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© 2022 International Monetary Fund
WP/22/94
IMF Working Paper
Fiscal Affairs Department
Assessing Vulnerabilities to Corruption in Public Procurement and Their Price Impact
Prepared by A. Abdou,1 O. Basdevant,2 E. Dávid-Barrett,3 and M. Fazekas4
Authorized for distribution by Nikolay Gueorguiev
May 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: Public procurement can be highly vulnerable to corruption. This paper outlines a methodology and results in assessing corruption risks in public procurement and their impact on relative prices, using large databases on government contracts and tenders. Our primary contribution is to analyze how price differential in public procurement contracts can be explained by corruption risk factor (aggregated in a synthetic corruption risk index). While there are intrinsic limitations to our study (price differentials can come from structural reasons, such as a limited number of potential suppliers) it still provides a guiding tool to assess where corruption risks would have the biggest budgetary impact. Such analysis helps inform mitigating policies owing to the granular data used.
| JEL Classification Numbers: | D73, H40, H57 |
| Keywords: | public procurement, corruption, corruption risks, procurement cost |
| Author’s E-Mail Address: | obasdevant@imf.org; misi.fazekas@gmail.com; E.David-Barrett@sussex.ac.uk; aly.abdou@govtransparency.eu |
| JEL Classification Numbers: | D73, H40, H57 |
| Keywords: | public procurement, corruption, corruption risks, procurement cost |
| Author’s E-Mail Address: | obasdevant@imf.org; misi.fazekas@gmail.com; E.David-Barrett@sussex.ac.uk; aly.abdou@govtransparency.eu |
Title Page
WORKING PAPERS
Assessing Vulnerabilities to Corruption in Public Procurement and Their Price Impact
Prepared by A. Abdou, O. Basdevant, E. Dávid-Barrett, and M. Fazekas5
Contents
I. Introduction: A Method to Assess Corruption Risks in Public Procurement
II. Assessing Vulnerabilities to Corruption Using Objective Data
III. Estimating the Impact of Corruption Risks on Price Differentials
IV. Conclusion
References
FIGURES
1. Corruption Risk Index and Its Components
TABLES
1. Red Flags Used in the Literature on Corruption in Procurement Systems
2. Average Score for Each Red Flag
3. Georgia – Main Results
4. Estimated Price impact of CRI Increase by Country
5. Georgia – Alternative Specifications
APPENDICES
I. Data Collection Methodology and Descriptive Statistics
II. Regressions Underpinning the Validity of the CRI
III. Additional Price Regressions
Paraguay
Uganda
Romania
Indonesia