossnational-objective-corruption-risk-indicators-using-public-procurement-data/8A1742693965AA92BE4D2BA53EADFDF0 and own calculations using national public procurement data for outside the EU-EEA 2018.11.09.

Development funding: World Bank procurement Single bidding in World Bank funded procurement, 1998-2010 cxy 2018.11.09.

Agency capture ~ excessive buyer spending concentration Agency capture correlates with businessmen perceptions of government favouritsm 2018.11.09.

II. Risk management tools 2018.11.09.

Tried tools you can use Informing public opinion: e.g. ranking of municipalities Tracking change over time: e.g. did corruption increase after government change in country X? Predictive analytics and risk-based audit: e.g. predicting risky contracts Evaluating&designing regulatory interventions: e.g. tightening transparency regulations 2017.09.14.

Informing public opinion: municipality rankings Municipality ranking in Estonia: Corruption Risk Index, 2006-2015, TED data, source: Ministry of Interior of Estonia https://www.just.ee/et/uudised/eesti-omavalitsuste-korruptsioonirisk-uletab-euroopa-keskmist 2017.09.14.

Quality of governance convergence in the EU? NUTS2 2006-2008 vs 2013-2015 2017.09.14.

Regulatory interventions: Before/after analysis of ECJ interventions in national PP markets Single bid Bidder number Local bidders 2017.09.14.

Regulatory interventions: World Bank: 2003 GWS regulatory change Interaction of regulatory change & recipient state capacity → to predict bidder number Source: Dávid-Barrett, E., Fazekas, M., Hellmann, O., Márk, L. & McCorley C. (2017) Controlling Corruption in Development Aid: New Evidence from Contract-Level Data. World Development, under review. 2017.09.14.

Risk mapping: Corruption risks cluster in contracting networks Considerable clustering of risks buyer-supplier bimodal network N org. contract >=5 or <=50 2017.09.14.

What works? Evidence overview Notes: * using discounts compared to the original price estimate; *** % change in unite price compared to regional sugar price Source: Fazekas, M., & Blum, J. R. (2017), Improving public procurement outcomes: review of tools and the state of evidence base, World Bank, under review

Sweden: weak electoral competition Single bidding and local govenrment turnover since the mid 70s +3% Source: Rasmus Broms, Carl Dahlström, & Fazekas, M. (2017) Political competition and public procurement quality. Working Paper Series 2017:5, University of Gothenburg – QoG Institute, Gothenburg. 2018.11.09.

Further readings: digiwhist.eu/resources Fazekas, M., & Kocsis, G. (2017). Uncovering High-Level Corruption: Cross-National Corruption Proxies Using Government Contracting Data. British Journal of Political Science, available online. Rasmus Broms, Carl Dahlström, & Fazekas, M. (2017) Political competition and public procurement quality. Working Paper Series 2017:5, University of Gothenburg – QoG Institute, Gothenburg. Charron, N., Dahlström, C., Fazekas, M., & Lapuente, V. (2017). Careers, Connections, and Corruption Risks: Investigating the impact of bureaucratic meritocracy on public procurement processes. Journal of Politics, 79(1). Fazekas, M. & Cingolani, L. (2017), Breaking the cycle? How (not) to use political finance regulations to counter public procurement corruption. Slavonic & East European Review, 95(1). Fazekas, M. & King, L. P. (2017). Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe. Regulation and Governance, in press. Dávid-Barrett, E., Fazekas, M., Hellmann, O., Márk, L. & McCorley C. (2017) Controlling Corruption in Development Aid: New Evidence from Contract-Level Data. World Development, under review. Fazekas, M., Cingolani, L., & Tóth, B. (2016). A comprehensive review of objective corruption proxies in public procurement: risky actors, transactions, and vehicles of rent extraction: GTI-WP/2016:03. Government Transparency Institute. Budapest. 2017.09.14.