Monthly Archives: May 2017

The Costs of Procurement Gaming: Evidence from the Czech Republic

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Like any complex bureaucratic process, a public procurement system can be “gamed,” its rules manipulated to defeat the system’s purpose.  Procurement systems are particularly susceptible to gaming for they are designed to advance two objectives in conflict.  One is to allow governments to buy what they need when they need it quickly and easily.  The second is to prevent fraud and corruption from infecting the system by imposing elaborate safeguards at every step in the purchasing process – at the cost of making it slow, cumbersome, and costly.  The pressures to privilege the first at the expense of the second are many: the agency needs a replacement part immediately; every day the road is left unrepaired traffic snarls and citizens’ patience tested; overworked staff don’t have time to conduct a full-blown procurement.  The result is that procurement officers are always on the lookout for ways to bypass, or “game,” the rules that slow the process down.

One way is to attach an unrealistically low estimate on what the item to be procured will cost.  If the estimated price is below a certain amount, procurement officers can avoid conducting a full-fledged, open tender.  Below the threshold, in many systems $1 million, procurement officers need not prepare a lengthy, formal tender document, advertise it widely for a several week period, constitute a technical committee to evaluate the bids, and follow the many other rules for open, competitive procurements. They can instead use streamlined procedures — variously termed “shopping” or a “request for” or “invitation to submit” quotes—which allow them to call a few suppliers for a price quotation and take the lowest one offered.

No one with experience in public procurement doubts that threshold gaming sometimes occurs.  The questions are how often and why.  Do procurement staff regularly underestimate the contract price to push it below the threshold and avoid the panoply of procurement rules that would otherwise have to be applied?  Do staff do so to secure desperately needed items faster and cheaper?  For other legitimate ends?   Or to further corrupt deals?

New research now settles these questions – at least for the Czech Republic. Moreover, in answering them the researchers use techniques that others can employ to analyze the same questions in their countries. Continue reading →

Profiting from the Presidency? Tracking Corruption and Conflicts of Interest in the Trump Administration

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The Trump Administration has been dogged by accusations that President Trump, as well as his family members and close associates, are seeking to use the presidency to advance their personal financial interests. We’ve had numerous posts on this blog about these issues (see, for example, here, here, here, here, and here), including a recent overview of the relevant federal laws and regulations that might apply to some of the alleged problematic conduct.

Because it can be hard to keep track of the various allegations related to corruption and conflict of interest in the Trump Administration–and because accusations of “corruption” are sometimes framed quite broadly–we’re going to try to keep track of credible allegations that relate specifically to President Trump, his family, and his close associates exploiting the office of the presidency for personal financial gain. Just as President Trump’s son Eric will be providing President Trump with “quarterly” updates on the Trump Organization’s business affairs, we will do our best to provide readers with regularly updates on credible allegations of presidential profiteering. (We are not the only ones keeping track of these issues. For other useful resources and compilations, see here, here, and here.)

We will organize the issues into the following four categories, which capture four related but distinct ways that political leaders leverage the power of public office to enrich themselves, their families, and their cronies:

  1. U.S. Government Payments to the Trump Organization
  2. Use of the Power of the Presidency to Promote Trump Brands
  3. U.S. Government Regulatory and Policy Decisions that Benefit Business Interests of the Trump Family and Senior Advisors
  4. Private and Foreign Interests Seeking to Influence the Trump Administration Through Dealings with Trump Businesses

You can find our first report here.

The Interational Olympic Committee’s Revised Host City Contract: Another Failed Attempt at Preventing Corruption

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Recent Olympic Games, including the 2014 Sochi Winter Games and the 2016 Rio Summer Games, have been dogged by corruption scandals (see here and here). The Sochi Games were particularly egregious: Russian politician Boris Nemtsov believes that the total scale of the embezzlement accounts for 50-60% of the stated final cost of the Russian Olympics. One example cited was the main 40,000-seat Fisht Olympic Stadium, which was first projected to cost about $49 million. Anticorruption activist Alexy Navalny estimates that the real final cost could well exceed $520 million and may total more than $700 million, many times the fair value. This has led to some very bad publicity for the International Olympic Committee (IOC), which organizes the Games. In response to these and other concerns, this past February the IOC made changes to its Host City Contract, which sets out the requirements that cities must meet in order to host the Olympic Games. For the first time, the IOC included specific anticorruption standards and human rights requirements, which were noticeably absent from all previous versions.

The revised provision in the contract states that [the host city must] “refrain from any act involving fraud or corruption, in a manner consistent with any international agreements, laws and regulations applicable in the Host Country and all internationally-recognized anti-corruption standards applicable in the Host Country, including by establishing and maintaining effective reporting and compliance.” The IOC’s revised language integrated a number of recommendations from organizations such as Transparency International, Amnesty International, and the Sport and Rights Alliance. IOC President Thomas Bach explained that the IOC adopted the changes because “[t]ransparency, good governance and accountability are key elements of Olympic Agenda.”

However, both the substance of the terms and lack of enforcement mechanisms mean this provision does absolutely nothing in fighting corruption. The change is little more than a public relations stunt by the IOC to improve its image following numerous criticisms from recent games. Rather than applauding Bach for placing words in a contract, anticorruption activists should continue to push for meaningful change at the Olympic Games. The revised contract fails to represent genuine progress on fighting Olympic corruption for three reasons:

Continue reading →