Bank Project Operations:

A framework for strengthening anti-corruption and governance in

the transport sector

William Paterson, EASTR

The corruption problem

• Infrastructure budgets large, typically 10-20%: Road subsector alone 8-15%, e.g.– ID: $0.8 billion (primary) + secondary– PH: $0.8 billion (national) + subnational

• Contracts many, large and dispersed:– 50 @ $1–25 m & 1000 @ $0.05-1.0 m

• Leakage: 3-15% on contracts + 10-20% on allocations – Total: 5-40%

The Operational Role of WB Projects

The Narrow View:• WB to ensure loan proceeds used for intended

purpose – Responsibility for implementation is with Borrower, thus include procedures to ensure Borrower reduces chances of corruption, monitors and controls use of funds

The Sustainable View:• Opportunity to improve efficiency and governance

of ALL spending in sector – change incentives, business processes, self-monitoring, remedies

A Menu for Reducing Corruption in Sector Operations

• Understanding corruption risks• Changing institutional incentives• Providing effective institutional tools• Improving transactions & implementation• Empowering civil society & recipients• Improving oversight: by gov’t, civil society, Bank• Defining & announcing remedies

Corruption Risk Mapping

• Sectoral budget allocation– Over-report assets

– Under-report performance, or exaggerate needs

– Exaggerate priorities or severity of problems

– Seek delegation, flexibility, discretionary power, blocks

– Manipulate allocation formula

– High visibility projects

• Program preparation– Equity v. needs-based

– Quality, performance (weakest soon have highest needs)

– Bending eligibility

– Phantom projects

• Project design & prep– Loose specs

– Favor industry, technology

– Over-design

Corruption Risk Mapping (cont)

• Procurement– Prequalification:

favors, distorted facts – Bidding process:

collusion, deals, etc.– Evaluation & award:

manoeuvres– Transaction clearances– Form of contract,

allocation of risk

• Implementation– Transaction fees

– Quality control

– Quantity measurement

– Addenda, costs (encumbency)

– Staffing, equipment

– Handover

Changing Institutional Incentives

• Commercialization – Buyer-supplier separation

• Financing – from user charges under

combined user/govt oversight

• Public accountability of institution

• Accountability of individual managing transactions

• Performance monitoring

Effective Institutional Tools

• Expenditure allocation:– Planning tool integrating

bottom-up data & sector-level performance output

• Road programming tool (pavement, bridge, safety management systems)

• Asset monitoring systems– Survey methods, imaging

• ICT enterprise-wide

• Financial management and accounting– Certification

– Account processing

– Transaction trail

– Fast monitoring

Use of IT and RMS for Tightening up the Inventory of Assets and Allocation of Funds

• Centerline survey of national roads with location referencing and video-imaging

• Found network on the books up to 22% longer than measured length, ‘bridge’ non-existent

• Maintenance funds allocated per km• “Severity” of condition and “priority” can be

viewed on line and compared with other alternatives to verify project selection

• Project design or location can be verified through objective data

Differences between Survey and Planning Lengths

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

1 3 5 7 9 11

13

15

17

Region

Dif

feren

ce (

% o

f P

lan

nin

g)

Survey was not conducted in Region IX, XII and Misamis Occidental Province in Region IX due to Peace and Order.

2000 Centerline Survey Results by Region

Road Does Not Exist

Alicia

Balligui

Cabua-an

Cofcaville

Diduyon

Dipintin

Divisoria Sur (Bisangal)

Dumabato Norte

Dungo (Osmena)

MADDELA

MangladPedlisan

San Bernabe

San Pedro

San Salvador

Santo Nino

Santo Tomas

Victoria

Villa Hermosa Norte

Villa Hermosa Sur

Villa Santiago

Balligui-Dumabato Road added to DPWH network 10th December, 1999.

Highway Imaging - video pictures at 10 meter intervals

Digital Photographs of Kilometer Posts andother Locational Referencing Points (LRPs)

Digital Photographs of Nodes

Centerline coordinates of NationalRoads used in GIS to enable display of

condition, roughness, traffic etc.

Roughness Data (IRI) over100m lengths of National

Road Network

Database of Road Sections andDPWH Managing Offices

Integrating Data Through GIS

Reforming Financial Management Business Process at the Enterprise Level

• Electronic capture at beginning of transaction• Reduces personal handling of transactions and hold

points• Internal checks – avoids duplication, double entries,

etc.• Tracks and identifies persons authorizing steps• Expedites processing, reduces delays & costs• Stronger budget & contract monitoring and control

Improving Transactions & Implementation

• Procurement process– Use of ICT for reduced

subjectivity, enhanced transparency & speed

– Standardize procedures use best practices

– Increase participation of civil society for oversight, transparency

• Implementation:

“Pork and Other Perks” – Corruption and Governance in the Philippines

(1998)• Maramag-Kibawe: “Through political connections, an

untested foreign company wins a lucrative contract. Its inexperience soon becomes evident and work falters. An embassy steps in… [firm] runs to a politically powerful law firm ….” “DPWH did not do a comprehensive background check, relying mainly on .. Financial statements..” “a trading company in the import-export of cereals,.. International cargo, …” “equipment came late..” “blamed landslide on contractor’s improper excavation of the mountainside.” “effort to reach a compromise .. reduce scope of work from 60 km to 25 km … to 16 km”

Pre-Qualification Registry for Civil WorksDPWH RIMSS Project Feb. 2000

• Computer application to help ensure that only technically and financially capable firms are invited to submit bids.

• Firm is responsible for submitting and updating information – verifies and signs a printout of current information

• In-built checks e.g., using tax returns as basis of financial turnover, etc.

• Screening determines “eligibility” to bid• Transparent, impartial, consistent, fast

1 .Contractor submits PQ informationto the DPWH in order to be

included in the PQ Registry. Records must be kept current and updates are

accepted anytime.

PQ FORMS

2. Analystsvalidate and enter information

into the PQ Registry

PQ RegistryDatabase

3. Approvals/denial letters are sent to the Contractors.

Contractors have seven days for rebuttals.

• Legal• Financial• Work Experience

Register ofContractors

Annual AdvertisementIn order to bid onCivil Works projects,Contractor must beregistered with thedepartment. Pick upPQ Registration forms at your nearest DPWH Office.

1B. The IO prepares bid documents and the Project Criteria. The Project

Criteria is sent to the PQ Office..

Project No:_______Type of Work:___________Dimension:___Cost Estimate:___________Project Duration:____

EnterProject Criteria

2B. The PQ Office checks theProject Criteria for completeness

and enters itinto the PQ Registry

.

Project CriteriaProject No:_____Type of work:Dimension:___Cost Estimate:_____Duration:_______

Project Criteria

PQ RegistryDatabase

PurchaseBid Documents

1. Registered Contractors go to DPWH Office stated in

the Project Notice

2. Contractor IDis verified

3. Contractor ReviewsRecords from the PQR

4. Contractor Signs Affidavit that records are current. Or else, gives update to the PQ Office and waits for confirmation.

5. Project Numberis Input into PQR

ProjectCriteria

ContractorRecords

Project # Contractor ID

PQR System performs:1) Slippage Verification2) License Category Verification3) Financial Capability Verification4) Work Experience Verification

If all Valid: Receipt printed for Purchase of Bid Docs

If any are Invalid: A Reason Report is printed. Corrections only processed by the PQ Office.

3 Stages of Verification

Registration/Update

PurchaseBid Docs

SubmitTechnicalProposal

ProjectMonitoring

System(PMS)

CPESContractor

PerformanceEvaluation

System

FutureLink

General • Name• Address• PCAB License• Type of Organization• Authorized Managing OfficerLegal• BTRCP/SEC Registration• Sealed Consular Certificate

Financial • Balance Sheet• Independent Auditor’s Cert.• Average Annual Turnover• Bank Information• Credit Line• Income Tax ReturnTechnical • Experience• On-going work

ProjectCriteria

ContractorRecords

PQR System will perform:1) Slippage Verification2) License Category

Verification3) Financial Capability

Verification4) Work Experience Verification

PQR PQR

Technical Proposal•Proposed Equipment• Proposed Personnel

#1 #2

• Price Proposal

Bid and Award

Slippage

Project #Contractor ID

Forms are submitted once.Updates annually/as neededSubmittal only of changes.

No forms required

Empowering Civil Society & Recipients

• Oversight role:– Inclusion of road users on Road Fund Board

• Presence in procurement – transparency– Bid openings, evaluation

• Publication of results (names, amounts, officials)

• Hotlines for reporting cases• Involvement in planning & project selection• Monitoring of safeguards, implementation

Improving Oversight

• Balance in oversight functions: – independence (government, independent

authority, user representatives, etc.)

• Performance contract – Include outputs, performance measures,

together with budget

• Financial management & audits• Technical audits

Closing remarks