Curbing Fraud, Corruption, and Collusion in the Roads Sector
THE WORLD BANK
1818 H Street, N.W. Washington, DC 20433
The World Bank Integrity Vice Presidency
Curbing Fraud, Corruption, and Collusion in the Roads Sector
The World Bank Integrity Vice Presidency
Curbing Fraud, Corruption, and Collusion in the Roads Sector
June 2011
2011 The International Bank for Reconstruction and Development/The World Bank
Integrity Vice Presidency The World Bank Group MSN U11-1100 Washington DC 20433
All rights reserved
The findings, interpretation and conclusions expressed here are those of the author (s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank cannot guarantee the accuracy of the data included in this work.
Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination f its work and will normally grant permission promptly.
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Contents
A c k n o w l e d g m e n ts
v
Foreword
vii
E x e c u t i v e S u m m ar y
Ix
I . I n tr o d u ct i o n
1
Development Impact of Roads
1
II . W o r l d B a n k I n v e st i g at i v e F i n d i n g s
5
III . C o l l u s i o n i n R o a d T e n d e rs
11
A. Evidence from Non-Bank Projects
12
B. Cartel Theory
12
C. Developed Country Experience
13
D. Effect of Collusion on Tender Prices
13
IV. F ra u d a n d C o rr u p t i o n i n C o n tract I m p l e m e n tat i o n
17
V. C o m bat i n g C o l l u s i o n , F ra u d , a n d C o rr u p t i o n
19
A. Measures to Reduce Collusion
19
Punish cartelization severely
19
Create incentives for the exposure of cartels
20
Revise tendering rules
20
Require independent bid certificates
23
Retain an independent procurement evaluator
23
B. Measures to Reduce Fraud and Corruption
24
Strengthen the engineer
24
Hire a technical auditor
25
Engage civil society monitors
26
Develop accurate cost estimates
26
Check the wealth of key procurement agency officials
26
C. Longer-Term Capacity-Building Measures
27
Modernize the roads sector agency
27
Strengthen competition law enforcement
27
Curbing Fraud, Corruption, and Collusion in the Roads Sector
D. Experimental Measures
27
Impose ceiling on bids
28
Use competitive negotiation
28
Contract out procurement
28
E. Issues for Consideration by Bank Operations Staff
29
Trade-offs between Transparency and Collusion
30
Subcontracting as a facilitator of capacity-building and collusion
30
Customizing measures to address fraud and corruption in civil works contracts
30
Developing expertise on cost estimating and detecting collusive bidding
30
Reevaluate current contract management form
31
Target enforcement on engineering firms
32
Increase contingent of professional World Bank staff with road engineering expertise
32
Spend more on corruption prevention in projects
32
VI . C o n c l u s i o n
35
R e f e r e n c e s 3 7
A NNEX 1 : Pr o v i n g B i d R i g g i n g o n R o a d s T e n d e rs
45
A NNEX 2 : R e f o r m s t o P u b l i c Pr o c u r e m e n t i n OE C D C o u n tr i e s
47
Tables
Table 1. Misconduct Cases in World Bank Roads Projects: Sanctions Imposed
6
Table 2. Misconduct Cases in World Bank Roads Projects: Sanctions Pending or Not Sought
7
Table 3. Estimated Cartel Overcharges
14
Table 4. Results of Audit of Zambian Roads Projects
17
Boxes
Box 1. World Bank Definitions of Misconduct
2
Box 2. Collusion and Cartels
8
Box 3. Ten Indicators of Collusive Bidding
12
Box 4. Publishing Cost Estimates: the Trade off Between Transparency & Collusion
21
Box 5. Combating Collusion by Changing the Procurement Process
22
Box 6. Certificate of Independent Price Determination
24
Box 7. Using Competitive Negotiation to Circumvent a Cartel: the US Experience
29
Box 8. Reducing Fraud and Corruption in Civil Works
31
iv
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