Highway robbery: Investigating corruption in road projects
Posted: August 25, 2012 Filed under: Corruption, Investigative techniques, Public works | Tags: Balkan Investigative Reporting Network, Public works corruption, tenders, World Bank
Unfinished bridge in Abra province, northern Philippines. Corrupt contractors ran away with the funds for this project. (Photo from the Philippine Center for Investigative Journalism)
The Summer School sponsored by the Balkan Investigative Reporting Network ended yesterday, and as the participants got ready to leave the picturesque mountain town of Mavrovo, Macedonia, talk inevitably turned to the bad state of roads in the Balkans. Most of the journalists were driving back home, taking journeys that will last five to 11 hours on highways that have seen better days.
Many of them traced the sad state of public works in the region to corruption. It’s a lament that’s heard in many other places as well. Yesterday, the ramp of an eight-lane bridge collapsed in Harbin, northern China. Reports say the bridge was just nine months old and was the sixth major bridge to have collapsed in that country in the past year. Citizens have blamed corruption and the frenetic speed of construction for the shoddy infrastructure.
In the Philippines, journalists end up reporting sooner or later on public works corruption. So when I recounted to Balkan reporters the kinds of corruption I had encountered in road projects, I wasn’t surprised that everything sounded terribly familiar to them.
Investigations on public-works corruption have tended to look at how contracts for infrastructure projects have been awarded and how contractors collude with corrupt officials to steal money from highway funds. In the Philippines, some officials estimate that anywhere from 30 to 45 percent of the funds allotted for infrastructure is lost to graft. To report on this, journalists have relied on whistleblowers or insiders in construction firms, or losing bidders in tenders for road projects. These corrupt practices are hardly secret so it’s often not hard to find businessmen who will speak about them because they’ve lost to a rival, taken part in the corruption themselves or been invited to collude with others in rigging bids or tenders.
But journalists need documentary proof ; human sources, more so if unnamed, do not suffice. The proof can often be found in the documents produced during the contract award and implementation process, so a familiarity with the process — and how it can be corrupted — certainly helps.
There are red flags that indicate wrongdoing is taking place — often even before a tender is held — and here’s what those probing corruption should watch out for:
Before a tender or public bidding even begins…
► Collusion among bidders to fix prices and take turns winning contracts:
Some years ago, a World Bank investigation
in the the Philippines found that a cartel of public-works contractors had been awarded most of the big construction projects. The cartel told its members what amounts they should bid, down to the last peso. These deals were often made during secret meetings at a hotel in Manila. Just before the tender, the firms all raised their bids by 20 to 30 percent, citing fluctuations in foreign currency costs for the increase. The public works department thus ended up with overpriced contracts. Confidential witnesses later told the World Bank
that the cartel paid bribes to congressmen, public-works officials and a go-between for the then president’s husband. “Losing” firms who were part of the cartel also got a cut, typically 1.5 percent of the contract price.
►Limited advertising: This was a favorite, especially in the pre-Internet age. Officials in charge of a tender advertised it in small, obscure newspapers to ensure that only firms who collude with them knew a tender had been scheduled. In many countries, it’s now mandatory to publish tender announcements on government websites. But that’s often true only for national, not local, public bodies.
► Pre-qualifying only favored firms: One way to get noncolluding firms out of the running is to put such stringent stringent conditions for qualifying for a tender that only one or two well-connected companies pass the requirements. Sometimes the qualifications have to do with the size of the firm or its paid-up capital. In one case in the Philippines, the specifications for a tender required that a company be capable of producing a very particular kind of dredging equipment, which meant only one firm in the country would qualify.
► Shortened submission periods: It takes time to prepare a proper tender document, as a firm needs to make an assessment of costs and to estimate the bid of potential rivals, especially for complex projects. Colluding firms sometimes get advance knowledge of a tender and so have the advantage. Officials can cut short the tender submission period to discourage noncolluding firms from taking part.
► Fake or made-up bids: The World Bank investigation cited above found indications of made-up bids. For example, the amounts in several, supposedly competitive bids for the same project were similar, obviously copied from a master document. Sometimes, nonexistent firms or firms with the same owners, addresses and phone numbers bid for the same contract, just so there’s an illusion of competition.
Contract award stage…
► Choice of evaluation committee members: Rigged tenders are sometimes made possible by tender committee members who have family or political links with corrupt contractors.
► Bribes to committee members: Public-works contractors interviewed by the World Bank in the Philippines said that they gave money to members of bids and awards committees, not just to rig the tenders on their behalf, but also not to forward to the central office bids made by rival companies.
Contract implementation stage….
►Constructing substandard roads:
One evidence of corruption are projects that do not conform to contract specifications. A number of civic groups have been so angered by the terrible state of roads and bridges that they have done monitoring of public-works projects. One of these is Road Watch
in the Philippines, where volunteers compare contract specifications with what’s actually delivered. Journalists have done this as well.
►Unjustified contract amendments: This is a very common way to cheat on a road project. A firm bids at a low price to win a tender and then colludes with officials to amend its contract, so that costs are increased, deadlines are extended and the project specifications adjusted to the firm’s advantage.
►Fictitious certificates of completion: Corrupt officials certify a project has been completed, even if it is not, thereby allowing a contractor to collect full payment for incomplete work.
► Incomplete work: As the photo on this post shows, contractors often cheat by leaving a project undone.
► Bloated costs: Even if a project has been completed, contractors pump up the costs to raise revenues and use part of these to pay bribes.