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146 Diagnosing Corruption in Ethiopia
Box 4.3
Contract Design, Tendering, and Procurement: Corruption
Risk Examples
Some interviewees cited examples of corrupt practices in contract design,
tendering, and procurement, as summarized below.
• Favoritism in design specs. Preparation of design specifications may favor one
company, or group of companies, over another. For example, if the tender includes
the drilling of both shallow boreholes and deeper ones, only those companies
with higher-capacity rigs would be able to compete. Similarly, tenders
may require contractors to meet specific requirements in terms of equipment,
personnel, and experience. Such preconditions may be entirely legitimate, but
some interviewees noted that they can also be used to skew contracts unfairly
to favored firms.
• Spurious items or activities in the design specification. For example, the tender
may include activities that favored firms would know are unnecessary, such as
a requirement to carry out five-day pumping tests on each borehole. Such
activities might add considerably to costs, yet those close to the evaluation
process would enter artificially low costs, or no costs at all, for this line item to
undercut less-knowledgeable bidders.
• Conflicts of interest in the selection of evaluation committee members. For example,
a regional bureau head may be serving on a committee evaluating a tender
in which the regional (state) drilling company is competing (bureau heads usually
chair or are board members of state-owned drilling companies).
• Arbitrary exclusion of bids on spurious technical or licensing grounds. Such exclusion
of bids might cite criteria that are introduced only during the evaluation
process.
• Interference in the bidding process. For example, a senior politician dictates the
type of process to be followed (such as single-source or preselection) or directly
determines the outcome.
• Collusion among contractors to rig the bidding process. For example, firms agree
among themselves which tenders to bid for to reduce competition and inflate
prices.
• Use of “contract variations” to extend the work of a contracted company beyond
the original contract. For example, company X could be requested to complete
a further 50 boreholes in area Y on the back of an existing contract, without
the need for another tender.