"When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind; it may be the beginning of knowledge, but you have scarcely, in your thoughts, advanced to the stage of science, whatever the matter may be."
Lord Kelvin

Corruption risks, intensity of competition and estimated direct social loss in public procurement of Zagreb – 2011-2016

11 October 2017

The research carried out by CRCB for the CMS is based on the analysis of 5,922 contracts of 4,483 public procurement issued by Grad Zagreb and Zagreb Holding between 2011 and 2016. During the data extraction, we could identify 1,197 winner companies on these tenders which are also the subject of the investigation.

The paper deals with the following questions: (i) What are the tendencies regarding the strength of competition and the corruption risks during the analysed time period? (ii) Which companies or groups of companies were the most successful on the tenders? Does the public procurement won by these companies differ from the rest by the corruption risks and the strength of competition? (iii) How are public procurement affected by the election years? How do the corruption risk and the intensity of competition in public procurement change in pre-election and in election years? (iv) To what extent can we estimate the direct social losses due to corruption and low intensity of competition in the period of 2011-2016? How does the direct social losses differ between the two analysed issuer (i.e. Grad Zagreb and Zagreb Holding?)

The analysis of public tenders launched by the Zagreb City and Zagreb Holdings in the period of 2011-2016 points out that these public tenders were characterized by high corruption risks and low intensity of competition. As a result the social loss is significant. The analysis also points out that a group of Croatian companies are likely to incorporate the above mentioned characteristics of procurement procedures into their expectations, and tenders with low intensity of competition and high corruption risk play an important role in their business strategy.

The results also underline the need for a regular empirical analysis of the intensity of competition and corruption risks of Croatian public procurement – this could be the first step towards an increase of social welfare.

The paper (pdf)