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.
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).