Bank Project Operations: A framework for strengthening anti-corruption and governance in the transport sector

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Bank Project OperationsA framework for
strengthening anti-corruption and governance in
the transport sector

• William Paterson, EASTR

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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 _at_ 125 m 1000 _at_ 0.05-1.0 m
• Leakage 3-15 on contracts 10-20 on
  allocations Total 5-40

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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

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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 govt, civil society,
  Bank
• Defining announcing remedies

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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

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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

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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

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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

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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

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2000 Centerline Survey Results by Region
Survey was not conducted in Region IX, XII and
Misamis Occidental Province in Region IX due to
Peace and Order.
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Explanation of Differences

• Sections are impassable due to construction, or
  road closures.
• Roads reclassified after survey.
• DPWH data includes lengths for sections but no
  road currently exists.
• Length is calculated based on a 2-D projection.

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Road Does Not Exist
Balligui-Dumabato Road added to DPWH network 10th
December, 1999.
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Integrating Data Through GIS
Database of Road Sections and
DPWH Managing Offices
Digital Photographs of Nodes
Centerline coordinates of National
Digital Photographs of Kilometer Posts and
Roads used in GIS to enable display of
other Locational Referencing Points (
LRPs
)
condition, roughness, traffic etc.
Roughness Data (IRI) over
100m lengths of National
Road Network
Highway Imaging - video pictures
at 10 meter intervals
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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

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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

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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
  contractors improper excavation of the
  mountainside. effort to reach a compromise ..
  reduce scope of work from 60 km to 25 km to 16
  km

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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

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Register of Contractors
PQ FORMS
1 .Contractor submits PQ information to the DPWH
in order to be included in the PQ Registry.
Records must be kept current and updates
are accepted anytime.
Annual Advertisement In order to bid on Civil
Works projects, Contractor must be registered
with the department. Pick up PQ Registration
forms at your nearest DPWH Office.

• Legal
• Financial
• Work Experience

2. Analysts validate and enter information into
the PQ Registry
PQ Registry Database
3. Approvals/denial letters are sent to the
Contractors. Contractors have seven days for
rebuttals.
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Enter Project Criteria
1B. The IO prepares bid documents and the
Project Criteria. The Project Criteria is sent to
the PQ Office. .
Project Criteria Project No_____ Type of
work Dimension___ Cost Estimate_____ Duration_
______
Project No_______ Type of Work___________ Di
mension___ Cost Estimate___________ Project
Duration____
Project Criteria
2B. The PQ Office checks the Project Criteria
for completeness and enters it into the PQ
Registry .
PQ Registry Database
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Purchase Bid Documents
2. Contractor ID is verified
1. Registered Contractors go to DPWH Office
stated in the Project Notice
3. Contractor Reviews Records from the PQR
Project Criteria
Contractor Records
Contractor ID
Project
4. Contractor Signs Affidavit that records are
current. Or else, gives update to the PQ Office
and waits for confirmation.
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.
PQR System performs 1) Slippage Verification 2)
License Category Verification 3) Financial
Capability Verification 4) Work Experience
Verification
5. Project Number is Input into PQR
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3 Stages of Verification

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

• Financial
• Balance Sheet
• Independent Auditors Cert.
• Average Annual Turnover
• Bank Information
• Credit Line
• Income Tax Return
• Technical
• Experience
• On-going work

Registration/ Update
Project Monitoring System (PMS)
Slippage
Forms are submitted once. Updates annually/as
needed Submittal only of changes.
Project Criteria
PQR
Purchase Bid Docs
Contractor Records
PQR System will perform 1) Slippage
Verification 2) License Category
Verification 3) Financial Capability
Verification 4) Work Experience Verification
PQR
CPES Contractor Performance Evaluation System
Future Link
No forms required
Contractor ID
Project
1
2
Submit Technical Proposal

• Price Proposal

• Technical Proposal
• Proposed Equipment
• Proposed Personnel

Bid and Award
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Process Summary

• For Pre-Qualification Registry, require
• General/Legal/License Information
• Financial
• Work Experience and Ongoing Projects
• Sell Bids Documents only to those firms that
  pre-qualify on the basis of
• Correct License to undertake the project
• Adequate Financial Capacity for the project
• Proper Work Experience required by the project
• No projects with negative slippage greater that
  15 (categorized as fault of the contractor)
• Post Qualification
• Verify Equipment schedule against project
  requirements
• Verify Manpower schedule against project
  requirements
• Re-verify financial capacity
• Project Start-Up
• Verify equipment and personnel
• If not the same, or adequate substitutions not
  provided, SUSPEND PQ Privileges.

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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

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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

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• Closing remarks