Corruption in road building ‘systemic’

By Helen Wright02 June 2011

The World Bank has called for sweeping action to tackle corruption in the global road building sector, including laws penalising bid rigging, market division, and other forms of collusive behaviour in both developed and developing countries.

In a report, Curbing Fraud, Corruption and Collusion in the Roads Sector, the World Bank said corruption in road contract procurement and subcontracting was a systemic problem in some countries.

"Collusion and corruption are sometimes deeply ingrained in the roads sector," the report stated. "Short-term palliatives, such as an independent procurement evaluator or technical auditor, may be the answer. More drastic measures may also be required including the use of bid ceilings, competitive negotiation, and turning procurement over to an independent agent".

And World Bank-financed projects are not immune to the problem. Between 2000 and 2010, the institution committed US$ 56 billion for around 500 road construction and maintenance projects, but around a quarter of these resulted in one or more allegations of fraud, corruption, or collusion.

Misconduct

To date, the Bank's investigative office, the Integrity Vice Presidency (INT), has confirmed allegations in 25 projects resulting in 29 cases of misconduct. The most common forms of misconduct exposed in these cases were collusion among companies bidding on a project and fraud and corruption in the execution of the resulting contract.

"While roads projects supported by the World Bank Group have had consistently positive development results, the dangers of fraud, corruption, and collusion plague the sector worldwide," the Bank said, adding that while the problem persists in both developed and developing countries, it is much more costly in terms of lost economic growth for developing countries.

The World Bank uses a standard contract when awarding road building projects. This assigns the responsibility for preventing fraud and corruption to the consulting engineer, who acts as the guardian of the project's integrity.

However, INT has reported instances where the engineer was negligent or absent. The World Bank report recommends retaining a second guardian to monitor the first, but pointed out that the fact there is a need to do this "is a sign of a systemic problem".

Confronting cartels

Leonard McCarthy, World Bank integrity vice president, said countries that have been able to deal with collusion effectively have confronted cartels and other corruption trends in the sector.

"It takes political will, a well-informed and credible capacity to prevent risk and detect red flags early on in the tendering process in addition to enforcement when corruption is detected," Mr McCarthy said.

"This review is another benchmark in enhancing the international momentum that the Bank launched at the Corruption Hunters Alliance meeting last December. Together with global enforcement partners and members of the Alliance, we will advance the range of measures this report recommends to stem collusion in tenders for roads contracts, and fraud and corruption in contract execution," said Mr McCarthy.

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