Table 9: Regression results on the value of supervision contracts

||**1**|**2**|**3**|**4**|**5**|**6**|**7**|**8**|
|---|---|---|---|---|---|---|---|---|
|PCF 1|0.67***||0.25***||0.22**|0.23*|||
||(3.58)||(2.75)||(2.15)|(1.94)|||
|PCF 2|-0.20|||-0.13|-0.05||||
||(-0.63)|||(-0.78)|(-0.31)||||
|PCF||0.21**<br>(2.22)|||||||
|PCF1 SV serving as<br>designer otherwise|||||||0.24**<br>(2.32)||
|PCF1 SV designing<br>same project||||||||0.01<br>(0.13)|
|Supervision period||0.10***|0.10***|0.10***|0.10***|0.11***|0.11***|0.09***|
|||(6.63)|(6.61)|(6.50)|(6.67)|(6.09)|(6.95)|(6.03)|
|Supervision contains<br>design||0.47***|0.45***|0.44***|0.48***|0.45***|0.48***|0.43***|
|||(3.78)|(3.74)|(3.56)|(3.67)|(2.88)|(3.70)|(2.90)|
|Log contract value||0.63***|0.63***|0.63***|0.63***|0.62***|0.62***|0.64***|
|||(13.50)|(13.47)|(13.46)|(13.59)|(12.17)|(13.55)|(11.94)|
|Age||0.73***|0.62***|0.66***|0.64***|0.48*|0.66***|0.60***|
|||(4.18)|(3.36)|(3.12)|(3.14)|(1.73)|(3.50)|(2.87)|
|Size||-0.09**|-0.07|-0.05|-0.08|-0.05|-0.08*|-0.08*|
|||(-2.05)|(-1.56)|(-1.08)|(-1.47)|(-0.89)|(-1.76)|(-1.74)|
|Capital||0.05***|0.04**|0.04**|0.04|0.05**|0.04**|0.04**|
|||(3.27)|(2.26)|(2.00)|(1.64)|(2.33)|(2.13)|(2.28)|
|Foreign supervisor||0.53**|0.55**|0.44*|0.50**|0.14|0.52**|0.48**|
|||(2.10)|(2.28)|(1.74)|(2.09)|(0.30)|(2.19)|(2.05)|
|Sector FE|NO|YES|YES|YES|YES|YES|YES|YES|
|Governorate FE|NO|YES|YES|YES|YES|YES|YES|YES|
|Year FE|NO|NO|NO|NO|YES|YES|YES|YES|
|Constant|11.80***|-1.51*|-1.04|-1.17|-1.14|-0.27|-1.19|-1.09|
||(85.72)|(-1.79)|(-1.20)|(-1.19)|(-1.22)|(-0.23)|(-1.35)|(-1.10)|
|Observations|297|275|275|275|275|205|275|190|

_Notes: Dependent variable is the log contract value of supervision contracts. PCF indicates dummy variables for all connected firms. PCF1 captures firms connected to the inner circle of elites that controls the CDR board. PCF2 includes firms of all political elites. Regression model uses robust standard errors; The table shows beta coefficients and t-statistics in parentheses; Significance levels: * p<0.10, ** p<0.05, *** p<0.01._

# **6. Discussion**

Our results chime with narrative one and help identify the conditions under which elites can broker deals. Two channels emerge in which the conditions for rent generation are met (Figure 2). First, for overpricing, both the designer and the contractor need to be PCF1. Second, for overspending, only the designer needs to be PCF1. Disaggregating the functions of a cartel helps explain this seemingly contradictory result.

Design consultants are the lynchpin of the cartel by performing the critical task of limiting competition and thereby minimizing _searching costs_ . Limiting the number of designers eligible to bid appears to be the precondition for elites to ease the searching and matching of actors. With prerogatives over bidding documents and discretion over who can be excluded from bidding, connected designers ensure that bidding documents are tailored to meet a deal and that the “right” firm wins a contract. As a result, even PCF1 contractors who are powerful actors in Lebanon’s political economy and close aides to the most powerful elites of the country (Leenders, 2012) do not receive larger contracts unless the designer is also a PCF1.

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