By Richard E. Messick
A new World Bank study on corruption in the roads sector shows the challenges contractors and engineering firms working in developing countries face when trying to avoid being drawn into schemes that violate the Foreign Corruption Practices Act or the anti-corruption laws of other nations or both.
The study cites cases where government official have made participation in a bid rigging scheme the price of doing business in their country and other instances where consulting engineers refusing to go along with fraudulent schemes are blackballed.
Among the findings:
- World Bank investigators were told that foreign firms wanting to bid on roads contracts in Bangladesh were warned by a road agency official that they would be disqualified if they undercut the price local firms had agreed on.
- In India, a senior official reported that “road mafias” of contractors, engineers, the local police, civil servants, “and last but not least local politicians” all conspire to keep prices on road contracts above market rates; and in explaining roads sector corruption in the state of Jharkhand, a civil society activist told the New York Times that “the nexus of politicians, contractors and bureaucrats is very strong.”
- In Uganda, researchers found that “the tendering process has been turned into a business by politicians at the district to settle their economic problems. . . . [They] pressure evaluation teams” to select certain contractors.”
- In Indonesia, engineers admitted to investigators from the Bank’s Integrity Vice Presidency that they were bribed to ignore fraud, explaining that if they did not go along, local officials “in on” the fraud would refuse to hire them on future government projects.
- In a project in Africa, Bank staff received information that in return for approving inflated invoices the engineer received 15 percent of the amount overbilled. The practice is apparently widespread in that country; during the investigation Bank investigators learned that the builder had instructed its local affiliate to “develop partnerships with local consultants,” so that if they were appointed engineers on future projects, they would be sure to cooperate with similar schemes.
Titled "Curbing Fraud, Corruption, and Collusion in the Roads Sector," the study recommends a number of steps developing countries and the World Bank can take to reduce collusion in the tendering for road construction contracts and fraud and corruption in contract execution. It is available here.
Richard E. Messick, the study’s author, is a Senior Operations Specialist in the World Bank’s Integrity Vice Presidency where he advises Bank staff and policymakers in developing countries on anticorruption policies. He can contacted here.