Cartels in Infrastructure Procurement — Evidence from Lebanon

Mounir Mahmalat and Wassim Maktabi

No 10226, Policy Research Working Paper Series from The World Bank

Abstract: This paper studies cartels in public infrastructure procurement and analyzes the conditions under which they succeed in generating rents. It first conceptualizes the interplay of the central actors of a procurement project, notably the contractor, the procurement agency, as well as the supervision and design consultants. By focusing on consultants, the framework includes important yet understudied actors in cartels that design tenders, evaluate bids, and supervise the implementation of projects. The paper then explores an original data set of infrastructure procurement contracts in Lebanon and analyzes the conditions under which powerful political elites can broker deals to overprice and/or over-spend contracts. To examine how cartels operate, the analysis identifies the political connections of contractors and consultants and classifies them according to their “quality” in terms of access to institutional functions of the implementing agency. The paper argues that design consultants serve as the lynchpin of the cartel by reducing transaction costs for searching, bargaining, and enforcing of corrupt deals.

Date: 2022-11-07
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