The following are some examples of the circumstances in which bribes could be paid during the prequalification and tendering phase.
a) A bidder which is properly qualified may find itself being rejected at pre-qualification stage as a result of a bribe paid to a representative of the owner or engineer by another bidder. The reasons given for rejection would be artificial. Alternatively, no reasons may be given. The rejection of several potential winners could result in the favoured bidder being given an unfair advantage at
tender stage.
b) There may be, in relation to a project at tender stage, confidential details such as the owner’s minimum and maximum acceptable prices, or tender assessment system. Possession of this information may assist a contractor in its bid. The leaking of this information by a representative of the owner or engineer to the favoured bidder in return for a bribe may therefore give it an unfair
advantage.
c) The tenders may be received by the owner and not be opened at a public opening exercise. In this case, no-one except the owner will be aware of the bidders’ prices and other critical tender components. This secrecy will enable a representative of the owner to provide confidential information to the favoured bidder in return for a bribe. This bidder can then amend its tender (for example by dropping its price) so as to secure a winning position. The tenders can then be publicised, and the favoured bidder announced as the winner, and no-one will be aware that the winning bidder was given the secret opportunity to amend its tender.
d) The tender process may be corrupted by international pressure. For example, during an allegedly competitive tender process, the government of a developed country may influence the government of a developing country to make sure that a company from the developed country is awarded a project, even if it is not the cheapest or best option. Such pressure can take many forms, including the offer of aid, arms deals or agreements to support a government’s application to join an international organisation. Great lengths are taken to conceal this pressure in some cases. In
others, it is remarkably overt.
The following are some examples of fraudulent practices during the pre-qualification and tendering phase.
a) The bidders may secretly collude with each other to share the market. This normally entails the bidders agreeing that each one of them will win a certain number of projects, or a certain amount of turnover, in a particular sector. In respect of each project, a winning bidder will be pre-selected secretly by all the bidders, and the other bidders will put in tenders at a price which is higher than that of the pre-selected bidder.
b) The bidders may agree with each other on a “losers’ fee” arrangement. This normally entails the bidders agreeing that they will bid in full competition with each other (i.e. no price fixing agreement, or pre-selection of the winner). However, they agree that they will each include in their price a fixed sum representing the estimated aggregate bid costs of all the bidders. The winner will then divide this fixed sum equally between the losers. The primary reason for this arrangement is compensation for the irrecoverable bidding costs of the losing bidders.
c) A group of suppliers of materials may collude to fix the minimum price of the materials they supply. Even when there is competitive tendering, prices will be kept higher than would be the case with genuine competition.
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http://14iacc.org/programme/global-challenges/construction-sector-transparency/
Publicly funded construction typically uses 10-30 percent of public expenditure, but mismanagement and corruption can seriously impair the quality, safety and value of the resulting infrastructure. Corruption causes wastage of public funds, and allows unnecessary, unsuitable, defective, or dangerous construction projects. It also undermines the rule of law and hinders the development of strong and accountable institutions that are essential for economic growth and social justice.
The CoST Criteria
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The CoST criteria have an operational focus and represent the proposed implementation requirements of CoST. The CoST criteria are:
1. For public-sector construction projects above an agreed threshold, there is regular disclosure of material project information to a wide audience in a publicly accessible, comprehensive and comprehensible manner.
2. Procuring bodies are subject to a credible audit process and, as far as possible, projects are subject to credible, independent financial and technical audits.
3. The adequacy of material project disclosures and audits are assessed by an independent, objective and technically competent Assurance Team, and reports published. The membership, terms of reference and activities of this team must be publicly disclosed.
4. The application of this approach is extended to the main procuring bodies responsible for public-sector procurement, and related contractors.
5. A Multi-Stakeholder Group (MSG) representing the interests of stakeholders has oversight of the implementation of CoST. The membership, terms of reference and activities of the MSG must be publicly disclosed.
6. Civil society is actively engaged as a participant in the design, monitoring and evaluation of this process.
7. A public, financially sustainable work plan for all the above is developed by the host government, including measurable targets, a timetable for implementation, and an assessment of potential capacity constraints.
These criteria will be reviewed during the Pilot Phase, and will be amended, if necessary, before the design of CoST is finalised.
What are the benefits of CoST?
Overall
* Enhanced accountability of procuring entities and contractors for the cost and quality of public sector construction projects through strengthened accountability mechanisms.
* Improved management of public finance and strengthened governance of public construction projects.
* Greater efficiency of public procurement of infrastructure projects, leading to higher quality infrastructure at lower cost.
Benefits to government
* Greater public confidence in government and the procurement process.
* Governments learn what they should get using public funds and can compare this with what they are getting. Empowered with this information they can reform procedures and improve delivery.
* Tackling corruption will encourage more contractors to bid and lead to fairer prices and higher quality projects with higher economic and social returns.
* Financial transparency will develop improved business confidence and trust, and increased prospects for investment, both domestic and foreign.
* As CoST gains international recognition it is expected to provide a seal of approval that will open the door to increased flows of funding for construction projects.
Benefits to industry
* Increased transparency and fewer opportunities for corruption will engender confidence in the industry that a ‘level playing field’ exists and contract award and administration will be fair.
* Reduced levels of corruption and greater accountability mechanisms will improve the chances of local companies winning contracts.
* Companies involved in the sector will benefit from increased understanding of the social and economic development contribution made by the construction industry.
* Companies will enjoy reduced risk to their reputation from association with projects or enterprises where corrupt practices are suspected.
* Improved financial risk management will lead to better access to credit and loans on more favourable terms.
* CoST should lead to improved professional standards.
Benefits to civil society
* Civil society groups will enjoy increased access to information, the chance to participate in the governance of the construction sector.
* Increasing access to information and actively involving stakeholders in the gathering, dissemination and analysis of the disclosed data will enable civil society (including parliamentarians, the media) to hold procuring entities and construction companies accountable for the cost and quality of public construction projects; and demand better project selection and oversight in the future.
* Civil society groups will also benefit from capacity building to enable them to realise the potential benefits of CoST.
Benefits to ordinary citizens
* The prospect of being able to compare what they are getting with what they should be getting, leading to better value construction, and construction that meets their real needs.
Greater transparency in the sector should also contribute to the implementation of environmental and social safeguards – ensuring that hazardous materials are not used and health and safety laws are observed.
he World Bank
The World Bank has been a committed supporter of CoST since the initiative’s conception. The World Bank has been involved in the design and rollout of the initiative over the past two years, including by playing an active role in discussions of the feasibility of the concept at a country level, as well as the 2007 conference in London and the May 2008 pilot launch in Dar es Salaam.
The World Bank will continue to support CoST during the pilot phase. While recognising that the success of the pilots lies in the hands of the lead agencies and multi-stakeholder groups of the pilot countries, the World Bank hopes to play an active role at the country level as well as providing technical support internationally. Using resources made available by the Department for International Development (DFID), the World Bank will provide inputs and assistance to the CoST pilot phase.
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