Well-earned reputations as a tool to fight corruption
From toxic masks(opens in new window) to bribery allegations(opens in new window): several EU countries have been shaken by corruption probes in the aftermath of the pandemic, further eroding fragile public confidence. According to a survey by Transparency International(opens in new window), more than one in two EU residents believe that procurement of goods and services in their country is influenced by bribes or personal connections. How can selection procedures for public contracts minimise the risk of corruption and ensure the best bidder gets the job? The REPCOR project, which received funding from the European Research Council(opens in new window), studied the roles of reputation and corruption in public procurement to assess how the links between the two influence results – and what we can do about it. Their work focused on real-life settings. “While there is ample literature on the theoretical outcomes of different models of public procurement, there is very limited empirical evidence,” explains Francesco Decarolis, professor of economics at Bocconi University(opens in new window) and REPCOR project coordinator. To bridge this gap, the team gathered procurement data from public authorities in Italy and other EU countries on aspects such as authorities and companies involved, tender awarding rules, and even criminal cases. Their results point to a number of measures that can be taken to turn assessments of past reputation into valuable information for selecting contractors.
Mitigating bias
What exactly is the connection between reputation and corruption? “In private procurement auctions, reputation is a crucial indicator of the expected quality of the work by a contractor,” Decarolis notes. “However, past performance is not an objective measure and can be influenced by the person or body that is checking the performance – making corruption much easier, as a public contractor could bribe auditors for a higher score.” The REPCOR team identified a set of measures that could be used to mitigate the risk of biased performance reviews. These include the use of random audits, with randomisation being applied not only to the choice of contracts to audit, but also to the allocation of auditors and the composition of auditing teams. Transparent awarding systems integrating these randomised audits with price performance in a weighted score showed the greatest promise. In certain sectors, the use of digital technologies for contract monitoring purposes could further contribute to making auditing more accurate. Another effective measure could be the use of centralised public procurement bodies, as these are easier to monitor than a large number of small local buyers. REPCOR’s results indicate that tenders with fewer participants are more at risk of corruption while also driving up prices. A case study on the procurement of medical devices in Italy revealed an impact of supplier concentration on device costs.
Data-driven reforms
The REPCOR team hopes to build on these results and the relationships established with public procurement bodies to work towards public procurement reforms in Italy and at EU level. “While the merits of price and performance auctions are clear, they require substantial fine-tuning, for instance to optimise weighting methods, the rating of new entrants and the discounting of older reputation data,” Decarolis says. “The EU is in an ideal position to set out an effective approach using granular data collection and experimentation to design better, empirically grounded solutions to improve public procurement outcomes.”
