You are here: Home / Student Projects / Better Indicators to Measure Corruption in Slovakia

Better Indicators to Measure Corruption in Slovakia

In the Framework of a Campus for Transparency Project, students from the London School of Economics (LSE) conducted a study for Transparency International Slovakia on the following question: “Can the procurement data on the process and results of tenders help to identify corruption patterns, suspicious procurers and suppliers?”

Corruption is a primary concern in both the developing and the developed world; with the spread of  corruption  being  a worrying  trend  in most  EU  countries,  governments  today  are  looking  for  new  practical ways  to measure  and  fight  it  (Mungiu-Pippidi,  2013).  Public procurement is particularly vulnerable to corruption because of its long processes of implementation and the large amounts of money involved (Campos and Pradhan, 2007).

In Slovakia, corruption has been widespread since the collapse of the Soviet Union and the beginning  of  the  economic  development  of  the  country  (2009  Human  Rights  Report).  In particular, the situation is striking in public procurement.  In this  sector,  Slovakia  is  ranked  among  the  worst countries  in  the  European  Union  for  government  favouritism  (Mungiu-Pippidi,  2013).  There  have been  previous  attempts  to  combat  corruption  in  Slovakia  including  a  1999  government  program implemented  jointly with  the  EU,  the World  Bank  and  USAID, which  have  had  limited  success  in reducing the level of corruption. 

Given this situation, the aim of this study is to identify and test a new approach that will help public authorities and stakeholders to identify corruption patterns.  The  methodology  is  based  on  the identification  of  “red  flags”  in  the  procurement  process.  This approach, unlike  corruption  indices that are based on perceptions and  combined  indicators  (TI CPI, BEEPS, WGI),  identifies  corruption patterns analysing the systematic presence of certain situations that are likely to be correlated with the practice of corruption (“red flags”). The model’s aim is not to identify the corrupt cases, but to provide guidance for further investigation on the most “red flagged” cases, sectors, or regions.

Like all models, the red flag approach has some limitations that require the results to be interpreted with care, as there is the risk of having a number of false positives (Kenny and Musatova, 2010), and of misinterpretation of the findings.

This study draws upon red flag approaches implemented by other multilateral organizations (e.g. the EU Commission, The World Bank, and the Inter-American Development Bank) and uses an adapted method that is tailored to specific needs and issue areas in the Slovak public procurement database. The 9 red flags utilized in the analysis are as follows:

1)     Number of participants in the procurement process;

2)     Number of valid bids submitted;

3)     Ratio of submitted bids to the number of participants;

4)     Total length of the tender procedure;

5)     Difference between total price and estimated price;

6)     Amount of savings or excess cost;

7)     Practice of sub-supply within the contract;

8)     Use of non-transparent awarding methods;

9)     The absence of EU funds.

These indicators will be tested on the Slovak database of procurement tenders. It is also important to note that when the data for a specific red flag in a specific tender is not collected, the number of missing values is included in the analysis as an indicator of interest.

The  findings  section  is  based  on  the  analysis  of  the  nine  red  flags  across  all  the  regions, with  a particular  emphasis  on  the  Bratislava  region, which  accounts  for  75%  of  the  total  value  of  public procurement. It includes analysis for the distribution of red flags, clear cases and missing data over the  years  2009_2013,  followed  by  an  overview  discussing  two  particular  sectors  in  the  Bratislava region — construction and business services.

Broadly speaking, the findings of the analysis show:

  • The  number  of  participants  as well  as  the  number  of  valid  bids  are  consistently  low  and below the threshold of four participants, signalling a strong lack of competition;
  • The number of tenders lasting less than the threshold of 210 days is significantly high, and the  number  of  missing  observations  for  this  particular  red  flag  is  also  higher  than  the average;
  • The  total  price  exceeded  the  estimated  price  of  the  contract  in  almost  half  of  the observations, signalling a potential presence of collusion;
  • No  tender  was  red  flagged  regarding  the  amount  of  savings  or  excess  costs,  signalling  a potential reporting error of the values; additionally for this indicator, the number of missing values is significantly high;

From  the  analysis  of  the  construction  and  business  services  sectors  within  the  capital,  some significant facts emerged as well:  the  construction  sector performs worse  than  the average of  the Bratislava region in the number of participants, and in the practice of sub-supply, while performing relatively  better  than  the  average  in  the  length  of  tender.  The business services sector is overall more aligned to the average of the nation. However, in this sector the number of missing data is higher than the average of the nation, and the absence of EU funds in the tenders is more consistent as well. 

Basing on this analysis, we are able to make some recommendations to the actors playing a role in fighting corruption in Slovakia:

  • Data accessibility: The public availability of procurement data is a big step forward in making the  process more  transparent  and  accountable;  however  the  data  should  be made more easily  understandable  and  readable  for  the  general  public  in  order  to  reap  the  anti-corruption gains related to increased transparency.
  • Data collection: One  considerable  obstacle  for  this analysis has been  that  some  indicators that  could  have  been  useful  were  not  available  in  the  database.  The collection of other indicators especially in the project implementation phase could be a major improvement for the practical application of models like the one proposed in this study.
  • Targeted sector and regional analysis: Models like the one in this study should be applied in specific sectors and regions, and results should be made available to the public in order to enhance awareness and knowledge about corruption.

 

The full report is available here.

References

A. Mungiu-Pippidi, The Good, the Bad and the Ugly: Controlling Corruption in the European Union, Hertie School of Governance (2013). Available from: http://www.againstcorruption.eu/wp_content/uploads/2013/03/ANTICORRP_Policy_Paper_on_Lessons_Learnt_1_protected1.pdf.

 J.E. Campos & S. Pradhan, “The Many Faces of Corruption: Tracking Vulnerabilities at Sector Level”, the World Bank (2007).

 C. Kenny & M. Musatova, “Red Flags of Corruption in World Bank Projects, an Analysis of Infrastructure Contracts”, the World Bank Sustainable Development Department, Policy Research Working Paper 5243 (2010).

Author : Drian Lewis, Daniela Jonova, Giovanni Lotti and Maryam Hassan

25 Nov 2014


Bookmark and Share

Our partner