ECONOMY

Bribes provide the foundation stone for most public projects

Anyone claiming that kickbacks are a widespread phenomenon in the domain of public projects is hauling coals to Newcastle. But when such sums paid by construction companies and contractors to various officials exceed 10 percent of the budget of some projects, the problem surely acquires an important dimension of which the taxpayers, who ultimately foot the bill, are often unaware. In this period of riches for the construction sector, a company official agreed to give us an insight into how the «mechanism is lubricated» by kickbacks. He is an active participant in the operation of the mechanism, one of the engineers in a government department that often commits breaches of faith, breaking the oath they made when hired. But they are only a part of the whole mechanism. The search for the real causes of the phenomenon reveals widespread corruption in which mayors and a host of other administrative officials are involved. The system is seriously sick and the various measures that are occasionally announced do not provide a cure. The green light for the activation of the corruption mechanism is given by the official announcement containing the details of the auction; that is, with the publication of the specifications of the study which, as a rule, is incomplete and contains a wholly unrealistic cost estimate. Subsequently, the tender for the selection of the winner is conducted on the basis of a unit price. The winner will ultimately be declared on the basis of a mathematical formula that gives the average of the bids submitted by the participating companies, which have made the largest discounts they can offer. The winning bids usually carry discounts that do not reflect the real cost of the project. Contractors cannot possibly complete projects at such low budgets. Immediately after the declaration of the winner, negotiations then start over the new likely cost. The introduction of the mathematical formula for the selection of the winner in Act 2576/1998, although heralded as a solution to the problem of the excessively large discounts in the tenders for public projects, has led to new distortions. Discounts were reduced, but the solution was a superficial one and the aim was only superficially attained. Bogus bids Currently, the level of the discount does not depend on the real cost of the project but on the percentage to which the formula statistically leads to. Tenders have now become the subject of mathematical analysis, and contractors have unofficially been split into groups, or «syndicates,» so that they may improve their chances when contesting a project. In a tender, for instance, the bidders may number as many as 50 companies. In reality, however, about one-third of the participants may be bogus, designed to introduce as many bids into the mathematical formula in order to lower the average and improve the chances of the «syndicate» winning the project. This means that the discount is not determined by the real cost factors but by the theory of probability. Naturally, the contractor is not overly concerned if his discount is too large. He knows full well that the study he will be supposed to implement is inadequate and that after he is declared winner he will have to employ underhand means to secure the prices he wants. The second phase begins after the declaration. There begins the long bargaining process between the contractor and the technical services of the employer over the new prices, extra work for the project and supplementary contracts. This is where an endless chain of middlemen come into the game. If it is a municipal project, the new prices for the unforeseen extra work that had either genuinely escaped the planners or had been deliberately left out of the original study must be approved by the municipal authority, then by the regional authority before being returned to the municipality, which will issue payment orders. This process may last between three and six months. To speed up the mechanism, it is necessary to «lubricate» all its cogs. Fresh expenses are incurred to secure step-by-step approvals and priority in receiving payment vis-a-vis other claimants. The more the steps, the higher the cost of the lubrication. Ultimately, everyone is involved: regional officials, the technical services of the ministries, and the engineers who make the measurements. Tighter rules mean more kickbacks «Can the new rules contribute to lessening corruption?» we asked our source. The reply was not encouraging. «There have been several attempts to this end in recent years. However, they failed to reach the essence of the problem, which is the quality of the project studies and the rationalization of the outdated list of prices set by public departments. Every new set of regulations simply makes the rules for bargaining tighter. What they achieve is only to push up the bribes needed in order to remove even the most sticky of obstacles. I fear that the introduction of the monitoring mechanism for projects, the Managerial Authorities, will lead to an even more unwieldy bureaucracy instead of lessening corruption. «A characteristic example is the signing of supplementary contracts, which is expressly banned by the Managerial Authorities, supposedly in order to reduce arbitrary cost overruns. Given the omissions in project studies, the prohibition is bound to lead to huge bureaucratic obstacles. And since the number of stages increases, the bureaucracy is bound to require more kickbacks to act.»