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Measuring Government Favouritism Objectively: The Case of Romanian Public Construction Sector

Abstract

Government favouritism in the allocation of public funds raises costs for any society in which corruption prevails. Particularistic transactions can be identified in three different situations: uncompetitive awards of public contracts when there is only one “competitive” tender, when public money is spent on contracts supplied by politically connected firms, and a situation of capture in which one private contractor obtains a disproportionate share of contracts issued by some public agency. This present research has tested for the relevance of those three types of particularistic transactions that signal government favouritism as they apply to the Romanian construction sector for the period from 2007-2013, and to do so has made use of original public procurement databases. Furthermore, it will be proposed here that the “kickback”—a percentage of particularistic awarded values—can be used as a measurement of corruption. Even conservatively estimated, kickbacks account for much of the cost borne by any society that fails to eradicate corruption. For our purposes here, amounts of kickbacks at county level have been controlled against criminal convictions for corruption at county level. As a result, data analysis provides strong evidence that kickbacks based on particularistic allocation of public funds are indeed relevant in the measurement of corruption, and the steps used to evaluate kickbacks can be used just as well for other countries.

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Notes

  1. 1.

    The discrepancy between the high number of award notices and the contracts included in the database arises from the fact that most of the awarded contracts do not exceed 1 million Euros.

  2. 2.

    The contract values have been converted into EUR using an average monthly exchange rate. Inflation was not taken into account.

  3. 3.

    The percentages are probably even greater, as I applied downwards corrections to the values of contracts.

  4. 4.

    The first classification takes into account different administrative structures by their activity identified geographically. The local level includes municipalities, towns and villages, each with their own elected mayors and local councils that award public contracts separately. The next layer refers to county level entities such as elected county councils, de-concentrated public services of ministries and government-appointed prefects, as well as to the Romanian capital, Bucharest. Schools and hospitals and other public entities that are not part of local or central government were assigned to the two levels mentioned above. Most of the regional contracting authorities are state companies or partially-owned state companies or universities. Finally, the “national authorities” category covers central government and state companies or partially-owned state companies that operate at national level.

  5. 5.

    The second classification refers to different types of state entities: after the fall of communism state-owned companies were reorganized in so-called autonomous regies (AR) and state companies or partially state-owned companies (Comp.) supplying public services. Other types of local government taken into account are the city and town halls and local councils (CH&LC), and county councils (County C.). I also considered the following to be important categories of contracting authorities: de-concentrated services of central government present at county level (Deconc.), central government (Central G.) and special entities active in the public road infrastructure sector—the Romanian National Company of Motorways and National Roads CNADNR (which is also a state company) and the so-called road and bridge departments that are active at county level (Road D.).

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Acknowledgments

This article has been produced with the support of the European Union's Seventh Framework Programme for Research –Socio-economic Sciences and Humanities theme (EU Grant Agreement number: 290529). The information and views set out in this article are those of the author alone and do not reflect any collective opinion of the ANTICORRP consortium, nor do they reflect the official opinion of the European Commission. Neither the European Commission nor any person acting on behalf of the European Commission is responsible for the use which might be made of the following information. The author would like to thank Dr. Alina Mungiu-Pippidi for her guidance, Roberto Kukutschka for his help and the two reviewers for their valuable comments.

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Correspondence to Irina Mădălina Doroftei.

Appendices

Appendix 1

Table 4 Global Competitiveness Index—1st pillar ranking

Appendix 2

Table 5 SEAP database description
Table 6 Aggregated SEAP data on the number of winner companies in PP (construction sector)

Appendix 3

Table 7 County level data

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Doroftei, I.M. Measuring Government Favouritism Objectively: The Case of Romanian Public Construction Sector. Eur J Crim Policy Res 22, 399–413 (2016). https://doi.org/10.1007/s10610-016-9319-9

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Keywords

  • Corruption
  • EU funding
  • Government favouritism
  • Kickback
  • Public procurement