Charles Kenny

Publishing Construction Contracts and Outcome Details

Publishing Construction Contracts and Outcome Details is a World Bank Working Paper.  Construction governance failures can lead to the construction of the wrong infrastructure, poor quality construction, and excessively high prices for work. There is some evidence from both other sectors and the construction sector itself that improved transparency, especially when combined with oversight, can improve development outcomes through its impact on the quality of governance. This paper reviews that evidence, discusses costs and benefits of greater transparency in particular with regard to the contracting and delivery process in construction, and briefly discusses an initiative to improve governance in public construction -- the Construction Sector Transparency Initiative.  Shorter, updated versions were published as a CGD working paper and in the ICE Journal.

'Red Flags of Corruption' in World Bank Projects : An Analysis of Infrastructure Contracts

Red Flags of Corruption in World Bank Projects is a World Bank working paper.  "Red flags" are indicators of potential issues regarding governance failure, collusion or corruption in projects. While some specific red flags can be powerful indicators of issues to be addressed, the hypothesis of this paper is that many proposed red flags are potentially too ubiquitous and randomly distributed to be useful as indicators of significant governance failure. The paper examines project documentation from a small sample of World Bank water and sanitation projects in an attempt to collect data on the presence or absence of 13 commonly accepted red flags. This paper finds that: (i) almost every contract reviewed raised at least one of 13 red flags analyzed; (ii) potentially tainted contracts did not exhibit notably more red flags than control contracts; and (iii) the occurrence of multiple red flags in the same contract was rare enough to suggest that joint occurrence was largely by chance, not as a result of a strongly causal inter-relationship between flags. The ubiquity and apparent randomness of these red flags suggests that their roll-out as a monitoring tool requires additional thought as to interpretation, context and use. The paper examines an alternate tool for uncovering potential problem projects -- supplier concentration. Across a very small sample, there does appear to be a relationship between such concentration and potential problem projects.

Grand Corruption in Utilities

Grand Corruption in Utilities, co-authored with Tina Soreide, was issued as a working paper in December 2008.  The paper discusses mechanisms of grand corruption in private sector utility provision in developing countries. The paper focuses on decisions made at the government level involving private sector management, ownership, and provision of utility services.  Corruption at that level may influence the pace and nature of private sector involvement and competition in utilities, as well as the level and form of investments, subsidies, and prices.  On the basis of a literature review and interviews with firms and regulating authorities in two countries, Tanzania and the Philippines, this paper discusses the levels and determinants of grand corruption in utilities.  The paper concludes by discussing a research program to extend this knowledge through a cross-country survey instrument.

Is There an Anti-Corruption Agenda in Utilities?

Is There an Anti-corruption Agenda in Utilities? is forthcoming in Utilities Policy. In a networked utility setting (few, predominantly monopoly providers), it is very hard to measure the extent of grand corruption using perceptions or surveys. It is even harder to measure the extent of damage done specifically by corruption, petty or grand. As a result, it will be hard to develop 'actionable indicators' of, or to develop empirically tested responses to, corruption in utilities. How much does this matter? Corruption is the result of a failure of governance (poor sector structure, weak management and so on). We can measure the impact of poor governance at the level of the utility looking at measures such as transmission and distribution losses or the construction of inoperable power plants. And we have a number of tools to improve utility governance (including sector structure reform and SOE corporate governance mechanisms). It is not clear that, at the sectoral or company level, there is a significant anti-corruption agenda not encompassed by this broader agenda of improved governance. To that extent, the 'new' anticorruption agenda provides renewed justification for the 'old' focus on institutions at the level of utilities management, but does not require a radically different approach.

Infrastructure Governance and Corruption: Where Next?

Infrastructure Governance and Corruption: Where Next? was issued as a working paper in August, 2007. Governance is central to development outcomes in infrastructure, not least because corruption (a symptom of failed governance) can have significantly negative impact on returns to infrastructure investment. This conclusion holds whether infrastructure is in private or public hands. This paper looks at what has been learned about the role of governance in infrastructure, provides some recent examples of reform efforts and project approaches, and suggests an agenda for greater engagement - primarily at the sector level - to improve governance and reduce the development impact of corruption. The discussion covers market structure, regulation, state-owned enterprise reform, planning and budgeting, and project design. The paper was the subject of an Economic Times op-ed.

Construction, Corruption and Developing Countries

Construction, Corruption and Developing Countries was published as a working paper in June, 2007.  The construction industry accounts for about one-third of gross capital formation. Governments have major roles as clients, regulators, and owners of construction companies. The industry is consistently ranked as one of the most corrupt: large payments to gain or alter contracts and circumvent regulations are common. The impact of corruption goes beyond bribe payments to poor quality construction of infrastructure with low economic returns alongside low funding for maintenance-and this is where the major impact of corruption is felt. Regulation of the sector is necessary, but simplicity, transparency, enforcement, and a focus on the outcomes of poor construction are likely to have a larger impact than voluminous but poorly enforced regulation of the construction process. Where government is the client, attempts to counter corruption need to begin at the level of planning and budgeting. Output-based and community-driven approaches show some promise as tools to reduce corruption. At the same time they will need to be complimented by a range of other interventions including publication of procurement documents, independent and community oversight, physical audit, and public-private anticorruption partnerships.

Measuring and Reducing the Impact of Corruption in Infrastructure

Measuring and Reducing the Impact of Corruption in Infrastructure was issued as a working paper in December 2006.  The paper examines what we can say about the extent and impact of corruption in infrastructure in developing countries using existing evidence. It looks at different approaches to estimating the extent of corruption and reports on the results of such studies. It suggests that there is considerable evidence that most existing perceptions measures appear to be very weak proxies for the actual extent of corruption in the infrastructure sector, largely (but inaccurately) measuring petty rather than grand corruption. Existing survey evidence is more reliable, but limited in extent and still subject to sufficient uncertainty that it should not be used as a tool for differentiating countries in terms of access to infrastructure finance or appropriate policy models. The paper discusses evidence for the relative costs of corruption impacts and suggests that a focus on bribe payments as the indicator of the costs of corruption in infrastructure may be misplaced. It draws some conclusions regarding priorities for infrastructure anti-corruption research and activities in projects, in particular regarding disaggregated and actionable indicators of weak governance and corruption.  A revised version will be published in the Journal of Development Studies.