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STRENGTHENING THE DEMAND-SIDE
FOR IMPROVED PUBLIC INVESTMENT Kirsten Hommann, Sr. Economist
ICGM Conference
December 6, 2011
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RATIONALE
Fundamental right
Informs voice andpolitical process
Enables accountability
Improves performancein public sector (?)
Reduces risk ofcorruption (?)
Reduces price ofborrowing
2
OBI v. Credit Ratings (Hameed, 2010)
OBI v. EMBI Sovereign Spreads (Hameed, 2010)
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STARTING WITH SIMPLE CONCEPTS
Government
ServiceDeliveryAgents
Citizens
Electoral ProcessMedia
Education
Contestability of MarketsExpertise
Independence
What are the Goods inQuestion and how are they
provided?
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BUDGET CYCLE: CREATING BETTER INCENTIVES THROUGH PARTICIPATORY MONITORING
Budget Formulation
Budget Review & Analysis
Budget/ExpenditureTracking
PerformanceMonitoring
Civic
EngagementParticipatory Monitoring,
Score Cards
Participatory PETS
Participatory Budget Planning
Participatory review: Do
allocations match announced
social commitments?
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IMPROVING PUBLIC SERVICE DELIVERY THOUGH PARTICIPATORY MEASURES:
WHAT IS THE EVIDENCE?
Olken (2007) Community-Based Monitoring of rural roads in 600 villages in Indonesia
An average of 24 percent of road expenditure were estimated to be diverted, which
were reduced by 8 percentage points where audits were pre-announced and with
insignificant reductions where participation was carried out without the audit.
Bjoerkman and Svensson (2007) Community-Based Monitoring of Health Service Providers in 50 communities in
Uganda
Quality and quantity of health service provision improved through Citizen Report
Cards; 1.7 percent lower deaths of children under 5 in control group
Luo, Zhang, Huang and Rozelle (2010) Examined the relationship between direct elections and investments in public
goods in 2450 villages in China
Directly elected village leaders implement more public goods projects compared
to non-elected leaders
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IMPROVING SYSTEMS, PROCESSES AND PRACTICES IN PUBLIC CONSTRUCTION
Value of global construction industry to increase to $12 trillion p.a. by2020 (13.2 per cent of global GDP) - Global Construction 2020
Mismanagement, inefficiency and corruption can account for 10 -30% of a construction project's value - OECD, TI
Construction Sector Transparency Initiative (CoST) : A participatory,
multi-stakeholder, multi-national framework to improve transparency andaccountability in public construction
Hypothesis (similar to Bjoerkman and Svensson): lack of reliableand structured information and organizational capacity constrainservice delivery improvements (here transparency in construction
sector) Pilot Phase: 2008 – early 2011
Country Participants: Ethiopia, Guatemala, Malawi, Philippines,Tanzania, UK, Vietnam and Zambia
Locally constituted multi-stakeholder group (MSG)oversees application of disclosure and assurance protocols
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BRINGING TOGETHER TRANSPARENCY AND ACCOUNTABILITY
Disclosure
Assurance
Informed Reaction
Accountability
Improve transparency throughpublic disclosure andassurance of relevantinformation
Encourage informedreaction to createdemand for improvedefficiency and quality
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COST PRINCIPLES
Promote transparency and accountability in publiclyfinanced construction projects
Implement a multi-stakeholder approach that incorporatesrepresentatives from public and private sector as well as civil
society
Collect, verify and interpret disclosed project informationalong the full construction value-chain
Disseminate information through public forums/channels
Voluntary and flexible implementation of these principles
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COST PROCESS
DISCLOSURE
Procuring entity regularly discloses “Material
Project Information” (MPI).
ASSURANCE
Assurance Team is responsible for assessing theadequacy and reliability of project informationdisclosures, and identifying “areas for concern”
REPORTING Assurance Team publishes reports to disclose to
the wider public its main findings
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IdentificationProgram &
BudgetDesign Procurement Implementation
Completion &Operation
WORKING ACROSS THE VALUE-CHAIN
Projectidentification,
Owner, Budget,Justification
Tenderrequest,
Designavailable
Contractaward
Updates,Variations
duringconstruction
Completiondetails
AssuranceReports
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MATERIAL PROJECT INFORMATION Project purpose
Location of project
Intended beneficiaries
Specifications Budget
Engineer’s estimate
Tender process (project supervision)
Tender procedure
No. expressing interest
No. shortlisted
No. submitting tender
Tender process (main works)
Tender procedure
No. expressing interest
No. shortlisted
No. submitting tender
For Project Supervision
Name of main consultant
Contract price
Contract scope of work Contract program
For Main Works
Name of main contractor
Contract price
Contract scope of work
Contract program
Significant changes in contract (PS)
Significant changes in contract, price (MW)
Significant changes in contract, program
(MW)
Details of any reward for main contract
Actual contract price
Total payments made
Actual contract scope of work
Actual contract programOther documents
Feasibility Study
Financing agreement
Tender evaluation report
Project evaluation reports
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HOW CAN DISCLOSURE HELP?
Detect possible collusive behavior
No. expressing interest
Participation of bidders
Names of winning bidders
Compare construction costs across bidders/geographic
areas
Compare efficiency of construction (time/cost overruns)
Deterrent effect
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WHICH CAN RESULT IN:
Reduced corruption
Reduced construction costs
Improvement in quality
A level playing field
Increased competition (more participants)
Boost in investor confidence
Improved taxpayer satisfaction
Reduced poverty through economic growth
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AVERAGE TIME AND COST OVERRUNS
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ASSURANCE PROCESS IN PILOT -TYPICAL ISSUES HIGHLIGHTED FOR ATTENTION BY
ASSURANCE REPORTS
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Projects finishingin less time thancontracted, 4%
Projects finishingon time, 19%
Projects finishingup to 100% over
time , 40%
Projects finishingmore than 100%over time, 19%
No information
returned, 17%
REASONS FOR TIME OVERRUNS
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EngagementGaining awareness of CoST
Preparation
Country CoST program
prepared and initiated
Implementation
Project information &assurance findings disclosed – on progressive basis until sustainable as
government system
CoST Implementation Path
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COST INTERNATIONAL GOVERNANCE STRUCTURE – REVISED NOV-2011
InternationalSecretariat
Delegate Assembly
ImplementingCountries
InternationalStakeholders
CoST Board
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