A Comprehensive Review of Objective Corruption Proxies in Public Procurement: Risky Actors, Transactions, and Vehicles of Rent Extraction

Fazekas, Mihály; Cingolani, Luciana; Tóth, Bence

doi:10.2139/ssrn.2891017

Cited by 17 publications

(17 citation statements)

References 45 publications

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“…Based on qualitative interviews about corruption in the public procurement process in Hungary and the Czech Republic, a media content analysis in Hungary, and a review of international literature, we identified a range of “red flags” indicating corruption risks in public procurement (Organisation for Economic Co‐operation & Development [OECD] ; World Bank ; Pricewaterhouse Coopers ; Klasnja ; Fazekas et al . ) (Table ). The simplest indication of restricted competition in line with our theoretical definition is when only one bid is submitted for a tender in an otherwise competitive market.…”

Section: Data and Variablesmentioning

confidence: 99%

Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe

Fazekas

King

2018

Regulation & Governance

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Given the unprecedented scale of intergovernmental development funding and the importance of institutional quality for human well-being, it is imperative to precisely understand the impact of development funds on corruption. In Europe, European Union (EU) Funds provide a boost to public spending in recipient member states while introducing additional corruption controls. We investigate whether EU Funds increase high-level corruption in the Czech Republic and Hungary in 2009-2012. We analyze newly collected data from over 100,000 public procurement contracts to develop objective corruption risk indicators and link them to agency level data in the public sector. Propensity score matching estimations suggest that EU funds increase corruption risk by up to 34 percent. The negative effects are largely attributable to overly formalistic compliance and EU Funds overriding domestic accountability mechanisms in public organizations entirely dependent on external funds. The policy implications are profound: governments should reduce barriers to market entry by lowering red tape and prevent excessive concentration of funds.

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Section: Data and Variablesmentioning

confidence: 99%

Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe

Fazekas

King

2018

Regulation & Governance

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“…Given the much higher organisational sophistication of government favouritism and the deliberate use of state hierarchy and public administration for the purposes of rent extraction, we can identify three major impact channels. First, government favouritism relies on private companies as vehicles of rent extraction [19]. Hence, the regulation of the creation and cessation of corporations is central to government favouritism [20].…”

Section: Mechanismsmentioning

confidence: 99%

Red tape, bribery and government favouritism: evidence from Europe

Fazekas

2017

Crime Law Soc Change

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Red tape has long been identified as a major cause of corruption, hence deregulation was advocated as an effective anticorruption tool, an advice which many country followed. However, we lack robust systematic evidence on whether deregulation actually lowers corruption. This is partially due to the difficulty of defining what is good regulation, but also to the lack of theoretical clarity about which type of corruption regulations impact on and to the deficient measurement of different types of corruption. In order to address the latter two gaps, we differentiate petty corruption from government favouritism and propose novel measurement of the latter by developing two objective proxy measures of favouritism in public procurement: single bidding in competitive markets and a composite score of tendering 'red flags'. Using publicly available official electronic records of over 2.5 million government contracts in 27 EU member states and two European Economic Area countries in 2009-2014, we directly operationalize a common definition of favouritism: unjustified restriction of access to public contracts to favour a certain bidder. Petty corruption is measured using business surveys while the extent of business regulation is measured by Doing Business expert assessment of precise regulatory costs. Using country-level panel regression analysis, we find that deregulation has a heterogeneous impact on both low and high level corruption. It is largely ineffective in tackling government favouritism, with business start-up deregulation even facilitating such corruption. Whereas deregulating the various channels through which governments and businesses interact (e.g. obtaining construction permits) often decreases the perception of bribery and petty corruption. Policy consequences are profound and point at a more targeted and context-dependent promotion of the deregulation agenda. Full public procurement database is available at

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“…Under these approaches, corruption is broken down into various types of individual or collective behaviors within several processes that affect private and public sectors likewise. Notably, the procurement of goods, services, and works is one of the governments' activities most vulnerable to corruption, with complex processes and high level of interactions between public officials and private businesses [8]. Here, corruption transforms public state institutions into private entities where public resources get diverted for the benefit of a few.…”

Section: Introductionmentioning

confidence: 99%

“…Linking actors by contracts, labor, or social relations may depict an organized network working for a common goal (win elections), multiple goals (private gain), or yielding criminal conspiracy (agreement to commit illegal acts) between companies bidding or having direct contracts while they intend to remain undetected and camouflage their activity. In public procurement, it is known that networked corruption schemes limit competition and affect the quality and efficacy of services, goods, and activities financed by governments [8,10,17]. However, to this day, there is no comprehensive understanding and convincing systematic evidence about the main structural and dynamical features of networked companies that might be able to define signs of corruption in organized crime activity despite the purchasing method.…”

Section: Introductionmentioning

confidence: 99%

Conspiracy of Corporate Networks in Corruption Scandals

Nicolás-Carlock

Luna-Pla

2021

Front. Phys.

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Corruption in public procurement transforms state institutions into private entities where public resources get diverted for the benefit of a few. On this matter, much of the discussion centers on the legal fulfillment of the procurement process, while there are fewer formal analyses related to the corporate features which are most likely to signal organized crime and corruption. The lack of systematic evidence on this subject has the potential to bias our understanding of corruption, making it overly focused on the public sector. Nevertheless, corruption scandals worldwide tell of the importance of taking a better look at the misuse and abuse of corporations for corrupt purposes. In this context, the research presented here seeks to contribute to the understanding of the criminal conspiracy of companies involved in public procurement corruption scandals under a network and complexity science perspective. To that end, we make use of a unique dataset of the corporate ownership and management information of four important and recently documented cases of corruption in Mexico, where hundreds of companies were used to embezzle billions of dollars. Under a bipartite network approach, we explore the relations between companies and their personnel (shareholders, legal representatives, administrators, and commissioners) in order to characterize their static and dynamic networked structure. In terms of organized crime and using different network properties, we describe how these companies connect with each other due to the existence of shared personnel with role multiplicity, leading to very different conspiracy networks. To best quantify this behavior, we introduce a heuristic network-based conspiracy indicator that together with other network metrics describes the differences and similarities among the networks associated with each corruption case. Finally, we discuss some public policy elements that might be needed to be considered in anti-corruption efforts related to corporate organized crime.

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A Comprehensive Review of Objective Corruption Proxies in Public Procurement: Risky Actors, Transactions, and Vehicles of Rent Extraction

Cited by 17 publications

References 45 publications

Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe

Perils of development funding? The tale of EU Funds and grand corruption in Central and Eastern Europe

Red tape, bribery and government favouritism: evidence from Europe

Conspiracy of Corporate Networks in Corruption Scandals

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