journalists and NGOs are invited in to act as watchdogs. In addition, there is an anonymous complaints mechanism which channels concerns to project authorities.

KDP projects that met high local demand with close local oversight and involvement produced savings of between 25 to 56 percent over conventional infrastructure projects and carried economic rates of return ranging from 33 to 83 percent (Wong and Guggenheim, 2005).<sup>29</sup> Features of community-driven and output-based approaches could be combined to maximize the efficiency of delivery and minimize the consequences of governance failure –for example, community-driven selection and monitoring could be combined with output-based delivery mechanisms. At the same time, it is worth noting that neither OBA nor CDD, combined or individually, is a panacea for corruption. Indeed, the study of road construction in Indonesia cited earlier, which found that an estimated 24 percent of expenditures were ‘lost’ in materials theft, focused on Kecamatan Development Program projects. Both approaches need to be combined with appropriate procurement, physical and financial auditing and transparency tools, and both are still likely to remain prone to corruption if the broader governance environment is weak.

Finally, it is important to design projects so that they do not put pressure on firms to contravene laws and regulations in order to increase the competitiveness of their bid. For example, bid documents and contracts can specify costs and obligations related to regulatory compliance in areas such as health and safety as well as building codes and standards. By inserting compliance obligations in bid documents and contracts, regulatory compliance moves from a burden on a competitive bid to a service to be paid for and monitored during implementation. Related to this, the World Bank, the Asian Development Bank and the International Finance Corporation all incorporate core labor standards in the design and formulation of their investments. If a country’s regulatory standards are considered inadequate for a particular construction project, specific standards can be elaborated for contracts.

# **The Government as Customer: Procurement**

Within the procurement process itself, there is scope for a gamut of interventions covering e-procurement, financial management information systems, participatory approaches, transparency and third-party (NGO or external professional) oversight rules applicable across sectors.<sup>30</sup>

> 29 Similarly, community-based construction of schools in Zambia and Mauritania cut costs by one half to two thirds over national competitive bidding approaches –although some considerable part of this saving was due to lower architectural standards (Theunynck, 2006).

> 30 At the project level, specifying who selects third party monitors (it should not be the implementing ministry) and where advertisements are placed (online as well as in a given set of major newspapers in a font of a minimum particular size) are both potential elements of an anti-corruption package.  PEFA performance indicators include an indicator of procurement standards and the OECD’s Baseline Indicator of Procurement Systems provides a tool for improving the institutions of procurement <u>http://www.pefa.org/index2.htm, http://www.oecd.org/dataoecd/12/14/34336126.pdf.</u>

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